A new report examining online financial startups such as Covestor highlights how the financial services industry is evolving as investors grow more comfortable using the internet for research and building portfolios.
“Online financial startups are starting to take root with investors. A report released Wednesday by Corporate Insight analyzed 11 online investment advice providers and found that combined they have more than $11.5 billion under management or advisement,” ThinkAdvisor reports.
“With a few exceptions — Covestor, MarketRiders are a little older — most of these services have gone live in the last year or two. Overall, they’re pretty young,” said Grant Easterbrook, an analyst for Corporate Insight, in the article.
“The basic idea here is they’re trying to build a very scalable model. They want to make it very low-cost at each new customer,” Easterbrook said. They can also onboard clients quickly with online tools.
“Members of Generations X and Y value online and mobile services more than quarterly face-to-face meetings. They also tend to be more concerned about costs and transparency than their parents are. These factors benefit startups, which provide more engaging digital services and more affordable advice than traditional wealth management firms offer,” Easterbrook said in a separate report by MainStreet.
“It addresses a gap in the mass affluent investor market, [that is] the lack of affordable, objective and rigorous portfolio analysis and investment advice,” he added. “After algorithm-based advice, trade mimicking probably holds the strongest near-term promise. It’s well suited to active traders and sophisticated self-directed investors who want to benefit from the success of other traders/investors.”