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FutureAdvisor, which invests and manages people’s retirement savings using automated software, plans to lure new customers by helping them manage college savings plans for free.
Depending on your income, child’s age, the likelihood they’ll go to college and other factors, FutureAdvisor will help you decide where to put your money. Most people go the route of what’s called a 529 college savings plan because of its tax benefits, but other options like Coverdell savings plans provide more flexibility in terms of where you can invest your money. Depending on the option you eventually choose, FutureAdvisor will help you manage it for free.
The free service is designed to lure new customers to its other services. It hopes that once you see your college savings grow, you’ll consider trying its core retirement fund management offering. FutureAdvisor takes a 0.5 percent cut on these assets if it manages them for you. “The point of the [college investment] product is to introduce people in the middle class to wealth management,” FutureAdvisor’s CEO, Bo Lu, said to Re/code.
FutureAdvisor is facing stiff competition from other robo investment companies like Wealthfront and Betterment alongside traditional brokerage firms like Charles Schwab, which announced its own plans to offer an automated wealth investment system at the end of last year. FutureAdvisor is squaring off against these rivals over price and product.
Michael Kitces, a partner with a financial advisory group called Pinnacle and the publisher of the financial planning industry blog Nerd’s Eye View, has been watching the space closely.
“FutureAdvisor is saying, ‘How do we make our own impression when consumers don’t know how to distinguish between us?'” Kitces said to Re/code. “Telling a story about college planning is a relevant one.”
This article originally appeared on Recode.net.
