If an investment portfolio gets optimized through an online investment advisor, do brick and mortar brokers make a sound?
As noted in today’s Wall Street Journal, many of the kinds of services that once were accessible only by high net worth investors patronizing financial advisors and planners in person are now available to the rest of us. This includes everything from using computer algorithms to make investment decisions to automatic portfolio rebalancing and asset allocation.
And of the seven companies highlighted in the column for helping make this possible, every single one is a Finovate alum.
In fact, two of the seven – FutureAdvisor and LearnVest – will be demoing their latest technology on the Finovate stage in New York next week for FinovateFall 2013
The reasons for the growth in online investment advisory are as varied as the companies themselves. Some cite a new generation of investors far more comfortable with both handling their own finances and trusting the Internet to help. Others suggest that with Wall Street falling into disfavor in the wake of the financial crisis, more investors are willing to seek out non-traditional – and less expensive – sources of information and advice.
Bill Doyle, an analyst for Forrester Research who has studied the industry for more than a decade and is quoted in the column, puts it this way: “I’m paying a lot more attention this time around because the software required to transform this industry finally works.”
Whatever the reason, there’s no doubt that venture capitalists believe this time is different. Consider the funding success of the above seven companies in the past two years ago:
Note also that Wealthfront, which helps get investors into low-cost diversified portfolios, has assets under management (AUM) of $300 million. Betterment has a similar model and has AUM of $250 million.
This quarter, both January and Feburary funding exceeded $50 million. Most of February’s funding can be attributed to On Deck Capital’s $42 million round.
Over three months, 15 companies raised more than $155 million, This is very similar to last year’s first quarter funding* when we saw a total of 11 companies raise more than $150 million.
Here’s the Q1 summary for 2013:
January — $57 million raised by 6 companies
February — $56 million raised by 5 companies
March — $42 million raised by 4 companies
*While the funding over last year has increased, so has the number of Finovate alums. We’re tracking more than 100 additional companies this year compared to last year.
Note: Funding that companies received before they demonstrated at Finovate was not counted. Questions? Comments? Email us at firstname.lastname@example.org or email@example.com.
Index Ventures, Greylock Partners and the Social+Capital Partnership have just made financial advisory service Wealthfront $20 million wealthier.
Joined by angel investors from institutions as diverse as WordPress and the San Francisco 49ers professional football team, the funding round provides a significant shot in the arm to a start-up still seeking to distinguish itself in a crowded and growing marketplace.
Wealthfront is an online, SEC-registered financial advisory service geared toward average, non-accredited investors who want actively managed accounts. The service includes such features as tax-loss harvesting (for accounts above $100,000) and automatic rebalancing. Note that both of these features are often accessible only through in-person, human brokers and financial advisors.
The company has seen growth in assets under management of more than 70% since 2013, totaling more than $170 million.
Wealthfront first appeared on the Finovate stage as part of FinovateStartup 2009. Then doing business as “kaChing”, the company presented their virtual investing environment. To see their demo, click here.