Reuters – By Linda Stern – June 7, 2012
(Reuters) – How cheap can investing get? We’re about to find out.
While Motif Investing (which sells complete portfolios of 20 or 30 stocks for $9.50) and FutureAdvisor (which aggregates retirement account and investment portfolio information and tells users what securities to buy and sell) both portray themselves as “disruptive” to the traditional money management business, they are part of a trend that began several years ago.
“This is the direction the industry is going,” says John Ritter, a Cincinnati financial adviser and money manager. “Investment management is becoming commoditized.”
That trend has been built on two key technology developments: Internet access and algorithms that can drive automated investing advice and portfolio construction. The start of that movement may date to 1975, the year Charles Schwab launched his discount brokerage. Before then, stock commissions could reach hundreds of dollars and the typical mutual fund sold with an 8.5 percent up-front sales charge that went into the brokers’ pockets.
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