Wealthfront calls its smart beta approach 'superior' to Dimensional Fund Advisors largely because DFA works with RIAs

The Redwood City-based robo-advisor's CIO Burton Malkiel says his firm's robo-approach to factor investing convinced him to reverse his stand on passive investing as unbeatable

Author Brooke Southall November 17, 2017 at 2:21 AM

3 Comments

Mark Matson: They've gone from smart beta is stupid to we're the ones that can pull it off. It's hypocritical at best and they're applying it completely wrong.

ETFs

Robo-Advisors

Mark Matson

Dave Butler

Matson Money

Burton Malkiel

DFA

Wealthfront

Jakub Jurek

Paul Damon

November 17, 2017 — 7:45 PM

And not to mention DFA sub-advises multi-factor strategies available to anyone via relatively low cost ETFs by John Hancock.....

Randy Bullard

November 21, 2017 — 4:33 PM

The sum total of this issue or disagreement comes down to whether an investor should or will pay the typical 1% fee that an advisor charges vs. the 25bps that Wealthfront charges. The difference between the multi-factor smart beta approaches utilized by DFA and Wealthfront are so minor as to be irrelevant. Tax loss harvesting within a sampled SMA portfolio vs. using pooled vehicles has greater opportunity to create usable losses, but comes at a cost of incremental trading and is ultimately of limited value. So again... this really comes down to an argument from Wealthfront that investors shouldn't pay 1% to an RIA. The 75bps advisory fee differential is real, but the arguments around that fee differential aren't based on the merits of one smart beta approach over another. This is about cheaper digital advice vs. more expensive traditional full service advice.

Wisefactors

September 25, 2018 — 6:55 AM

Thanks for the useful blog. Looking forward for more.

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Mentioned in this article:

Wealthfront
Portfolio Management System
Top Executive: Andy Rachleff