Monday, March 26, 2012
Interview with Bo Lu, FutureAdvisor
Sometimes, it's difficult for people to find good financial advice, and you end up turning to your more knowledgeable friends for help. For Bo Lu and Jon Xu, they ended up being the more knowledgeable friends, and were constantly being asked for investment help. Tired of having everyone they know ask them that help, Bo and Jon, the founders of FutureAdvisor (www.futureadvisor.com), decided to write software to solve the problem, and use that software to help analyze and recommend investments to others. Bo Lu told us more about how the Seattle company is looking to make financial advice accessible to anyone, via its use friendly, online service, after recently raising a round of funding from Sequoia Capital and others.
What is FutureAdvisor?
Bo Lu: FutureAdvisor is a company built on a single vision, which is to provide high quality and unbiased financial advice. We believe financial advice should be available to everyone, and accessible for everyone. The entire thing started when I was at Microsoft, with my co-founder, Jon Xu. Our friends kept on asking us for financial advice, trying to figure out what to do with their 401(k) or where to invest their IRA. Trying to find financial advisors, we realized that good financial advisors want you to have a lot of money, a half a million or more, and the others that didn't kept trying to sell us life insurance. We saw there was a need for this, so we brought together a team which included CFAs, people who worked for the Bank of England, web application designers, and others to give people unbiased, financial advice on their long term investments.
Tell us a little bit about the recent funding round?
Bo Lu: We're funded by Sequoia Capital, out of Silicon Valley, as well as prominent angels, including Keith Rabois of Square, and Jeremy Stoppelman of Yelp.
What's your background?
Bo Lu: Both my cofounder and I were program managers at Microsoft. Most recently, we were part of the Windows Phone team, which build Windows Phone 7. We came into this, because friends kept asking us for financial help. Out of our friends, we were the ones who knew the most about investing. After helping them out, and seeing that they were all making the same set of mistakes--they weren't diversified, they were paying too much in mutual fund feeds, and so on--we really saw the need for this. We thought, why not build some software to help everyone, in a scalable way. So, we assembled the finance team, and put this together.
We see lots of startups trying to figure this area out, what edge do you have?
Bo Lu: That's a great question. The edge we have, is that we are trying to solve, and are solving, a very visible problem which no one else is solving yet, which is hot to give personalized advice, given where your investments are today. There are other startups where you give them money, and they invest in myopically. The problem is, you might have a 401(k) with limited plan options, and old leftover 401(k), an IRA, and a brokerage account. We have figured out how to put together a cohesive portfolio, taking into consideration all those different accounts. We are launching with support for the 100 largest 401(k) plans in the country, and almost all of the tech companies in Seattle. We want people to et advice specific to their situation.
How difficult has it been to deal with financial regulations covering advice?
Bo Lu: We are officially registered as a financial advisor in the United States. It was difficult, but necessary.
Can people use your product now?
Bo Lu: We have broad accessibility and free access at FutureAdvisor.com. You can use it immediately. What the user can expect, is an experience that takes four steps. They tell us about themselves, and we create a target portfolio for them. We use the same, secure technology as Mint.com, to link your existing investment accounts to the service. Or, if you prefer, you can enter your investments manually. We do lots of analysis on your existing portfolio, and give you insights into how much to invest in the U.S. versus outside, how much to invest in long term bonds versus short term bonds, and analyze other information about mutual funds you own. The last step, is we give you personalized, unbiased advice, which is very actionable, about what to do to decrease the amount of fees you are paying, how to increase your tax efficiency, and how to better diversify for your age. If you think about it, the three key values we bring are tax efficiency, lowering your fees, and increasing your diversification across your entire portfolio. And we do that with knowledge of your 401(k) and your different plan options.
How much does this cost?
Bo Lu: It's a web application, and it's completely free. It's more free than other free financial service. Let me explain that. When something in financial services is free, you have to think about who is paying for that. Someone is, and if that someone is not me, you need to be cautious about what that person's ulterior motive is. Some folks giving "free" financial advice are in fact compensated by funds to recommend them. That's a massive conflict of interest. We're free, completely, in that we believe that we don't get paid for it by anyone else, and we don't accept money. Our model is that a small portion of our client base will have very specific questions, very unique to their situations, and for that we'll provide a gold or platinum, premium subscription where they can schedule advisory time with advisors who we have on staff. That's our business model. Fundamentally, our software for everyone is free.
Finally, what's your next big goal?
Bo Lu: For us, it is to continue to deliver on the vision that financial advice should be accessible to everyone who needs it. For example, the average American family paid $1,000 in fees to mutual funds last year. If you think about that number of families, it becomes pretty clear who is paying for all those suits on Wall Street. If we're successful, the average American family will keep much more of the money that is already theirs, and they will stop losing money, which is being siphoned off by Wall Street.
Thanks!