Longboat Retirement Solutions LLC

Goldman Sachs buys ‘robo’ investment adviser March 15, 2016

Filed under: Corporate Malfeasance,Economics,Investing Globally — larsfforsberg @ 1:53 pm
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BY:  Ben McLannahan

Goldman Sachs has made a move into the fast-growing world of “robo” investment, buying Honest Dollar, a start-up which aims to make it quicker and simpler to set up savings accounts for retirement.

Goldman’s new business is distinct from firms such as Wealthfront and Betterment, the biggest automated investment companies, which manage pots of cash according to customers’ stated goals and risk appetites. Honest Dollar, launched a year ago in Austin, Texas, does not select portfolios itself but charges a per-month, per-user fee for setting up and maintaining retirement accounts which are managed by Vanguard, the fund manager with $US3.3 trillion in assets.

Honest Dollar declines to provide numbers on how many users it has, but says it is targeting the roughly 45 million Americans – freelancers and small-business owners – who do not have access to employer-sponsored retirement plans.

The size of the acquisition, made through Goldman’s investment management division, was undisclosed.

“We’re trying something very new and innovative, and we love the validation [from Goldman],” said William Hurley, Honest Dollar’s chief executive. “Goldman did an incredible amount of work, putting in the effort of understanding what we are.”

A recent surge of private investment in financial technology companies has prompted the biggest banks in the US to consider whether they would rather buy, build or partner to keep pace with the newcomers.

Goldman, which prides itself on its vast team of software engineers, has mostly bought or built, last year launching an internal venture to challenge the likes of Lending Club in loans to consumers and small businesses. It is also a driving force behind Symphony, a big consortium of financial services firms aiming to unseat Bloomberg from its dominant position in messaging.

“Honest Dollar has created a simple solution to a complex retirement savings problem,” said Timothy O’Neill and Eric Lane, co-heads of Goldman’s investment management division, in a statement. “Together, we have the potential to help millions of people achieve their investing goals.”

Mr Hurley, 44, who prefers to go by the name “Whurley”, pursued a career as a bassist in a funk band before a serious car accident sparked an interest in computing. He worked at Apple, IBM and Symbiot before founding his own design firm, Chaotic Moon Studios, in 2010. He left the company – which was sold to Accenture last year – in 2014 to co-found Honest Dollar.

He launched his latest venture about a year ago in Austin at South by Southwest, an annual set of film, interactive media, and music festivals and conferences. By then he had raised $US3 million of seed funding, including a personal investment from Vikram Pandit, the former chief executive of Citigroup.

Honest Dollar, which now has 30 staff, will stay in Austin and operate as part of Goldman’s investment management division.

“As a software person, this is my first foray into financial services, but Goldman has a 100-plus year history and a lot of the brightest minds in this space,” said Mr Hurley. “So far we’ve built this on our own; imagine what we can do with access to that data.”

Financial Times

 

My thoughts on this transaction:

The tentacles grow.  This is probably the first time in history that the word “honest” has been used in the same sentence as Goldman.  Buyer beware.

 

 

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