You may have heard of Wealth front (formerly kaChing), a startup that has revolutionized the investment and personal finance space. As we’ve written in the past, Wealthfront has given average investors access to registered fund managers who might otherwise require a minimum investment of $ 1 million or more.
Today, Wealthfront is launching its Online Financial Advisor for the Tech Community, reaching out to professionals in the tech communities who prefer to do everything online and are looking for ways to manage their new wealth at much lower fees.
Finding (and paying for) a high quality financial advisor can be a difficult task. First of all, you may not meet the minimum for some private wealth management advisers, which require millions of investments. And if you qualify, these advisors take 1% or more of the returns.
What makes Wealthfront’s web service unique is that it brings a fund manager’s quality investment theories online, at a much lower price, essentially democratizing private wealth management for the masses. . The company uses modern, industry-standard portfolio theory, which until now has remained out of the reach of consumers and can only be accessed through expensive financial advisers.
MPT optimizes the expected returns of your portfolio for your acceptable level of risk. Until now, rigorous MPT-based financial advice has only been available through high-end financial advisers.
Wealthfront automates the application of this investment model, which has been open source by Goldman Sachs. Co-founder Andy Rachleff, who was previously one of the founders of Benchmark Capital, explains that the startup initially targets the tech community because that community feels comfortable managing money online. And Rachleff adds that many tech pros have actually started asking Wealthfront for a dedicated online platform.
When you start using Wealthfront, the platform will ask you a number of questions to assess your risk, in order to create a tailor-made investment plan. For example, Wealthfront will ask if you have any stock options, if you have ever made an angel investment, etc.
The platform will then recommend an optimized portfolio of carefully selected exchange-traded funds (ETFs) spanning six asset classes, and periodically monitors and rebalances the mix of investments to maintain the risk tolerance desired by the client. Rachleff explains that Wealthfront only uses exchange-traded index funds, as the target audience of tech professionals tend to be fans of ETFs due to their low cost.
Another element of the platform that Rachleff highlights is transparency. Wealthfront will show exactly what you will be investing in before you commit. Users have full visibility into the performance of their portfolio at all times. And there is no advisory fee on the first $ 25,000 under a client’s management, and only a 0.25% fee on assets over $ 25,000.
And now is the time for a focused platform focused on money management for tech professionals. With the current liquidity unfolding in the tech world with both acquisitions and IPOs of LinkedIn, Pandora and many more to come, Wealthfront is an attractive alternative to investing your money with a Goldman Sachs, UBS or another private wealth manager. Already, Rachleff says the number of early Facebook, Skype, LinkedIn and Zynga employees have signed up to use the platform.
The startup has raised more than $ 10 million from DAG Ventures and individual investors including Marc Andreessen, Jeff Jordan and partners from Benchmark Capital, Index Ventures and Kleiner Perkins Caufield & Byers. Wealthfront faces competition from Improvement.