Saturday, January 18, 2014
Where to Search for a Financial Advisor Online
Where to find the Yelp of financial services and others.
We’re going to offer you some long- and short-term ways to make additional money. First, we’ll suggest some Websites that can help you find a reliable financial advisor and then detail an innovative new pricing program for heavy traders, from TradeStation.
Barron’s speaks frequently with financial advisors, providing insights into what they think about the markets and how they manage their businesses. But what do the clients think of their advisors? A new Website, Wallethub (wallethub.com) lets its readers take over, allowing them to search through more than 250,000 advisors in the U.S., and provide feedback about those they’ve worked with in the past.
A search through the 40 advisors who share my zip code turned up zero reviews, but that’s not terribly surprising given the recent launch of the site. Others from around the country received reviews ranging from, “A gifted financial analyst,” to “He just wants to get his commission and does not care about the customer.” Wallethub aspires to be the Yelp of financial services, with consumer reviews of banks, credit cards, and insurance companies to complement its offering on advisors.
Another site, Nerdwallet (nerdwallet.com), lets its members pose questions directly to financial advisors; members then vote on whether the answer was helpful or not. There are links attached to each advisor’s answer that let you make contact with the ones you like. The top contributors, based on how many people found their answers helpful, are listed in the right-hand column of the Ask an Advisor page. Recent questions included whether a couple was close to being able to retire (it seemed like they were, according to an advisor) and whether to pay off $58,000 in credit-card debt by raiding a 401(k) (not a good idea, said several advisors).
Many financial planners and advisors rely on word-of-mouth to find customers, though an increasing number are turning to social media. There are also sites such as WiserAdvisor.com that ask a few key questions, such as what sort of services you’re looking for and the size of your current portfolio, that match you with an advisor near you. Of course, we’d suggest you check out Barron’s many annual advisor rankings, including The Top 100 (April 15, 2013). You could take the results of a WiserAdvisor.com query and then search Barron’s rankings, Wallethub, and NerdWallet to gather more information about a potential match.
TradeStation, a sophisticated online broker for frequent traders who like to build their own systems, recently launched an unbundled equities commission structure for high-volume users. Unbundled pricing, rather than a flat fee, allows the firm to pass the various fees and rebates from exchanges and other market centers on to their customers. For those who trade a lot, it’s possible to lower costs by choosing the appropriate venue.
“Each exchange or market center charges different fees and awards rebates based on how a trader’s order interacts with the markets,” explains CEO Solomon Sredni. As a result, the trader will reap the benefit of any rebates or other discounts offered and thereby lower their trading costs. It will “give clients the ability to route their orders to the exchange or market center offering pricing that best suits their trading style and objectives,” he says.
For example, a client who trades 5 million shares per month could place a limit order to buy 10,000 shares of Microsoft (ticker: MSFT) that will add liquidity to the marketplace. She selects BATS as the destination to route the order and receives a rebate of $25 for adding liquidity. TradeStation’s commission is $20, based on her trading activity, and the clearing fee is $2. So this customer will see a $3 rebate when all is said and done. If the customer had selected flat-fee pricing, she would have paid $4.99 for this transaction.
Taking advantage of unbundled pricing requires study of the fees charged by the exchanges and market centers, as well as an understanding of when one is adding or removing liquidity. If you’re willing to do the work, you can reap the rewards.
Published in Barron’s Online, January 11, 2014.
Saturday, January 04, 2014
Market Prophit Finds Predictability in Social Media
A new feature on Market Prophit’s site ranks bloggers who tweet on their ability to be correct.
Is there predictability in the stock market in social media? Igor Gonta of Market Prophit believes so, and has introduced a new feature to his company’s website that helps you find financial bloggers who have crystal balls that are polished and ready to go.
We looked at Market Prophit earlier this year, and liked what we saw ("Check the Buzz on Apple,” July 15, 2013), noting that it generated bullish or bearish signals about stocks based on posts being made to Twitter. The sentiment calculations are generated in real-time, based on proprietary analytics, and are updated every minute. Ranging from +1 (bullish) to -1 (bearish), you can view heat maps that translate the sentiment calculation into shades of red and green by sector or exchange.
The firm just launched its Market Prophit Score, which helps identify individuals who provide content that is predictive of market behavior. Each financial maven also receives a Market Prophit Rank, showing how each blogger ranks relative to his or her peers. If a person has a good predictability, a positive score is generated. If they have a negative correlation to stock-price movements, they get a negative score. If they’re just noisy, they get a 0.
Gonta believes that some bloggers may attain high scores in the twos and threes, while the lower-quality posters may end up in the negative two to three range. The analytics ignore a poster’s popularity, measured in terms of followers and retweets, because, as Gonta says, “We don’t think popularity has anything to do with predictability. Just because someone has 100,000 followers and tweets constantly about stocks doesn’t necessarily make them good.”
One feature Gonta points to is that the scoring mechanism can discover people you may never have heard of in the sea of millions of Twitter posters.
Clicking on the Top Ten Market Prophits links brings up a page with information about the current top ten prognosticators. In first place overall earlier this week was the Twitter account attached to The Options Pros, with a Markit Prophit Score of 2.282, which had recently mentioned Amazon (ticker: AMZN), Illumina (ILMN), Costco (COST) and Twitter (TWTR) itself.
Each stock analyzed on Market Prophit also provides details about the bloggers who are more focused. Poking around Market Prophit’s detail page for Apple, for example, the top three Market Prophits early this week had the Twitter usernames of @MW_AAPL (with a Market Prophit Score of 0.696), @DBainySun (0.587) and @A_Karunaratne (0.374). The first account, @MW_AAPL, is focused solely on Apple and is managed by MarketWatch, which is owned by Dow Jones, the parent of Barron’s. The other two are individuals. Clicking on a Twitter handle opens a new browser page with the most recent tweets displayed. You can also look at each maven’s user stats, which details the ticker symbols mentioned and the ticker-specific return and ranking.
ONCE YOU’VE IDENTIFIED BLOGGERS who provide information via Twitter that is positively correlated with a particular stock or sector’s return, you can add that maven to your Market Prophit dashboard and keep an eye on what they’re saying. You can also create an alert so that you receive an e-mail when they’ve put up a new tweet about your stock.
You can flip your display about a particular stock from what the crowd is saying to what the mavens are saying with a mouse click. Market Prophit is currently in its late beta testing phase and is free for now. Eventually, Gonta expects the site will offer subscriptions and premium content, and also provide an interface for brokers and other financial sites so that their content can be integrated with other third-party data.
If you’re using social media at all in your investing strategy, Market Prophit is well worth adding to your toolkit.
IT’S TIME FOR OUR 19TH ANNUAL review of online brokers. Help us refine the criteria for our survey by letting us know what is working for you with your online broker, and what is driving you crazy. If you’re not yet trading online, what feature could a broker offer that would entice you to sign up? Drop us a line at firstname.lastname@example.org .
Published in Barron’s, December 30, 2013.