Free ETF Robo-Advisor Thinks Small

August 07, 2014

WiseBanyan offers free online financial advice, fractional shares and no minimum account balance.

WiseBanyan is one of the newcomers to the so-called robo-advisory space. Going head-to-head with heavyweights such as Wealthfront and Betterment, the firm is hoping its focus on the smallest—and often youngest—investors will put them in a niche all of their own.

Herbert Moore, co-founder of WiseBanyan, told us how its approach is different, and why a free-of-charge portfolio management model—for which you have to put your name on a waiting list—is proving to work. What’s more, WiseBanyan is one of the first to crack ETFs into fractional shares, promoting true portfolio diversification for even the smallest clients. How did WiseBanyan come to be?

Herbert Moore: We launched in October of last year, but that was a very quiet, private beta launch to put 50 clients onto our platform to see how it worked. With the learning we got from those clients, we changed some things, beefed up some things and then we launched publicly in very late February/early March as the world’s first free online financial advisor.

We offer the same portfolio management that Wealthfront and Betterment uses, but we have our own portfolio of ETFs that we’ve created. What sets you apart from other online advisories?

Moore: We service those who are underserved by traditional financial advisors. But that’s really the same line as other robo-advisors give. Where we’re different for the client is we have no fees. There are no trading fees, no transfer fees, no advisory fees. And there’s no minimum to start.

One of the most interesting, and also most terrible, statistics is that over half the people in this country couldn’t come up with $5,000 in cash if they needed to. Even though a firm like Wealthfront has brought the barriers down pretty low, they’re still ignoring a large segment of the population, and a lot of those people are young and they’re completely underserved by the investment industry.

WiseBanyan allows them a way to start earlier with less money. Our clients are younger than Wealthfront’s and they’re younger than Betterment’s. And frankly, we’re growing a lot faster than they were when they first launched.

Since our launch in March, we have had 14,000 people join our waitlist to sign up. We’ve had 1,200 people open live accounts. We’re seeing really high adoption by younger people, and by older people too, who have already realized that this is the right way to invest. What’s the average age of your client? And how much assets under management do you have today?

Moore: We have about $5 million in assets managed. Our average client is 34 years old.

The average account size on WiseBanyan is about $4,000. Forty percent of our clients have an auto-deposit set up, and the average auto-deposit is $400 a month. Truthfully, Wealthfront and Betterment do this as well, but for most people, even if they have enough assets or know-how to use an E-Trade account, just the idea that we’re saving them hundreds of dollars on trading fees every year is very appealing.



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