The Impact of the US Election and Your Portfolio

With the election now in books, it’s important to reiterate SigFig’s view about managing your portfolio in an uncertain future. For many people, investing for the future is a very long-term endeavor, with most people living through 10-to-12 Presidential elections over the course of their careers. In the grand picture, last night’s events represent a single moment in a long lifetime.

At the same time, markets tend to disfavor uncertainty. Most projections had Clinton winning the election and with a Trump victory, stock market volatility is likely to increase, as the election’s unpredictability is weighed and priced in. Nonetheless, we encourage our clients to stay the course.

In practical terms, holding a diversified portfolio insulates our clients from some of the medium and longer term impact of an unexpected result. This is because there are likely certain industries, companies, and countries which will do better under a Trump Administration than they might have with Clinton in the White House. Furthermore, though Trump could act quickly to undo some of the Obama Administration’s economic agenda, significant changes in direction would would require the cooperation of Congress and the Courts.

On the whole, the future may become more challenging for investors, yet a diversified portfolio remains the most appropriate long-term approach to managing your investments.

Terry Banet

Terry Banet is SigFig’s Chief Investment Officer. With over 25 years of investment experience, Terry has held senior investment management and private banking positions at JPMorgan and USTrust.

All Financial Advisors Should Put Their Clients’ Interests First

terry_200pxIn the United States, physicians do more than uphold the Hippocratic Oath. They have a fiduciary duty to their patients. In other words, doctors are required by law to put the interests of the patient above their own.

Now, imagine if a group of American physicians argued that they should be exempt from this standard.

As the White House considers a proposal to expand the fiduciary standard to brokers and insurance agents, we are hearing exactly that argument when it comes to financial advice.

Given how much consumers stand to lose from questionable financial advice, it’s hard to believe that all advisors do not have to operate under a fiduciary standard already. Registered investment advisors and 401(k) plans, for example, are fiduciaries. Some professional designations, such as Certified Financial Planner, also carry a fiduciary promise.

In most states, however, brokers and insurance agents operate under the lower standard of suitability, under which an advisor cannot recommend an investment grossly out of line with the investor’s age, risk tolerance, or liquidity needs. The advisor can, however, recommend an expensive fund that pays him a commission, even when a cheaper fund exists.

We’ve explained again and again how high fees can decimate investors’ nest eggs. Those arguing against the fiduciary standard are effectively saying, “We can’t make enough money if we’re forced to treat our clients fairly.”

One possible argument against expanding the fiduciary standard could suggest that hiring a fiduciary is no guarantee that you’ll get good advice, and that it would make more sense to enforce the standards already in place before expanding them.

This argument doesn’t make sense. There are bad doctors out there, too, but no one seriously believes that lowering the standard of care for doctors would result in better choices or outcomes for patients.

The fact is, anyone who wants to hire a fiduciary can do so. Most investors, however, do not know what the fiduciary standard is or whether their advisor meets it. As the SEC puts it:

“Investors typically make no distinction between broker-dealers and investment advisers, and most are unaware of the different legal standards that apply to their advice and recommendations.”

This is particularly true when the advisor operates under the suitability standard. No broker will intentionally wear a button saying, “Ask me why I don’t put my client’s interests first.”

Whether they work for brokers, RIA firms, or insurance agents, financial advisors perform similar jobs and have significant influence over their customers’ livelihood. We should hold all advisors to a consistent standard of care: the fiduciary standard.

Terry Banet

Terry Banet is SigFig’s Chief Investment Officer. With over 25 years of investment experience, Terry has held senior investment management and private banking positions at JPMorgan and USTrust.

SigFig Launches Diversified Income Portfolio, with 4% Target Yield and Low Volatility

Generating investment income is a goal for many investors, especially for those in or approaching retirement. Unfortunately, most investors who seek income do a poor job of it. They are often poorly diversified (64% of income investors own three or fewer stocks*), or generate low yields by investing in cash and bonds, and almost always have US home-country bias.

With that in mind, the investment team at SigFig set out to create a well-diversified portfolio with a generous income stream while managing risk. Today, we are excited to unveil SigFig Diversified Income, a portfolio that is designed to target a 4% income yield by blending eight different income-generating ETFs. By diversifying across many asset classes and geographies, our Diversified Income portfolio provides 4% gross annualized yield** with half the volatility of the S&P 500.

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Unlike traditional wealth management firms who frequently have high minimums of $1 million or more and charge high fees of over 1%, the SigFig Diversified Income portfolio has a minimum investment requirement of $100,000 and management fees of 0.50% which include all trading commissions. And unlike bonds and CDs, which can be hard to sell before they mature or are subject to early withdrawal penalties, our Diversified Income portfolio can be sold at any time, for any reason.

At SigFig, our mission is to help investors improve their portfolios by balancing risk and return and minimizing fees. With this product, investors who seek income can do so at reduced volatility and at very low cost.

Want to know more? Click here to speak with a SigFig Investment Advisor, who will answer any questions you may have.



* Data is from investors who have synced their investment portfolios with SigFig who are 40+ years old with at least 30% of the portfolio in dividend stocks or AGG/BOND/TIP. Historical data to calculate yields and volatility are from Yahoo Finance and Google Finance.


** Target yield of 4% is net of underlying fund expense ratios and gross of management fees. Since its inception 5/31/2012, the Diversified Income portfolio has gross annualized yield of 4.3% and net annualized yield of 3.8%.


Additional disclosures: Target returns are based on model performance and do not represent actual client accounts. There are inherent limitations with model portfolios, such as the limited impact of market factors related to executing trades or liquidity, among other limitations. The target results are not an indicator of the returns a client would have realized or will realize in relying on the Diversified Income portfolio. Past performance is no guarantee of future return. All investments carry a degree of risk. For more information and disclosures, please visit https://www.sigfig.com/l/terms.

Terry Banet

Terry Banet is SigFig’s Chief Investment Officer. With over 25 years of investment experience, Terry has held senior investment management and private banking positions at JPMorgan and USTrust.