Wealth Management Startup FutureAdvisor Raises $15.5 Million

Looking to bring top-flight wealth management services to the middle class, FutureAdvisor has raised $15.5 million in fresh capital.

The round was led by new investor Canvas with participation from the company’s previous investors including Sequoia Capital. Y Combinator, one of the country’s top accelerators, provided the initial boost for the company’s launch into the marketplace in September 2013.

Unlike other wealth management tools like Betterment or Wealthfront, FutureAdvisor is catering to a different, less wealthy clientele.

“We cater to the mass middle American market,” says chief executive Bo Lu matter-of-factly. “Our clients are people like airline pilots or military officers. These are people who are diligently saving for their long term financial future.”

Unlike the other services, which are tackling a different price-point and type of user, typically tech-savvy and more wealthy, the classic client for FutureAdvisor has roughly $100,000 and multiple accounts with different institutions,” Lu says.

In some ways, the FutureAdvisor service is similar to other offerings on the market, in that it uses algorithms to optimize the portfolio for a potential customer. It offers free services around portfolio optimization and the aggregation of investment data into a single source. Should a customer want FutureAdvisor to actually execute an investment strategy the company can do that — and indeed expects that service to provide a good chunk of its services.

“We aggregate a single view across all accounts and advise on how best to optimize the portfolio. All of that is free,” says Lu.”We charge clients for the pay product when we become the day to day portfolio manager.”futureadvisor_target_portfolio

Typically a charge would be half of a percent in management fees that a client would pay FutureAdvisor.

Investors who have tracked the wealth management space express some concern about whether these companies can get to profitability quickly enough to create venture-sized returns, but Lu says that despite low fees, there are billions of dollars to be made in wealth management. Put simply, asset appreciation alone creates tremendous value over time, and if a firm can lock in a large enough user base… that value could manifest itself sooner rather than later.

Not only does FutureAdvisor monitor investments, it’s got an underlying agreement with TD Ameritrade and with Fidelity Investments act as custodians for a user’s portfolio.

Lu said that the company would use the investment to double the size of its team, which he expects to grow from 20 employees to over 40 by the end of the year.

Impressively, the company has grown its assets under management from $!3 million in September to $110 million today.


Photo via Flickr user Scott Maxwell