Robo-Advisor News + Updates

Hedgeable Closes to Retail Investors – Active Robo Restructures

Robo-Advisor News – Hedgeable Closes to Retail Investors

“Hedgeable is restructuring, and we have decided to discontinue our regulated investment management business effective August 9, 2018… On that date, all access to the existing Hedgeable investment management portal will cease to be operational.” ~Hedgeable website

Launched in 2010, Hedgeable is one of the earliest robo-advisors. Unlike Betterment and Wealthfront early adopters, Hedgeable took a “hedge-fund” like approach to investing. In contrast with the passive, index fund ETF investing strategy, Hedgeable used alternative investments like precious metals, currencies and bitcoin as well as shorting strategies in their investing recipe. These hedge-fund tactics also included investing in typical fixed income and growth stocks.

On July 9, 2018, Hedgeable decided to close its doors to new investors and ask existing investors to transfer their funds out of the company. Folio Investments, the firm’s custodian, is making the transition smooth for existing Hedgeable clientele. Existing customers receive free self-directed access to a Folio Investments, Inc. account for the remainder of 2018, with no transfer or management fees.

Hedgeable Alternatives; Robo-Advisors With Human Advisors

Despite $80 million in assets under management and 1,700 clients, Hedgeable decided it was time to change focus.

According to co-founders, Michael and Matthew Kane, the company is not insolvent and will announce a new direction for Hedgeable going forward.

What Does Hedgeable’s Closing Mean for the Robo-Advisory Industry?

As we’ve written in various articles that address the future of robo-advisors, industry consolidation and fallout is to be expected. As with any competitive environment, there are winners and losers, and every platform will not survive.

The Hedgeable closing falls on the heels of the recent demise of WorthFM, a women-oriented robo-advisor.

The robo-advisory industry is getting crowded, with new platforms rapidly emerging. As Hedgeable has shown, all robo-advisors won’t survive.

With free robo-advisors and other automated investment advisors offing low fee robo-advisory platforms, it’s tough to compete.

The cost of client acquisition is great and to compete with low or no fee platforms, huge AUM and a large client base is required for long term profitability.

Additionally, when you’re competing against deep pocket investment companies such as Schwab Intelligent Portfolios, FidelityGo, and Vanguard Personal Advisor Services it’s tough to survive.

Where Should Investors Seeking Active Management Go?

Although Hedgeable was the first actively managed robo-advisor, they are not the only player in the game. Despite the preponderance of passive, ETF investing robo’s there is a group of robo advisors that cater to those who desire an active management robo-advisory approach.

Qplum,  co-run by a former hedge fund manager, Mansi Singhal is Hedgeable’s closest competitor. You can invest in this actively managed platform though the qplum website or their relationship with interactive brokers.

Qplum employs active management and strives to temper risk. Qplum developed portfolios that target specific risk levels such as the Fairway portfolio that targets 3% risk and is geared towards conservative investors. The Sunflower portfolio targets a 15% risk and is more appropriate for aggressive investors. Stocks might be more risky today than yesterday, but the qplum portfolio remains at the same risk level.

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Other actively managed robo-advisors include the T.Rowe Price ActivePlus Portfolios, Alpha Architect, and BuildingBenjamins. Additionally, Interactive Brokers took over Covestor and offers a multitude of managed portfolio options.

Personal Capital Advisors is another choice for Hedgeable clients. This digital advisor is a balance between the human touch and automated investment advisor. With a segment weighted investment method, as opposed to the typical market cap weighted style, their hands on advisors help investors manage risk and reach their investment goals for a fee lower than most human financial planners.

Hedgeable Wrap Up

Hedgeable led the way for a new type of investing – an active management robo-advisor for a reasonable fee. The Hedgeable closing shows how difficult it is to survive in the competitive robo-advisory sphere. They offered an early introduction to this constantly changing digital investment world.

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Barbara A. Friedberg, MBA, MS

Barbara A. Friedberg, MBA, MS

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