A new robo advisor, Strategic Growth Investment Management, will only charge users if it beats the market, according to InvestmentNews. The financial startup will pick individual equities and fixed income vehicles rather than investing in index funds, the publication writes.
How SGIM Works and the Chances of Its Success
The platform has three strategies, each with a different benchmark, InvestmentNews writes. U.S. equities are compared with the S&P 500, global investments are benchmarked to the MSCI World Index and the socially responsible strategy is held up against the MSCI KLD 400 Social Index, according to the publication.
These benchmarks must be beaten by 0.25% each quarter for fees to be charged, which, if they are for the full year, would result in a total annual fee of 1%, InvestmentNews writes. This is similar to traditional advisors but higher than the average robo, according to the publication.
SGIM, which requires a minimum investment of $10,000, launched earlier this year and now has $8 million in assets under management from 55 accounts, InvestmentNews writes. The company has yet to secure venture capital funding, but the co-founders, Mitchell Wonboy and Adam Forbes, believe it will, thanks to its unique value proposition, the publication writes. Furthermore, they say that they already have a strategy in place for downturns, which is more than most traditional advisors offer, writes InvestmentNews.
The fact that the executives are betting on their own product and that SGIM could be free during a bear market could attract prospects and stop client money leaving during a downturn, Alois Pirker, of Aite Group, tells the publication. However, he says that investors are now looking to fulfil individual goals rather than a “beat the benchmark” strategy, according to InvestmentNews.
