Why Current Investing Apps & Services Just Aren’t Cutting It

By 2018-01-30 October 3rd, 2019 Market Commentary

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If you search “investing apps” in your phone’s Play Store, the search results will include: Robinhood, Acorns, Stash, and Betterment. You’ll also see the big names like Fidelity, Schwab, TDAmeritrade, and ETrade mixed in there.

So, why are 80% of Millennials still not investing?(1)

  1. They’re misled into thinking DIY investing as a hobby when in reality, it’s extremely time consuming. This means apps like Robinhood and websites like ETrade and ThinkorSwim are really only useful to the self-investor. But, what about the fact that 34% of Millennials report they don’t know how to invest?(2)
  2. Sure, robo-advisors will invest your money for you, but consumers have been reported to prefer a combination of human and technological guidance. Especially, during troubled times. Although inexpensive, financial markets have been known to be too chaotic for machine learning(3). In fact, machine-learning in investments has definitely not been as successful as it has been in purely data-driven industries. Investing with a robo-advisor also means you’re depending on an old-school investment philosophy based on diversifying risk. This philosophy wouldn’t have protected your money during the giant selloff that was the Internet Bubble (2001-02) and Subprime Mortgage Crisis (2007-08). In a Bull Market, everybody makes money. The true value-added comes in not only growing your money, but also protecting it.
  3. When we refer to hybrid advisers we mean robo-advisors who offer customer service on an as-needed basis. Specifically, Schwab, Ellevest, Vanguard, TDAmeritrade, and Fidelity, to name a few. In addition to the problems with robo-advisors mentioned in #2, these advisors have substantial conflicts of interest. Associates at these firms win bonuses to push higher-priced products to clients(4). This sounds like Wall Street ethics to me. Considering 86% of Millennials don’t trust Wall Street, it’s no surprise these hybrid services aren’t cutting it either(5).
[1] Steenkamp, Henri. “Millennials Are Great at Saving Money but Reluctant to Invest It.” Entrepreneur. September 22, 2017. Accessed January 29, 2018. https://www.entrepreneur.com/article/300177.
[2] “Millennials Are Great at Saving Money but Reluctant to Invest It.”
[3] Hope, Bradley, and Juliet Chung. “The Future Is Bumpy: High-Tech Hedge Fund Hits Limits of Robot Stock Picking.” The Wall Street Journal. December 11, 2017. Accessed January 29, 2018. https://www.wsj.com/articles/the-future-is-bumpy-high-tech-hedge-fund-hits-limits-of-robot-stock-picking-1513007557.
[4] Zweig, Jason, and Anne Tergesen. “Advisers at Leading Discount Brokers Win Bonuses to Push Higher-Priced Products.” The Wall Street Journal. January 10, 2018. Accessed January 29, 2018. https://www.wsj.com/articles/advisers-at-leading-discount-brokers-win-bonuses-to-push-higher-priced-products-1515604130.
[5] Cillizza, Chris. “Millennials don’t trust anyone. That’s a big deal.” The Washington Post. April 30, 2015. Accessed January 29, 2018. https://www.washingtonpost.com/news/the-fix/wp/2015/04/30/millennials-dont-trust-anyone-what-else-is-new/?utm_term=.a42e657bc1f5.
Maria R. Padilla Hurd, CMT

Maria R. Padilla Hurd, CMT

Maria earned a Bachelor of the Arts degree from the College of William & Mary in 2013. After graduating, she joined Greenwich Creek Capital Management. She is also a member of the Chartered Market Technician Association, completing all three levels of the professional designation.