Gratio Capital's GoalPack works like a gift card: It can be purchased for any amount starting from $25 and redeemed at the company's website by allocating the cash to one of three mutual funds or a savings account. (Money can later be added to the account by direct deposit.)
By focusing on small starting amounts, the company hopes to get the business of consumers usually overlooked by bigger brokerages.
Gratio set out to create a new type of gift card and "do what prepaid did for the transactional space," says Rimmy Malhotra, the company's co-founder and chief investment officer. "How do we do that with mutual funds and asset-building products?"
The process resembles the way the prepaid card marketer Green Dot Corp. allows users to fund their accounts by purchasing MoneyPak cards in stores.
For now, GoalPacks can be bought only online, through certain credit unions or at the flagship Austin, Texas, store of Mango Financial. Mango was founded by Bertrand and Roy Sosa, who, along with their venture capital fund MPOWER Ventures, invested in Gratio. The Sosa brothers also founded the prepaid provider NetSpend Corp., a Green Dot rival. But Gratio is in talks with some national retailers to put GoalPacks on the racks in their stores, Malhotra says.
Rather than courting a relatively small pool of investors with a lot of cash, Gratio seeks a lot of users with relatively small investments. Its fees include a $1 withdrawal fee and a 2 percent penalty for withdrawing money less than 180 days after it's deposited. Gratio mutual funds' expense ratios range from 1 percent to 1.4 percent. It doesn't charge commissions.
"If you are Morgan Stanley or Merrill Lynch the economics of your business says that targeting somebody who can only open up an account with $25, $50, just takes too long to make money," says Ron Shevlin, a senior analyst at the research firm Aite Group. But "there may be some great long-term potential there."
Though it takes minimum investments of thousands of dollars to open a mutual fund through a traditional brokerage, those fund managers might take notice of Gratio's model, says Aaron McPherson, a research manager for payments at IDC Financial Insights. "It could be a good way, I guess, to focus on young people who don't have much savings," he says.
Malhotra would not say how many accounts Gratio has opened, how much money is in them or what the most popular investment options are. At the company's website, GoalMine.com, users can set personal goals for saving and investing money. Since the site launched in November, Gratio's customers have collectively set a target of $7 million, Malhotra says.
The savings account, insured by the Federal Deposit Insurance Corp., is provided by The Bancorp Bank, which also issues prepaid cards. Gratio's platform also lends itself to social networks. Users can broadcast their goals on their Facebook pages and encourage relatives and friends to donate to their account.
