The more money that flows from traditional wealth managers to Web-based alternatives, the more venture capitalists want to invest.
In the last two days, Wealthfront and Personal Capital raised a combined $114 million to bulk up their automated offerings. The big idea is pretty simple: traditional money management is costly, opaque and underperforms the market, so surely technology can do better.
"There are over 90 million millennials in the United States, and they are increasingly demanding a different type of investment service than Wall Street offers their parents," Wealthfront CEO Adam Nash said in a statement on Tuesday. The Palo Alto, California-based company raised $64 million in a financing round led by Spark Capital Growth.
While Wealthfront and Personal Capital are going after the same general problem, their solutions are quite different.
With Wealthfront, clients hand over their money, and the company invests in low-cost, tax-efficient exchange-traded funds. Personal Capital provides easy-to-use software that helps investors manage their portfolio, including providing advice on rebalancing.
Plenty of other start-ups are taking their own Web-based approaches to the market. FutureAdvisor, Motif Investing, SigFig, Jemstep and Betterment have raised closed to $200 million combined as investors pour into the market.
Wealthfront and Personal Capital have each raised more than $100 million since launching in 2011.
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"We're leading the transformation of financial services from physical to virtual delivery," Personal Capital CEO Bill Harris said in a statement on Wednesday, announcing that the company had raised $50 million in a round led by Corsair Capital.
Personal Capital said that its software is used to track more than $100 billion of customers' money. Wealthfront is managing over $1.5 billion in client assets.