Now You Can Leave Goldman Sachs, Too! Personal Wealth Management Start-Ups Multiply.
They say the best inspiration for starting a company is to build something you personally want. Well, it says something about the current state of Silicon Valley that a recent Web start-up trend is personal wealth management.
Disrupting investment banking is also particularly hip in the age of “Why I Am Leaving Goldman Sachs.”
The latest such start-up to launch is FutureAdvisor, which opens to the public today. The site helps users manage their index investments, and it says it is the only competitor to plug into 401(k) plans — it pulls data from 100 of the largest ones in the U.S.
Investing is “unnecessarily daunting,” FutureAdvisor CEO Bo Lu told me. “If we just bring the power of math, it’s actually not that difficult. Most people can put together a great portfolio in three funds.”
FutureAdvisor’s product is advice — it doesn’t help people move their money. Users need to have an existing 401(k), IRA or brokerage account to participate, though there’s no minimum investment. Automated advice is free, and users can pay an annual fee of up to $195 to video chat with investment advisors.
FutureAdvisor has been gestating for a while — the Seattle-based company participated in Y Combinator in 2010, and at the end of that year raised funding from Sequoia Capital, Keith Rabois and Jeremy Stoppelman.
FutureAdvisor isn’t disclosing how much it raised, in part because it’s peanuts compared to competitor Personal Capital, the wealth management start-up led by former PayPal and Intuit CEO Bill Harris, which has $27 million from IVP and Venrock.
Personal Capital, which last week launched an iPad app for asset allocation from the comfort of a touchscreen, offers tools to manage stock options, tax optimization and stock portfolios. A very basic version of the service is free, but the real product is active investment help. Users must invest a minimum of $100,000 within the system, and they pay a relatively low fee of approximately 1 percent of their assets per year.
The Redwood City, Calif.-based company is “focused on long-term money and complex households,” Harris said in a recent interview. Users can’t directly manipulate their holdings, but can connect to full-time financial advisors when they want to move things around.
Also in the online personal wealth management space — though I haven’t talked to them yet – are Wealthfront, which is backed with more than $10 million from DAG Ventures and individual partners at Andreessen Horowitz, and Betterment, which raised $3 million from investors including Bessemer Venture Partners. Both manage investment accounts on behalf of users, while charging what they say are reduced fees.
As an aside, one thing I’ve found interesting is that FutureAdvisor, Personal Capital, and virtually every financial start-up I’ve ever talked to, pays Yodlee to hook into accounts at various financial institutions. Seems like an excellent business.