Our robot overlords won’t be pleased. The Wall Street Journal reports that high-profile 401(k) robo-advisor Betterment, described as “a pioneer in the world of automated investing,” suspended all trading Friday morning as markets were reacted to the U.K.’s vote to leave the European Union.
It’s another point sure to contribute to the robo-advisor debate, and in particular their effectiveness in generating successful 401(k) participant outcomes.
The paper adds that clients say they weren’t aware of the halt, raising questions around how robo- advisors communicate with clients during market volatility.
Betterment, based in New York, manages $4.8 billion. It told the Journal that it took the step to “protect investors from paying the higher transaction costs associated with buying and selling securities during times of extreme market volatility.”
The halt ran from the market’s 9:30 a.m. open until noon.
“If there is some highly unpredictable volatility expected, what we do is not trade into it,” said Boris Khentov, vice president of operations at Betterment. “Trading into one of those wild price swings is undesirable for our clients.”
Betterment caused a stir last September when it announced a plan to target the 401(k) plan market. They made good in January with the official launch of Betterment for Business. The 401(k) platform, which uses technology and includes personalized investment advice for all plan participants, went live for a charter group of plan sponsors and participants.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
