It’s been about two years since FutureAdvisor launched to advise people in managing their 401(k)s and other retirement accounts. In that time, it’s grown dramatically, and now analyzes $4 billion in retirement funds. With that in mind, the startup has raised a $5 million Series A round from Sequoia Capital to accelerate its growth, and it’s also rolling out a new tool to help users save on fees in their 401(k) portfolio.
FutureAdvisor co-founder Bo Lu told me that only the very rich can afford to hire professional investment advisors. But here’s the catch: Humans are notoriously bad at beating the market. Not only do they pick stocks poorly, Lu said, but they “charge you for the privilege of bad advice.” FutureAdvisor believes that it can do better, and has built a platform to help users make better investment decisions.
While it’s been around for about two years, FutureAdvisor only launched publicly about four months ago. Even so, it’s gotten some serious traction, as it now makes recommendations for more than 11 million Americans’ 401(k) accounts. That’s $4 billion in assets, and in aggregate, it expects to save those users up to $50 million projected over their lifetimes. It does that by suggesting better-performing investments for its users.
With growth like that, it’s no wonder Sequoia, after leading FutureAdvisor’s seed round, has put additional money into the startup. This round adds $5 million more to the startup’s coffers. Other investors include Square COO Keith Rabois and Yelp founder Jeremy Stoppelman.
In addition to the funding, FutureAdvisor announced a new feature that could help users save even more money, by showing them how much they’re losing in fees. Thanks to new disclosure regulations requiring companies to tell investors about fees associated with their offerings, FutureAdvisor has introduced a new 401(k) fee analyzer. It visualizes the amount of money paid out to mutual fund providers who manage various funds, and makes suggestions for other, similar investments that don’t carry the same fees. The new tool is available at www.futureadvisor.com/401k.
FutureAdvisor was founded in 2010 on the premise that investing for your future does not have to be difficult or expensive. Members of the founding finance team have been actively investing and worked in finance for years, and so have always been the ones friends asked for advice. We eventually realized that most of our friends were asking the same questions (how should I allocate my money?), making some of the same mistakes (buying high-fee funds), and that the...