Wakeman says the comparison tool is easier for investors than the traditional lengthy risk tolerance questionnaire.
“There’s a subset of investors who do not respond well to the psychological questionnaires,” Wakeman says. “They find them confusing, or they misinterpret the questions, or the questions produce anxiety and they shut down the process and walk away. Allowing them to compare and to see what happens in a crash of 2008 situation sets a reasonable expectation in the investor’s mind: we’re solidifying their understanding of risk.”
At the end of the process, FinMason tells users where the portfolio they identified is being offered, and gives them the option of clicking through to begin the onboarding process at that firm. It also warns investors and recommends that they seek advice if their goals are out of reach.
This process doesn’t really show do-it-yourself investors the value of professional advice, says Joel Bruckenstein, publisher of Technology Tools for Today.
“Tools like this are interesting, but they’re not going to look at your allocation and see if you’re on the efficient frontier or not,” Bruckenstein says. “All they do is show you model portfolios, they don’t really demonstrate any of the value of receiving financial advice, they’re only recommending investments that they think are low cost.”
FinMason also allows users to measure an existing portfolio against its recommendations with an account integration tool. Wakeman says that the tool fills public demand for unbiased investment device.
“Our tool makes things simple and clear, and people tend to trust things they see on computers,” Wakeman says. “We’ve found that people are starting to use our tool to see if their current portfolio matches up with their risk tolerance, and if it doesn’t they hopefully go out and get some help. We’re fans of professional advice, we think it do-it-your-self puts people ant a disadvantage.”
Brukenstein questioned whether the advice could be considered unbiased in light of FinMason’s revenue model.
“I think the model is conflicted,” Bruckenstein says. “The advice isn’t free, there are advertisers in the form of roboadvisors and other firms paying to have their model portfolios used in the tool. Even if they’re trying to provide as unbiased advice as possible, as an investor it looks like there’s a pay-for-play issue at work. That would leave a bad taste in my mouth.”
However, FinMason is likely to deliver on its primary goal: to create more educated investors, says QuonWarrene’s Neal Quon.