FutureAdvisor is an online investment advisor that offers a blend of automated asset allocation and active management to optimize investment portfolios. The product works in tandem with online brokerage accounts (Sharebuilder, TD Ameritrade, etc.) to monitor and rebalance portfolios while providing periodic personal guidance. The service examines finances and allocates assets based on risk preferences to (reportedly) provide gross returns similar to those of traditional advisors, but superior net returns thanks to a lower fee structure which totals 0.5% of assets under management.
FutureAdvisor is positioning itself as a simple, smart approach to investment advisory at a lower cost than the traditional channels thanks to the use of technology. Accordingly, the product appears to target professional, technology-literate people who perhaps don’t have the time, patience, or general desire to seek out a traditional advisor. FutureAdvisor appears to be differentiating itself by offering the active management and the global view of a personal advisor, and the low cost and automation of an online brokerage, essentially filling a gap that these two services don’t currently offer.
The market for FutureAdvisor could clearly be large, as millions of passive investors may want more than an online brokerage offers without the cost of an advisor. One clear (and obvious) challenge will be that investment advisory is a severely crowded space. There are scores of online brokerages and personal financial advisors already. How FutureAdvisor cuts through this crowd to access its customer (likely passive and not actively seeking a product) seems to be the challenge.
Please Note: I was not in class for the first week and was granted a seat in the second week, which is why I am posting this now (didn’t have access to Canvas or WordPress until this week). Thank you!