A new company wants to shake up the way Americans invest by providing individuals with direct access to institutionally priced mutual funds and other investments.
InvestForLess LLC, a registered investment advisory based in Alexandria, Va., will charge a flat annual fee of $250 per investor for access to its platform and suite of tools. It charges neither commissions nor fees based on asset levels. It also eschews revenue and soft-dollar reimbursement from advisers and investment product providers.
"We liken it to a 'Costco model' for investments," said Kevin Knull, InvestForLess' chief executive. "We're a less expensive way to buy and own investments."
The company says its portal is aimed at self-directed, fee-conscious investors who want to decouple their investment management from financial planning services. It is positioning the portal primarily as a way to buy mutual funds; the company is set up to avoid bias toward any product or adviser.
InvestForLess contends that it enables investors avoid marketing and sales costs common to retail investments. (The annual fee doesn't include transaction charges for certain mutual funds, however.)
The difference in costs between retail and institutional mutual fund share classes can be considerable, according to the company. In an example on the company's Web site, a $100,000 investment in A-shares of American Funds' Growth Fund of America grew to $108,765 after five years, but an adviser-class share grew to $111,650.
"The hard part at the end of the day is education," Knull said. "Investors just don't know that share classes exist."
InvestForLess does not disparage advice — to the contrary, it recommends that its clients seek it out. But it suggests getting that advice in a "fee for service" model that it says is best for the average investor.
To that end, the company is creating a nationwide network of professionals who have either earned their Certified Financial Planner designation, or who have at least a decade of financial planning experience and a spotless client service record. Admission to the network will be limited to those professionals who charge an hourly or a flat rate; rates and fees are to be disclosed in the InvestForLess adviser directory.
The savings gained by using advisers' services for just four or five hours a year, as opposed to paying them an ongoing fee, can be substantial, Knull said. "If you require little advice, it's an enormous value for you," he said.
Another feature of the InvestForLess portal is an online financial planning platform. The tool, FinanceLogix, takes into account investors' assets and liabilities. It allows users to identify all their investments and assets and quantify future goals, and it provides a plan of action for meeting the goals.
InvestForLess does appear to be innovative, said Doug Dannemiller, a senior analyst at Aite Group. Dannemiller compared it to MarketRiders, which has a investment modeling tool built around exchange-traded funds, though it lacks an investment platform.
"These are two low-cost approaches to helping smaller investors get some help with investment selection at an affordable price," he said.