Qplum Robo-Advisor – Sophisticated Investment Management
Q & A with Qplum Robo-Advisor Founder Mansi Singhal
Robo-advisors began in the wake of the 2008 financial crisis, and have known only the bull market of the past nine years. Up until recently, it was unclear how their computer algorithms would handle high volatility, market drops, and fearful investors. Qplum robo-advisor was challenged and succeeded during the recent market volatility.
When stocks collapsed during a turbulent week in early February, robo-advisors were tested, many for the first time. Some experienced excess site volume that temporarily shut or slowed their websites. Others, like qplum and Schwab reported no disruptions. “Our systems were fine,” says Mansi Singhal, chief executive officer of qplum that offers AI-powered portfolios. Both qplum and Schwab sent out newsletters to subscribers aimed at calming frayed nerves and warding off irrational behavior.
I recently got the opportunity to sit down with Mansi and learn more about qplum’s unique approach to managing risk.
Barbara: Before we leap into your firm’s approach to investing and risk management, perhaps you can share a little bit about your background.
Mansi: Of course. Before starting the qplum robo-advisor, I spent more than 10 years working as a trader and portfolio manager for big banks and hedge funds. I was handling multi-million-dollar accounts, making some very rich people a whole lot richer. I was doing great. But over time, it was becoming increasingly difficult for me to enjoy my success. I didn’t like the lack of access and transparency surrounding institutional investment methods. The bigtime Wall Street players just keep getting better, but none of that wisdom is being passed along to personal investors.
From this inequity, qplum was born. Qplum robo-advisor is an online wealth management platform that gives individuals and families diversified trading strategies, data-science and an honest approach. Qplum is my effort towards helping everybody else use what I have learned in a very profitable trading career.
Barbara: How exactly does qplum help everyday people invest like major financial institutions?
Mansi: Any trader or portfolio manager worth their salt will tell you that all good investments start with a plan. You need to plan first, invest later. Proper planning will help you determine your short and long-term financial goals and create a balanced agenda for meeting them that’s aligned with your risk tolerance.
One of the trickiest parts of planning is pinpointing your risk tolerance. At qplum, we have young clients who have saved a lot, and young clients still paying off education loans. We have young clients who are extremely risk averse, and young clients who are risk-seeking.
Even though two people may be the same age, they can have very different risk profiles based on their particular circumstances.
Barbara: Ok, so how do I get my plan? Is everything done through the platform, or can I speak with a person?
Mansi: We have a chatbot to kick off the financial roadmap. It’s a simple tool that leads you through a series of questions about your assets and liabilities. In the end, it provides a checklist for how much of your savings should remain in the bank, how much should be invested, and which portfolios are best suited for growing the value of your savings.
We built a unique human fallback mechanism into this bot. So, if you ask a question the bot doesn’t recognize, our team receives an internal notification that you need assistance and we step in to help you.
The thing is, financial advice usually requires long and nuanced conversations. It demands a personal touch. No matter how good our bot is, it can’t replace human interaction.
We use the bot to start a conversation, never to give comprehensive advice. For that, we have a team of investment advisors available through email, live chat, or phone.
Barbara: It seems like many services are using a hybrid approach, combining computerized recommendations with on-demand advice from a human. Would it be fair to say this is your approach?
Mansi: Yes, that’s fair.
Many people assume robo-advisors are just a bunch of nameless, faceless robots managing your money. And that sounds kind of scary, so I can understand people being turned off by it.
But it’s important to remember that robos are made by people, for people. At qplum robo-advisor, we have teams of people monitoring and improving our portfolios. We also have a team of people interacting with the clients.
The term ‘robo’ simply refers to our use of technology to make investing easy, affordable, and transparent.
Barbara: I assume having human support came in handy when markets took a downturn earlier in the year.
Mansi: Definitely. People often react emotionally to market downturns. It can be a big help to know a representative is standing by to answer questions and provide reassurance.
But along with human support, you need to have a plan in place for periods of market turbulence. Our technology provides that for our clients through risk management.
Barbara: Can you break that down for me? How does the risk management piece work?
Mansi: We’ve created portfolios that try to protect your hard-earned money without buying expensive insurance, using options or stop-loss orders. To capture a variety of risk appetites, we developed portfolios that target specific risk levels. For example, our Fairway portfolio targets 3% risk and is geared towards conservative investors. Our Sunflower portfolio targets a 15% risk and is more appropriate for aggressive investors. Stocks might be more risky today than yesterday, but your portfolio remains at the same risk level.
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On top of volatility targeting, we employ dynamic asset allocation. Many investors follow a 60-40 stock v bond allocation, popular because of its medium-level risk. But how do you know 60-40 is the right combination? Maybe it should be 70-30 or 80-20. This is why we use a dynamic asset allocation that changes with time, withstanding different market seasons, proactively adjusting itself.
A third tool that we utilize in all portfolios is risk management, which is simply a systematic plan to enter and exit the markets. When your portfolio declines in value, we gradually move money out of the market and keep it in cash. When your portfolio value begins to grow again in value and markets cool down, we begin reinvesting the cash.
The qplum roboo-advisor uses active management to protect and grow your assets, unlike many of its competitors.
Barbara: I guess the only question left is how much does this all cost?
Mansi: Our service is completely flat fee. We charge 0.50% of your total managed funds. There are no trading fees or hidden costs. And, financial planners can cost upwards of 1.0% to manage your investments.
Put simply, it’s $50 per year for every $10,000 you invest. That is less than a Netflix membership.
Barbara: I imagine many people are surprised by this. Active management usually means tons of trading fees.
Mansi: Yes, we get many double takes from seasoned investors when they ask about our fee. It’s a big draw for us. The reason we can offer our service at such a low price is because we’ve built our own trading infrastructure. By maintaining end-to-end control of our clients’ orders, we get better execution which results in cost savings that we can pass onto our clients.
Barbara: Well, I congratulate you on realizing your vision of a more democratic investment world. I’m sure we’ll be hearing plenty of great things about qplum in the future.
Mansi: I certainly hope so. Right now, we’re just focusing on helping people achieve their financial goals through data-rich and AI-powered means.
Disclosure; This is a sponsored article.