Covestor lines up five money managers for ‘adviser-less’ platform

A unique separately managed account platform that takes the financial adviser out of the equation has received a boost as five money management firms have come on board.

Covestor Investment Management tomorrow is expected to announce the addition of Navellier & Associates Inc., AlphaMark Advisors LLC, Braver Wealth Management LLC, King Investment Advisors Inc. and Mosaic Financial Partners Inc. Collectively, the five firms manage more than $4 billion.

The Covestor platform, CV.IM, was launched in July. Currently, it offers access to 46 investment strategies that investors can track and customize by opening a $10,000 account.

The five new management firms will add 12 strategies to the mix. According to Covestor chief executive Perry Blacher, the platform will boast about 100 strategies within a few weeks.

The platform was rolled out as an alternative to traditional separate-account models, which require working with a broker or adviser intermediary.

Some representatives of the managed-account industry originally criticized the platform for using amateur and hobbyist money managers.

Mr. Blacher said about half the strategies on the platform are currently managed by individuals. Some of the strategies are managed by registered investment advisers with as much as $300 million under management.

The signing of such brand names as Navellier is a significant move that could bring new validity to the platform, he believes.

“Nobody wants to be the first firm to do something like this,” Mr. Blacher said of the money managers that Covestor has been wooing.

One other issue that he admits might have prevented some money managers from joining Covestor is that “they don’t want to upset their wirehouse relationships.”

Wirehouses still represent about 70% of the managed-accounts industry. But Mr. Blacher said firms are getting around competing directly with the wirehouses by offering different strategies on the Covestor platform.

“We see this as a significant new distribution opportunity,” said Louis Navellier, chairman, chief executive and chief investment officer at Navellier, which manages $2.7 billion.

“Covestor represents an entirely new and efficient channel for investment managers, benefiting investors and market participants alike,” Mr. Navellier added. “That connection, and its potential, is what motivated us to participate.”

Mr. Blacher refused to disclose the number of investors or the amount of assets that are currently on the platform, but he did say that the average client account size is $60,000 and that in October, the platform had its first $1 million trading day.

Although the platform is marketed as an alternative to traditional money management, including mutual funds, Mr. Blacher said he is not going after the wirehouse market.

“We have a different audience from the unified management account and separately managed account,” he said. “We’re catering to people who are self-directed investors with between $100,000 and $1 million worth of disposable assets.”

Like the more traditional wirehouse model, Covestor is now offering more access to money managers who might otherwise be out of reach for many investors.

King Investment Advisors, for example, has a $250,000 minimum for anyone coming directly to that firm. And Mosaic has a $2 million minimum.

But where Covestor still stands out from the wirehouses is that it offers access to a wide range of portfolio managers. Those managers are allowed to set up shop on the platform as long as they have at least a one-year verifiable track record and a strategy that can be easily replicated.

Related Topics: Separately Managed Accounts (SMAs)