SigFig - Financial Investment App
SigFig - Financial Investment App

Warren Buffet said that If you don’t find a way to make money while you sleep, you will work until you die. One way to make money while you sleep is to invest it. There’s only one catch which Buffet also pointed out. “Successful investing takes time, discipline and patience.”

Many people have neither the time, discipline nor the patience to invest successfully. It for this reason that financial investing has become its own diversified career path and why financial investors don’t come cheap.

Thanks to technological innovation in the financial sector, those who lack deep pockets, time, patience, discipline and knowledge have another option. Robo advisors like SigFig.

About SigFig

SigFig is short for significant figures. The company’s primary mission is “to make high-quality investment advice accessible and affordable to investors of all wealth levels.”

Their app enables users to track their brokerage held, financial investment portfolio in one location. They can also sign up to receive custom recommendations on how to achieve optimal performance based on information gathered (risk tolerance, income, invested assets, and age) during the sign-up process.

The company, co-founded by Mike Sha and Parker Conrad in 2006, was first known as Wikinvest.  Sha is one of the original inventors of Amazon’s Prime program and was also behind the fastest growing consumer loyalty card in history, the Amazon Visa Card. Conrad was fired from the company after disagreeing with Sha on a number of issues including leadership of the company which is headquartered in San Francisco, California.

Wikinvest originally provided portfolio management, financial and business analysis on individual corporations and economic pattern reviews. They changed their name to SigFig in May 2012 and also switched their focus to portfolio tracking and becoming an investment adviser referral service.

The concept behind the company has proven to be extremely popular. A recent round of funding led by General Atlantic raised $50 million. Prior to this, they had raised $40 million in 2016 a funding round led by Eaton Vance.

How SigFig Works

Unlike traditional robo advisors, you do not invest directly with SigFig. Their goal is to provide you with information that helps you manage your existing investments in your brokerage account. For example, they tell you which investments are underperforming or have high fees and also suggest alternatives.

They can also assist with retirement planning by reviewing your current plan and identifying whether a retirement gap exists.

Their investment strategy is focused on low-cost, commission-free index-based ETFs from Vanguard, iShares, and Schwab in the following six asset classes:

  • US-based stocks
  • US-based bonds
  • Developed Markets (Nbetwon-U.S.)
  • Emerging market stocks
  • Real estate
  • Short-term US Treasury securities.

SigFig supports personal investment accounts and IRA accounts including individual and joint taxable investment accounts, traditional IRAs, SEP-IRA, Roth IRAs and Rollover IRAs. They are currently working on including 401(k) and 529 plans. They do not make money on your existing investment but make money by taking a commission on referrals to local financial advisors, as well as new brokerages or investments

SigFig’s Accounts

The SigFig app lets users choose between two products. A portfolio tracker or a portfolio asset manager they refer to as a managed account.

Portfolio Tracker

There are two types of portfolio tracking accounts you can sign up for. Synched or manual. Both types are free.

Portfolio Tracker – Synched

The synched Portfolio Tracker links directly to your brokerage account e.g. Ameritrade, Fidelity Investments, Vanguard, Scottrade. Once you complete the sign-up process, the data from your brokerage account will be displayed on SigFig’s app.

Portfolio Tracker – Manual

The manual Portfolio Tracker is created to keep track of the performance of an investment you do not currently own. Changes to those investments are not updated automatically. The tracker will only monitor the overall value, so if you eventually purchase them, you will need to update the number of shares and cost for yourself.

Managed Account

In addition to a portfolio tracker, managed accounts come with the following features

  • Free consultation via appointment with a human investment advisor. (limited to 15 minutes)
  • Personalized portfolio allocation based on factors including risk tolerance, income, invested assets, and age.
  • Cash optimization to minimize “cash drag” which is when assets in a portfolio are held in cash or cash-equivalent security for a substantial period of time that negatively impacts the portfolios’ performance.
  • Automated rebalancing to maintain optimal asset allocation and minimize losses in the long run.
  • Automated reinvesting of dividends to keep cash balances to a minimum.
  • Tax optimized sales to minimize tax liability.
  • Tax loss harvesting through the strategic sale of assets to lower capital gains tax liability.
  • Tax efficient migration to maintain optimal portfolio allocations
  • Whitelisting to decrease capital gains and minimizes taxes on new portfolios.

Managed Account Pricing

Managed accounts require you to have a minimum of $2,000. Up to the first $10,000, no management fee is assessed. Accounts with more than $10,000 are assessed a 0.25% annual management fee. Fees are billed monthly and deducted from your account automatically. A portion of your cash is always held in your account to ensure that you always have funds to pay it.

How to Sign Up for a SigFig Account 

To open a SigFig managed account, you’ll be prompted to answer a series of questions including your age, how long you wish to invest (less than 5 years, 5-10 years, or 10-plus years),  household income, amount of your liquid assets and income that you save and risk tolerance.

Summary

Pros

  • Free portfolio tracking
  • Free consultations with live advisors
  • You don’t pay commission or trade fees unless your broker charges them
  • Competitive management fees
  • The first $10,000 is managed for free
  • Penalty-free account cancellation
  • Continuous portfolio rebalancing
  • Help with retirement planning

Cons

  • You require a minimum of $2,000 as an initial investment.
  • Limited investment platforms
  • Free consultations are limited to 15 minutes
  • They currently do not support 401(k) and 529 plans
  • You can only link to brokerage firms.

Conclusion

Sig SigFig may be a good fit for people who have investment accounts they prefer not to manage themselves or pay an expensive broker to manage. Small investors looking to maximize their investments while lowering their fees may also be able to put it to good use. Their management fees are competitive when compared to companies offering similar services.

Sign up for their services on their website or on your Apple or Android device.