Ben Franklin

INVESTING IN PENNSYLVANIA’S FUTURE

SaveSimply: Bringing Wall Street Services to Main Street Investors

Say “gambling” and most people think of casinos, slot machines and Texas hold’em poker. But more than 83 million households are rolling the dice with their hard earned money every day, and Jim Langenwalter wants to do something to make it less risky.

SaveSimply

SaveSimply’s software affords mainstream investors—via their bank, advisor or insurance company—the same powerful investment management tools as the more affluent investor.

“The number of Americans who currently invest in mutual funds without the aid of a financial advisor is staggering,” says Langenwalter, CEO of Pittsburgh-based SaveSimply. “Unfortunately, many professional advisors don’t want to service these households because of the high cost of managing smaller accounts.”

As Benjamin Franklin quipped, “A penny saved is a penny earned.” But with the eroding force of inflation, people need to do more than save-they need to actively invest their pennies. Generally, investors with less than $100,000 in an account do not generate enough revenue to cover the cost of providing active investment advice.

Given the fact that the average size of an investment account sold through banks range from $13,000 to $19,000, this represents a significant profitability issue for large retail financial services companies.

Automation: The Key to Cutting Costs

SaveSimply, whose parent company Mid-Market America began working with BFTP during the concept stage, is a software company that targets the growing market of small investors by providing financial management software to banks, credit unions and investment advisors.

The software allows these financial services institutions to create allocation models based on time horizons and risk tolerances and matched to each investor’s needs-without the advisor’s direct involvement. Reallocation, rebalancing and trading occur automatically-according to the advisor’s instructions.

“Our platform gives mainstream investors-via their bank, advisor or insurance company-the same powerful tools as the more affluent investor,” says Langenwalter, a financial services industry vet who spent time with Mellon Financial Corp. and Federated Investors.

BFTP invested $100,000 in the company and SaveSimply has gone on to raise an additional $2 million. Langenwalter is thankful for the business expertise BFTP has lent along the way. “They helped us finish our initial prototype and provided valuable insight on how to position our company to be successful in the various stages of raising money.”

Expert Advice Executed Automatically

Langenwalter says SaveSimply works by automating an advisor’s asset allocation investment philosophy. “That way, the portfolio maintains the appropriate risk-return over a given time period regardless of account size,” says Langenwalter. “Without a human advisor selling and managing the process directly for each individual account, a firm’s costs are reduced. They’re able to offer sophisticated investment management that is typically out of reach for the average investor.”

Released in February 2005, SaveSimply currently has six customers and is on track to have more than 100,000 consumers on the platform by this time next year. “What we are doing is bringing the mainstream investor into the money class,” says Langenwalter. “Banks couldn’t make a profit in a fully-managed account with a small balance investor-until now.”

While some may worry about software taking control of their nest egg, Langenwalter points out that someone at the financial institution will always have full control over each individual account.

“When we sell our product to a bank, they create all the auto-triggers that guide the software. To the consumer, the end result is the same-the portfolio gets rebalanced or a trade is executed-all under the watchful eye of the bank’s investment professional,” says Langenwalter.

“The only difference is that we’ve made it so efficient; the bank can now profitably manage a $3,000 account. We enable them to provide lower balance customers with full-service benefits.”

Best of Both Worlds

According to Langenwalter, banks are losing money as they try to distribute investment services to consumers because the human advisor is dealing with both high- and low-balance accounts.

“The fact that there are many more lower-balance accounts drags the average transaction size down,” he says. “Our platform allows banks to redistribute advisors’ time so they can focus on high-balance accounts, while at the same time providing a powerful solution to the lower end of the market. They can have their cake and eat it, too.”

Langenwalter estimates that SaveSimply could give a large group of Americans-who up until now have had to navigate the investing waters on their own-access to powerful wealth building tools at a price they can afford and a brand they can trust. “And if we can do that en route to building a profitable $500 million company it’s a good thing.”

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This article was featured in
Keynotes February, 2006
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