After five years of trying, online investment management firm Wealthfront seems to have hit on a formula that works. Its assets under management jumped nearly five-fold last year to top $500m.
Of course, this hardly counts as a drop in the bucket in an industry where huge scale really matters. Vanguard and Charles Schwab count their assets in the trillions. But it hints at a fast-growing opportunity for new online financial brands if they can hit the right formula – as online credit firm LendingClub has also proved. Read more
I confess to being a stick-in-the-mud when it comes to investing in the stock market. As a committed adherent of the efficient markets hypothesis (I know, I know, they haven’ t always looked that efficient recently) you can count me among those who find it hard to believe that any money manager can consistently beat the indices.
Add in the the high fees and lack of transparency that come with active managers, and it doesn’t seem that customers are well-served by this particular part of the financial services industry.
That’s what makes a site like Wealthfront interesting. If the web is the perfect medium for raising transparency and reducing distribution costs (and fees), then this is a good demonstration of how to go about it. Read more