Re The “New” Canadian Couch Potato DIY service

Re the recently “New” Canadian Couch Potato DIY ETF service (hat tip Ken Kivenko re his monthly newsletter). There are a couple of points I think are worth making here: 

For many investors it does not make financial sense to have someone personally manage their money and it does not make financial sense for many advisors to do it for them.   Yet, they do not possess the expertise needed to construct, plan and manage their portfolios.  In Canada to date the most have been forced to either use a commission based investment “advisor”/salesperson or go and do it yourself.  Neither are optimal solutions.

The way to go, in my opinion, for the mass market is to automate the investment process and to design a software interface that allows an organisation to provide the necessary management of assets to meet investors financial needs over time.  Automation allows the investment process to deliver, at much lower cost, the necessary planning, construction and management expertise. 

Investors would probably start off with an initial interface with an adviser who would guide them through the systems, the education, the risk assessment and induct the investor into the use of the systems.  Over time, many investors would end up doing it themselves, with others choosing to retain the services of an investment professional, to greater or lesser degree. 

Whatever the option chosen, the core systems and processes would be centrally managed and delivered via a use friendly interface.   While these services may be rudimentary at the start, they would eventually deliver the type of sophistication that is even beyond the realm of most of today’s portfolio managers.  So ultimately, these are game changers for everyone.

What we have with the PWL/Couch Potato DIY service is the start of the game changing paradigm for the Canadian market place.  Investors should be able to access low cost, personalised wealth management that delivers good value for money over time and that inculcates investors into well disciplined investment habits.   The low tech, low skill set, labour intensive investment advisor model is the rear view mirror and the current “DIY” service is part of the forward view.

And now to the other point:

I do not feel that these services of the future are truly DIY given that the investment process, the planning, the assumption generation, the portfolio construction and management parameters are generated by an external expert body.  These services are essentially advisory based systems with the providers arguably subject to a fiduciary duty to ensure the integrity of the planning, construction and management, as well as education and the tools needed to allow the investor to do the necessary legwork.  

In this context I feel the Couch Potato service is only going half way.  Market valuations, expected returns, financial circumstances etc all change over time and these need oversight.  Perhaps more importantly, the investor needs access at all times to the planning and risk management software that allows them to reassess saving, expenditure and risk/return decisions over time. 

Choice is also important and the current service lacks the necessary feedback loop to the expertise, the systems and the processes that would fully liberate investors while at the same time provide the structure and support needed to help them best meet their goals. 

The service is a start and perhaps an important one, but it needs to realise that it is leading to a great deal more than they may have realised.  Doing the leg work yourself, yes (DLWY), but it is not doing the process yourself.     

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