Questions over robo-advisors arose after Betterment briefly halted trading after Brexit.
A trading interruption occurred [intentionally] on Friday, June 24th, for New York-based Betterment, a robo-advisory firms with $5 billion in Assets under Management (AuM), as the firm decided to override its robots in an effort to protect clients the day after the UK's Brexit vote.
Yet, financial markets had operated efficiently, even as circuit breakers were triggered at some venues, there was no fall-out or firms going out of business, even as record volatility and price moves were reached for various securities.
Not so robo
Robo-advisors are expected to largely automate their human counterparts, advising clients on how to invest in financial markets, via the use of a programmatic rules-based approach - although the industry for robo-advisors is still relatively new and emerging in finance.
Often, human discretion is applied over the way that the robos are managed and configured, as the trading robots are occasionally steered and tweaked by people - which is a not-so robo approach.
Progress is nonetheless being made as emerging challenges across both segments – including flash-crash style events for institutional firms - help set the basis for future working points, and as abnormal volatility from last week’s Brexit vote has apparently shown issues for robo advisors.
The nature of Betterment’s business model as an RIA, robos aside, is focused on long-term investing, and the firm already prevents clients from trading during the first 30 minutes after the markets open each day, on purpose.
So while the decision for Betterment to halt trading as the market overreacted last Friday appears prudent, the lack of advanced notice may have caused undesirable client feedback as some customers were unexpectedly unable to trade during the brief ban. In response to feedback, the company leaned on its customer agreement noting that its actions were in line with relevant clauses.
Best execution obligations
Coverage by the Wall Street Journal noted that Betterment’s CEO Jon Stein stood by his company’s decision on the temporary halt yet acknowledged the need to communicate better with customers. Mr. Stein was quoted in an interview saying: “We are talking about different notifications we can give either in the - mobile or web - app or the moment of trading via email. There are lots of different things we’re looking at.”
Betterment has its own broker-dealer and apparently had concerns over its best-execution obligations when implementing the brief trading ban - including how thin Liquidity or wide spreads could have caused unfavorable prices for an otherwise longer-term client base that isn't concerned with intraday timing when making longer-term investment decisions.
A securities expert, Barry Bernstein shared comments with Finance Magnates regarding the temporary trading halt: “There are circuit breakers that could halt trading at the exchange level industry-wide in an effort to prevent panic and build investor confidence but having a robo make the decision for you based on a subjective view seems somewhat reactive and can create unintended consequences."
"The ability to turn assets into cash or cash into assets quickly is essential and by removing this ability even for a short period of time can create fear – or when done so without notice."
Mr. Bernstein added: “Whether the fiduciary responsibility was met or not and even if the clients benefited from the stoppage the question is now raised: What if the market had continued to fall, would the robo have kept the doors closed for longer? At what point would they have opened? Hopefully, this occurrence does not damage the reputation of the robo-adviser industry but instead will drive further innovation in machine learning and artificial intelligence.”
A trading interruption occurred [intentionally] on Friday, June 24th, for New York-based Betterment, a robo-advisory firms with $5 billion in Assets under Management (AuM), as the firm decided to override its robots in an effort to protect clients the day after the UK's Brexit vote.
Yet, financial markets had operated efficiently, even as circuit breakers were triggered at some venues, there was no fall-out or firms going out of business, even as record volatility and price moves were reached for various securities.
Not so robo
Robo-advisors are expected to largely automate their human counterparts, advising clients on how to invest in financial markets, via the use of a programmatic rules-based approach - although the industry for robo-advisors is still relatively new and emerging in finance.
Often, human discretion is applied over the way that the robos are managed and configured, as the trading robots are occasionally steered and tweaked by people - which is a not-so robo approach.
Progress is nonetheless being made as emerging challenges across both segments – including flash-crash style events for institutional firms - help set the basis for future working points, and as abnormal volatility from last week’s Brexit vote has apparently shown issues for robo advisors.
The nature of Betterment’s business model as an RIA, robos aside, is focused on long-term investing, and the firm already prevents clients from trading during the first 30 minutes after the markets open each day, on purpose.
So while the decision for Betterment to halt trading as the market overreacted last Friday appears prudent, the lack of advanced notice may have caused undesirable client feedback as some customers were unexpectedly unable to trade during the brief ban. In response to feedback, the company leaned on its customer agreement noting that its actions were in line with relevant clauses.
Best execution obligations
Coverage by the Wall Street Journal noted that Betterment’s CEO Jon Stein stood by his company’s decision on the temporary halt yet acknowledged the need to communicate better with customers. Mr. Stein was quoted in an interview saying: “We are talking about different notifications we can give either in the - mobile or web - app or the moment of trading via email. There are lots of different things we’re looking at.”
Betterment has its own broker-dealer and apparently had concerns over its best-execution obligations when implementing the brief trading ban - including how thin Liquidity or wide spreads could have caused unfavorable prices for an otherwise longer-term client base that isn't concerned with intraday timing when making longer-term investment decisions.
A securities expert, Barry Bernstein shared comments with Finance Magnates regarding the temporary trading halt: “There are circuit breakers that could halt trading at the exchange level industry-wide in an effort to prevent panic and build investor confidence but having a robo make the decision for you based on a subjective view seems somewhat reactive and can create unintended consequences."
"The ability to turn assets into cash or cash into assets quickly is essential and by removing this ability even for a short period of time can create fear – or when done so without notice."
Mr. Bernstein added: “Whether the fiduciary responsibility was met or not and even if the clients benefited from the stoppage the question is now raised: What if the market had continued to fall, would the robo have kept the doors closed for longer? At what point would they have opened? Hopefully, this occurrence does not damage the reputation of the robo-adviser industry but instead will drive further innovation in machine learning and artificial intelligence.”
Tide Rides Adyen's Banking Wave into Germany's SME Market
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
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#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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