Recent reports of the growing sophistication of individual retail investors have proved true on one roboadvisor platform.
Mike Sha, CEO and co-founder of SigFig, a digital investment management platform and roboadvisor, said that he noticed fewer big changes from users during market volatility associated with the Covid-19 pandemic.
“We’re seeing from investors a much more long-term orientation than in the past, and we’re hearing that from the advisors we work with, too,” said Sha. “The idea of goal-setting for the long term has kept investors more calm during periods of volatility.”
Covid-19’s impact on consumer preferences provides tailwind for a shift in wealth management towards digital and remote channels, said Sha.
“I think many of these changes are going to end up being long-lasting,” he said. “We’ve fast-forwarded ten years in terms of getting more of the populace into a digital engagement model.”
For banks and other large financial institutions, partnership with a fintech firm may help accelerate their deployment of technology, said Sha, while engaging third parties is likely the only option for small- and mid-sized firms to comprehensively build out their technology offerings.
SigFig has seen an increased interest in institutional demand for its managed account services, said Dan Mercurio, general manager and head of revenue and strategic partnerships for SigFig.
“We’ve seen enough demand to actually bring on some additional resources,” said Mercurio. “Our solutions kind of broadly solved for client engagement needs in remote and digital channels.”
A Simple Idea
SigFig launched in 2006 as Wikinvest, a direct-to-consumer Wikipedia-like site for investments, which over a handful of years grew to serve hundreds of thousands of users managing tens of billions of dollars in assets.
“Wikinvest was built around this notion that people have a hard time keeping track of all their investments, which is a side effect of the fact that today people tend to have a lot of investment accounts,” said Sha. “Given how quickly people change jobs in today’s economy, a lot of people end up collecting a hodgepodge of accounts, so we built a tool that helped people track their portfolios.”
The company was gradually pivoting to a portfolio tracking and investment comparison platform and an investment advisor referral serice, said Sha. As it rebranded to SigFig in 2012, it added more tracking capabilities and automation, developing more sophisticated portfolio analysis capabilities to help users understand the components of their portfolios. SigFig also became an RIA to provide users advice on how to optimize and streamline their portfolios.
SigFig eventually launched a direct-to-consumer digital investment management service in 2013, said Sha. At the time, the roboadvisor charged users a flat $10 a month to manage money from users’ brokerage accounts, favoring low-cost, diversified ETFs – but allowed them to retain their existing custodial relationships. Users have the option of allowing SigFig to manage all or only a portion of their accounts, and can track investments managed by SigFig side-by-side with their other holdings.