Web Startup Aims to Protect Your Bottom Line SigFig audits investment portfolios to uncover extra charges.
By Marty Jerome
Opinions expressed by BIZ Experiences contributors are their own.
What it is
Most financial advice is a witch's brew of hidden fees and other costly "gotchas" that can turn investment gains into losses. SigFig is a free site that exposes some of this. In less than 60 seconds, it runs all your investments--401(k)s, IRAs, trading and managed accounts, mutual funds--through its ever-evolving algorithms to show you where you're getting burned from fees and overcharges. The site then makes recommendations for changing underperforming assets. And it does all this with bank-level security. In a little over a year, the company has synced with some $30 billion in customer assets.
How it started
Founders Mike Sha and Parker Conrad began day trading out of their Harvard dorm room. They went on to found education site Wikinvest. Seeing the need for better tracking tools, they built Wikinvest Portfolio Tracker, which lets investors follow assets across brokerages.
The tool exploded. So they launched another one--adding to their bare-bones accounting machinery a feature they built called SigFig, which reveals the hidden fees, overcharges and weak assets buried in various managed funds.
"One in five users who owns a fund owns one with a load fee that's greater than 4 percent," Sha explains. "That money gets paid directly as a commission to their broker, which is especially disappointing because people who own those funds were sold them by their brokers when there was very likely an identical fund with very low fees."
Why it took off
The site is free, secure--and fast. Analysis takes less than a minute. The tool, not brokers or screaming TV stock pickers, makes recommendations. Investors have quickly embraced the tool for its impartiality.
The business
SigFig is not yet profitable. ( "We've been investing heavily in growth over the past year," Sha says.) But how does it make money at all? The company is adamantly not in cahoots with brokers, its team will tell you. Instead, commissions are made from referrals to a hand-selected group of registered investment advisors who have a fiduciary responsibility to their clients, not to any brokerage or mutual fund. In addition, SigFig will sometimes pocket a referral fee for a user who opens a new account with a brokerage listed on the site.
The site claims to save investors an average of $5,000 in annual fees and investment "optimizations." With more than 100 million U.S. retail investors ($21 trillion in total assets), the market potential is huge.
Initial funding came from VC powerhouse DCM and angel investors Mark Britto (CEO of Boku), Owen Van Natta (former COO of Facebook), Bill Harris (former CEO of Intuit and PayPal), George Moffett Cochran (former president of Credit Suisse Asset Management) and Charlie Cheever (co-founder of Quora), among others.
What's next
Premium services--as yet undetermined--may bring in new revenue streams. Meanwhile, media partnerships with CNN and Forbes continue, with an eye to powering their audiences' portfolio trackers.
