SigFig wants to save you from 'costly yet avoidable' financial mistakes

SigFig wants to prevent money from quietly leaking out of your bank account.

The financial services startup launched a new online service today that automatically balances individual investors’ portfolios for them.

“Financial managers have motivation to invest money in ways that make them commissions but aren’t always fully in your best interest,” CEO Michael Sha told VentureBeat. “Automating trades removes the bias, so your money is diversified in the best way for your appropriate level of risk.”

SigFig started out as a portfolio tracker, geared towards inexperienced investors who often can’t afford an expensive financial advisor. It offered financial education as well as detailed visualizations and graphs on how stocks are faring, a weekly recap, and money management tools.

The system would also point out costly mistakes and give free advice on how to fix them.

“We had data that clearly showed just how frequently people made costly, yet avoidable investment mistakes,” Sha said. “As we watched investors lose millions to Wall Street in the form of fees and bad investments, we realized our data put us in a truly unique position to help people.”

The new service determines how much risk is appropriate based on a short questionnaire and will help allocate your funds into a diversified portfolio. Now, rather than just offering free financial advice, SigFig will also actively manage the money by making trades for you.

Sha said that 1 in 5 investors have not touched their portfolio in the past year, and this neglect means people aren’t getting the most out of their investments. He said another issue is hidden fees — many mutual funds take “skimmed off” returns, so investors don’t realize how much they are actually paying.

Another big challenge is achieving and maintaining the appropriate levels of risk and diversification.

SigFig’s new service is designed for amateur investors who don’t have the financial knowledge, time, or motivation to consistently manage their portfolio. For just $10, SigFig’s technology will take over some of the control (you can dictate how much), so people get more out of their investments. 

Financial services is an exciting area of tech right now. In the wake of the financial crisis, people are less willing to put their trust and money into large opaque financial institutions. Advances in online payments, big data, and cloud computing have created opportunities for Internet companies who claim to offer more transparency, better rates, and greater efficiency. 

SigFig isn’t the only company seeking to make financial advice and wealth management more accessible. It competes with Personal Capital, Wealthfront, and LearnVest Planning.

SigFig raised $15 million earlier this year and is currently tracking $100 billion. It also powers personal portfolio trackers for Forbes, USA Today, CNN, and Yahoo, and makes money by sending new customers to brokerage firms, which then compensate SigFig for the referral.

It is backed by Union Square Ventures, Bain Capital, and DCM.