Test Accounts Week 7

We’ve just completed week 7 for the test accounts. The S&P 500 index dropped a tad bit  -0.3%. Meanwhile the 3 market related test accounts finished up slightly for the week. Betterment was up 0.2%, Wealthfront gained 0.2%, and Folio Investing 0.3%.

Folio Investing notified me that the RTG folio “Analyst Upgrades” made its monthly ajustments. This resulted in 29 buy and 27 sell orders. I did have the option staying with the stocks I held in the folio. But that would seem to be contrary to the purpose of this RTG. These trades will be made in the next trading window, Monday 11 AM.

Progress has been made at Lending Club. We’ve added 25 notes that have been issued from automated investing. We’re down to 24 notes in the review stage. By my math, that means 60 notes were rejected last week in the final stage. Since I paused automated investing the money for these notes went back in my account. I used some of this cash to purchase 4 notes from the secondary market. Finally, payments for some of the issued notes are coming in. That is the reason for the 0.7% increase in the account balance.

My mid-week post will go into more detail in the changes in Lending Club .Follow me on twitter @billlanke and I’ll let you know when I update the blog.

W/E	S&P 500	BTRMNT	WLTFRNT	FOLIO	LND CLB
16-Jan	-1.2%	0.0%	0.4%	-0.2%	0.0%
23-Jan	1.6%	1.1%	0.7%	2.0%	0.0%
30-Jan	-2.8%	-1.5%	-0.9%	-2.0%	0.0%
6-Feb	3.0%	1.0%	1.0%	0.9%	0.0%
14-Feb	2.0%	1.0%	0.8%	1.8%	0.0%
21-Feb	0.6%	0.6%	0.4%	0.5%	0.0%
28-Feb	-0.3%	0.2%	0.2%	0.3%	0.7%

Structural Difference Between Betterment and Wealthfront

When the test accounts began receiving dividends, a difference in the business structure of Betterment and Wealthfront had an impact on how they were able to handle the dividends.

Both are “investment advisors”. They present the face that you interact with on the web and make the investment decisions for your account. They differ in where your investments and cash are held. Here are their descriptions.

We have two separate arms: the first, Betterment LLC, is an SEC-registered investment advisor, which operates the advice and investment platform you experience when you access your Betterment account. The second arm, Betterment Securities, is a FINRA member broker-dealer, which executes trades on your behalf, and is the custodian of your assets.

Betterment deals in fractional shares and consequently does not have to carry cash in your account. This allows them to fully invest your account. It also allows them to use even small amounts of dividends to attempt to re balance your account.

Wealthfront is an “investment advisor” only and executes the investment decisions for your account. Here’s their description.

Third party custodian: Your assets are held in an account at a third-party custodian named Apex Clearing. Wealthfront only has the right to issue trading instructions against your account. It cannot access your cash other than to receive its monthly advisory fee. You are the only one who can deposit to or withdraw from your account

Since Wealthfront only deals in whole shares, they need to maintain cash where small dividends are accumulated. I assume when enough is there they will use the cash to attempt to re balance the account. It seems to me that being limited to whole shares will make this a little more difficult. In all fairness, this only has a significant impact on small accounts.

I will be updating the test accounts weekly. Follow me on twitter @billlanke to be notified when I make updates.

Test Accounts Week 6

We’ve just completed week 6 of the test accounts. The overall market was up, with the S&P 500 index gaining 0.6%. The 3 market related test accounts were also up. Betterment was up 0.6%, Wealthfront gained 0.4%, and Folio Investing 0.5%.

Meanwhile at Lending Club, We’re up to 291 notes issued and 109 in various states of funding. I’ve noticed quite a few of the notes do not get issued and automated investing goes back to the available loans to pick others. I’ve paused automated investing to get a sense of how often this happens..

I’m working on several non-weekly update posts. Follow me on twitter @billlanke and I’ll let you know when I update the blog.

W/E	S&P 500	BTRMNT	WLTFRNT	FOLIO	LND CLB
16-Jan	-1.2%	0.0%	0.4%	-0.2%	0.0%
23-Jan	1.6%	1.1%	0.7%	2.0%	0.0%
30-Jan	-2.8%	-1.5%	-0.9%	-2.0%	0.0%
6-Feb	3.0%	1.0%	1.0%	0.9%	0.0%
14-Feb	2.0%	1.0%	0.8%	1.8%	0.0%
21-Feb	0.6%	0.6%	0.4%	0.5%	0.0%