NEW YORK--(EON: Enhanced Online News)--Corporate Insight today released an informative study examining a new generation of online retail investing-related startups. The comprehensive report, Next-Generation Investing: Online Startups and the Future of Financial Advice, examines more than 100 investing- and personal finance-related startups that have emerged in the wake of the financial crisis. Corporate Insight attributes this influx to such factors as widespread skepticism toward large financial institutions and improved technology that has allowed startups to quickly launch their platforms. The crisis has also made it easier for these startups to raise venture capital funding, as many VC firms see great potential in these innovators.
“These newcomers offer average Americans access to low-cost advice and investment solutions with fewer potential conflicts of interest and greater performance transparency.”
Corporate Insight, the leader in competitive intelligence and online user experience research in the financial services industry, has found that many of these online investing-related firms offer scalable, low-cost financial solutions that redefine how investors can obtain financial advice. The startups are more agile than traditional financial firms and are able to bring a wide array of services to investors via the Web.
“The financial crisis has sparked the creation of scores of innovative startups,” says Grant Easterbrook, Analyst at Corporate Insight. “These newcomers offer average Americans access to low-cost advice and investment solutions with fewer potential conflicts of interest and greater performance transparency.”
In the report, Corporate Insight conducted an in-depth analysis of 10 categories of new investment product and service offerings. Highlights include:
- Algorithm-Based Investment Advice: These firms provide automated buy/sell/hold recommendations for clients’ entire portfolio using aggregation of outside investment accounts. Examples of this approach include Jemstep, FutureAdvisor and SigFig.
- Trade Mimicking: An alternative to traditional asset management, investors can “follow” or “copy” the trades of an investment manager, retaining control of their own investments. Examples of trade mimicking firms include Covestor, Ditto Trade, eToro and TradeHero.
- Low-Cost Online Managed Accounts: By removing the human element of managed accounts, firms like Betterment, Nutmeg and Wealthfront are reducing the cost and minimums associated with basic investment guidance.
- Online Financial Advisor Search Tools: Americans increasingly rely on search engines and third-party reviews to make shopping decisions. The firms in this category – like VouchedFor, BrightScope and tippybob – apply the same thinking to help investors find a financial advisor.
- Online-Only Financial Advisors: Firms like eSavant, LearnVest and Personal Capital offer online-only personal financial advisor relationships without any face-to-face interaction. The lack of in-person meetings lets these firms charge lower fees than a traditional financial advisor.
- Online Financial Planning and Budget/Cash Management Tools: These do-it-yourself, user-friendly financial planning tools aim to help consumers plan for and achieve their financial goals. Examples include Planwise, Guide Financial and iQuantifi.
- Retirement-Plan Specific Advice: Several firms now offer free and paid retirement plan-specific advice, helping investors select the right combination of funds in their employer-sponsored plan. Examples include Kivalia, Smart401k and 401K GPS.
- Customizable ETFs: A substitute to traditional mutual funds or ETF products, customizable ETF providers like Motif Investing and Folio Investing let investors create a custom fund where they own all of the underlying securities.
- Real Estate Crowdfunding: Although these services are in limbo as the SEC finalizes new crowdfunding rules, this promises to give the average American the ability to directly invest in real estate for the first time. Unlike REITS, which provide diversification but not direct ownership, investors will be able to invest in shares of pre-vetted real estate opportunities.
- Tuition Financing Alternatives: A new collection of companies offer three new ways to finance the cost of tuition: a loan in exchange for a stake in students’ future earnings, crowdfunding donations and facilitating student loans from alumni at a lower rate. Examples include CommonBond, Pave, SoFi and Upstart.
The study features profiles of the pioneering online financial advice firms and investigates the potential impact these innovative ideas will have on the traditional investment industry. Through their research and analysis, Corporate Insight concluded that algorithm-based investment advice, trade mimicking, retirement-plan specific advice and low-cost online managed accounts have the most potential to make an immediate impact on the broader financial services industry.
“While the odds of success at many of these startups are long, their innovative ideas clearly have the potential to reshape the investment industry,” said Michael Ellison, President of Corporate Insight. “It will be fascinating to see how the industry’s biggest players respond to these disruptors.”
To download an in-depth preview of the study, click here. For more information or to schedule an interview with the study’s author, Grant Easterbrook, please contact:
Eileen Leonardo, Intermarket Communications
About Corporate Insight
Corporate Insight provides competitive intelligence, consulting and user experience research to the nation’s leading financial institutions. For over two decades, the firm has tracked technological developments in the financial services industry, identifying best practices in online banking and investing, online insurance, mobile finance, active trading platforms, social media and other emerging areas. The firm helps its clients to remain at the forefront of industry trends and improve their competitive position.
Further information on Corporate Insight is available at www.corporateinsight.com/about-us.