What Did Your Brokerage Firm or Investment Adviser Do Wrong With GWG
Published On: July 25, 2021

Chicago-based Stoltmann Law Offices is investigating cases where investors have suffered losses from “robo-advisors.” In recent years, the rise of robo-advisors has been dramatic. These highly automated platforms will not only recommend securities and mutual funds, but create entire portfolios online or through a do-it-yourself (DIY) phone app.

The convenience and speed of making trades on your smartphone, however, doesn’t always reduce the chance that you’ll lose money. Many of the algorithms used to push securities don’t pay close attention to personal risk tolerance and are often loaded with hidden fees. And many robo accounts may automatically funnel customers funds into cash accounts, which are a money-losing proposition when you account for inflation.

The mega-brokerage Charles Schwab, which operates one of the largest robo platforms (Intelligence Portfolios), recently disclosed that it will take a $200 million charge in the second quarter regarding the U.S. Securities and Exchange Commission’s (SEC) probe into its robo practices.

“One practice that became a lightning rod was the hefty amount Schwab’s service would direct of a client’s funds into cash, ranging from 6% to 22.5%,” Investment News reported. “In 2016, the cash in client accounts was earning 0.08% at a time when some online high-yield savings accounts were offering 1%. Now, the interest rate Schwab pays on cash is 0.01%. People who kept assets in cash over the past few years would have missed out on large market gains.”

On its website, Schwab says: “We believe cash is a key component of an investment portfolio. Based on your risk profile, a portion of your portfolio is placed in an FDIC-insured deposit at Schwab Bank. Some cash alternatives outside of the program pay a higher yield.” According to Investment News, robo-adviser accounts skyrocketed during the pandemic: “Robo-advisers have experienced a meteoric rise since their debut in 2008. Assets managed clocked in at $460 billion in 2020 and are predicted to grow to $1.2 trillion by 2024, according to a white paper by Plaid. Schwab Intelligent Portfolios, for one, has experienced a 51% year-over-year increase in client assets at $64 billion as of the end of March, according to the company’s 8-K filing.”

“Accounts at online brokerages, too, skyrocketed during the pandemic with more than 10 million new brokerage accounts opened in 2020, according to J.D. Power. Brokerage platforms such as Robinhood snatched 27% of all new DIY account openings, more than any other firm.”

Of course, offering bad advice is a perennial anti-investor issue in the brokerage industry, even if that advice is offered by a robot. Brokers can still be held accountable for losing money in robo-advisor accounts.

If you invested with the Schwab robo advisor “Intelligence Portfolios” and lost money as a result, you may have a claim to pursue through FINRA Arbitration. Please contact Stoltmann Law Offices, P.C. at 312-332-4200 for a free, no obligation consultation with a securities attorney. Stoltmann Law Offices is a contingency fee law firm which means we do not get paid until you do!


The posting on this site are mere OPINIONS and NOT statements of fact in any way whatsoever. The information should not be relied upon and there have been no findings made against the firms or individuals referenced on this site. In addition, this Blog is made available for educational purposes only and incorporates information from the web as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and Stoltmann Law Offices (161 N Clark Street 16th Floor Chicago, IL 60601). The Blog opinions should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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