Yet another web-based risk tolerance tool focused on the individual investor was launched last year, with a goal to educate amateur investors by allowing them to compare their portfolios to professionally designed models.
Boston-based FinMason isn’t trying to reinvent the wheel, but to ensure a smoother ride by ushering do-it-yourself investors toward more substantial advice.
The tool, available at finmason.com isn't particularly notable for its interface, but for its revenue model: The tool is free to consumers and relies on advertising purchased by advisors for its bottom line.
“We think that information should be given to people for free, so we never charge users anything,” says FinMason CEO Kendrick Wakeman. “Essentially, we’re able to direct users in a productive way towards venues for advice, and ultimately we’re going to get compensated for that.”
The tool offers advisors the opportunity to advertise their model portfolios on its risk tolerance platform.
FinMason is also trying to build an advertising network for advisors, says Wakeman, giving financial bloggers the opportunity to nest FinMason’s risk tolerance tool on their pages, with the idea that bloggers, the tool and advisors will support each other.
“If you’re an advisor, you’re constantly trying to market your services, getting clients is a top priority,” Wakeman says. “That puts a lot of advisors in an unhappy situation, not many that I’ve talked to are happy with their options. We’re giving them away to digitally contact more clients who are already engaged with managing their financial lives and interested in more advice, and that’s been very welcomed.”
As noted, the interface is streamlined — investors enter information about their age and retirement plans, and the tool figures out a model allocation and savings amount for retirement. FinMason does spice up the presentation a little, however, allowing a user to compare a series of actual portfolios to determine which best suits their preferences.
“We think it’s more effective for people who have no financial training,”Wakeman says. “They’re not asked to do any fancy math, they’re just comparing risk by looking at performance.”
The result is a little like sitting in an optometrist’s chair — investors are asked to choose between the performance of pairs of portfolios until an ideal match is found for them. Users are not shown a portfolio’s underlying components, instead, they’re shown the hypothetical upside of the portfolio at the time of their retirement, the estimated downside experienced by the portfolio during the 2008 financial crisis and the likelihood of achieving their retirement goals with the portfolio.