People receive financial advice in a number of ways. Some people turn to friends and loved ones that they perceive as being successful financially for advice on how to manage their finances. Others choose the assistance of a financial advisor who is paid to help them manage their finances effectively. Now, there are dozens of new investing and personal finance-themed startups that are designed to make financial management easier for all consumers.
These companies offer everything from algorithm-based investment advice to online financial advisor search tools to online financial planning and budgeting tools.
LearnVest originally started as a budgeting Web site directed at women.
Today, LearnVest offers both online financial advisor services as well as free budgeting tools. In the four years that the company has been in operation, it has provided comprehensive and conflict-free financial advice to the middle class.
Founder Alexa von Tobel wanted to make financial advice as widely available and affordable as any other mass-produced consumer product or service. LearnVest charges a $399 upfront fee and $19 a month, or $608 annually, for its financial planning services. Customers that are just interested in reaching a particular financial goal, like paying off debt or starting a budget, can obtain help for less.
LearnVest recently received another large round of financing from investors which will allow the company to expand its hiring as well as open a training and adviser hub in Phoenix. The company will be releasing a newly designed product, a seven-step customized financial plan, in the near future. The company is also working on a potential deal with American Express, one of its new investors, and is working with employers and financial planning firms to sell its program within 401(k)’s.
Betterment offers straightforward online tools that allow savers to manage their investments themselves. Betterment allows people to roll over their personal or corporate retirement plan and they can connect their bank accounts to Betterment’s own systems. People who move their retirement or savings accounts to Betterment can choose from index and exchange-traded funds from Vanguard and iShares. Customers also have the choice to leave most of the decision-making to Betterment’s software by inputting information about their goals and risk tolerance.
Betterment charges an annual fee on the assets it manages. The fee for Betterment’s no-minimum account begins at 0.35% annually. Customers who can afford to put more in and elect to maintain higher account balances are charged lower rates. The company currently manages more than $200 million in assets for thousands of customers, mostly in the form of savings and retirement accounts.
Betterment CEO Jon Stein believes the financial services industry should use crisply designed technologies that make financial management easier, smarter and more efficient. Betterment is very user-friendly, so if someone doesn’t have any specific financial goals set, the site will suggest some based on what other users with a similar income level or profession profile are saving for. Betterment tries to cut through the complexity to make financial decisions as easy as possible for the account holder.
Sigfig offers algorithm-based investment advice based on users’ aggregated accounts. The company’s advice gives investors recommendations for how to optimize their investment portfolio with regards to fees, management expenses, and risk adjusted returns. SigFig allows its user to link accounts from more than 100 different brokerages. The company also offers weekly suggestions for saving money and improving investment performance.
SigFig was initially known as Wikinvest, an investment tracking wiki. The company changed to its current advisory business model in May 2012 after becoming an SEC-licensed Registered Investment Advisor (RIA). According to co-founder and CEO Mike Sha, the company relies on data-driven analysis to deliver “unbiased, scientific portfolio recommendations.”
SigFig utilizes a business-to-business-to-consumer (B2B2C) distribution model. The company licenses its Web and mobile investment tools to publisher partners in exchange for a revenue share. SigFig also generates referral fee revenue when a consumer switches to investment advisors recommended by the company. The company doesn’t take commissions on trades or collect an asset management fee.
Jemstep is a money-management website that lets retail investors import their retirement-account data and get automated advice. The company was founded in 2008 by Michael Blumenthal, a former stockbroker who is now the company’s co-chief executive officer. Today, the company has a membership of around 2,000 users, including employees at Google and EBay.
In January, Jemstep began offering its automated portfolio manager to the public as a free service. For suggestions about specific funds to buy and sell, the company charges a flat monthly fee that starts at $18 per month and is based on the size of the user’s retirement portfolio. Advice on asset allocation is free.
The service will remain free for those managing less than $25,000 in retirement assets, but for those managing larger portfolios, the cost can be as high as $70 per month. However, those with larger portfolios also get to take advantage of the company’s portfolio analysis service as well as tracking and rebalancing advice.
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