(Forbes) Swanest has developed a robo advisor with a difference — it uses algorithms rather than models so individuals can develop and analyze their own portfolios of stocks, ETFs, funds, commodities and crypto investments. It focuses on what is inside a portfolio and the risks of each investment.
‘Swanest uses algorithms to build investment tools that help private investors in taking better investment decisions. Making sense of financial data, crunching complex theories and seeing the big picture has never been easier,” the company explains on its web site. Its Tooltip performs an automated quantitative analysis on any stock, ETF or mutual fund to identify opportunities and risks.
Silvan Schumacher, CEO and co-founder of Swanest, said the tool provides individual investors with access to state of the art financial theories through its algorithms.
“The one-size-fits-all approach to managing one’s investment portfolio is outdated. Self-directed investors want the option to personalize their portfolio – and have a co-pilot by their side while managing their assets. This includes access to tools and calculators that enable them to conduct their own risk analysis without any complexity and with the same confidence of financial analysts.”
It is not aimed at day traders but investors who are looking at the mid to long term in their holdings. For instance, said Schumacher, the Risk Score of the Risk Scanner takes into account indicators such as risk/reward ratio, highest loss in the past, liquidity of the asset, market capitalization, capacity to recover from losses — all indicators that focus on the overall quality of assets, rather than their short-term movements.
“Traditional analysts and brokers tend to focus on the short-term, as their business model focuses on the generation of trades. However, such investment strategies often harm investors more than the help.”
Swanest sells to financial media and offers two versions — a white-label publishing site can be used on a subscription basis or a branded version with a revenue-sharing model. Media such as De Tijd, L’Echo and wallstreet:online have already implemented the plugin. The company, which is based in Brussels and London has sold mostly to European financial media firms.
In January 2019, Swanest will launch a new portfolio tool, which will be accessible globally.
“As a first feature, we will release a simple portfolio tracking and analytics service in January 2019,” said Schumacher. “Swanest will connect to third-party investment services to help its users invest in stocks, ETFs, mutual funds and crypto currencies. Therefore, its users get access to a wide universe of investment opportunities. However, for the purpose of simplicity, it will also provide model-portfolios and include single stocks or crypto currencies as well.”
Schumacher said that existing robo advisory services and personal financial advisors provide only limited personalization.
"At the end of the day, such services always provide the same investment portfolio but with different allocations. The parts that are personalized are the financial objectives and the risk profile.” But the portfolios themselves are not personalized.
“To be frank, not everyone wishes to personalize a portfolio. However, if users do wish to personalize a portfolio, it can quickly get tricky. Some investors simply wish to be sustainable in their investment strategy, others want exposure to commodities and still others are interested to invest in certain companies. Such a degree of personalization is currently only provided to high net-worth individuals, where the advisor receives sufficient compensation to dedicate his time to manage a personalized portfolio.”
No technology can provide automated advice and management for such a degree of personalization yet, he added — Swanest wants to fill that gap in the market, which he admitted is not an easy task.
“First, services quickly tend to become too complicated, which needs to be avoided to remain accessible to a wide mass of users. Second, suddenly you need to deal with a huge amount of data that needs to be processed in real-time. Lastly, algorithms that provide investment advice and management must work for any portfolio, and not just one type of model portfolio.”
Swanest will offer regulated services in Europe first, and then depending on the user feedback, it may provide regulated services in the U.S. as well.
Swanest provides its services to self-directed investors through its website and offers a solution to independent financial advisors as well.
The hybrid approach — directly to investors and as a tool for advisors — is similar to SigFig. Schumacher said that SigFig is an inspiring case for Swanest for several reasons, including its acquisition strategy of working with the media to attract customers to its website and its ability to attract billions of assets to its portfolio tool.
He noted that while partnering with banks provides faster access to customers, that can limit the ability to take fast and personalized decisions. By providing technology to independent advisors, Swanest lets them offer fully personalized portfolios and personal investment advice, Schumacher said.