Walt Mossberg is out today with a review of a new service being launched by Cake Financial, called Cake Premium.
I’ve written about Cake previously here and am generally impressed with all they are doing. As opposed to expert communities like Covestor or kaching which try to make you a better investor by aping others, Cake provides an overlay on top of your existing portfolio at your online broker. This overlay is intended to make you smarter about your own portfolio by providing nice analytics and a gentle interface.
With over a million transactions tracked through their platform, Cake has evolved by providing suggestions and recommendation based on individual and community activity. And recently, Cake made a move into financial planning by providing investment-grade automated tools to help investors easily assess their portfolios and make guided changes if necessary. This move mirror some of the similar activity we’ve seen at E*Trade with their Online Advisor product.
As more investors defect from full-service brokers to the online brokerages, more and more tools are being developed that blur the line between DIY investing and full service financial planning. Technology is being automated that can deliver investment grade services to online investors — effectively marrying the ease and autonomy associated with online investing with the professional advice that many investors desire to manage their portfolios.
Anyway, back to Cake and Walt. Walt reviewed Cake’s new retirement service (premium $model, by the way) that according to Mossberg:
attempts to tailor a mutual-fund portfolio that will get you to retirement according to your goals. It’s designed to be simple, clear and relatively quick, using plain English, easy-to-understand graphics, and a step-by-step approach that walks you through the process. In essence, it’s a robotic, low-cost investment adviser.
It does this by conducting a mini-financial plan via a wizard and aggregates 401(k) data from a provider. I haven’t tested it, so I can’t speak to how well it works or posit my opinion on the product/service but here’s Mossberg’s take:
I can say that I found the service clear and easy to use, and can see how it could be helpful to average people with limited time and knowledge.
A typical, somewhat tepid Mossberg review. He cites a couple of limitations as well:
- only mutual funds: The system doesn’t suggest changes to investors’ securities other than a change in mutual funds. Mossberg wanted to see something about CDs or money market funds. I hear that objection but also think that the system is trying to help make sense of more opaque securities like actively managed mutual funds. Anyone can quickly check on CD and money market rates. Those are simple apples-to-apples comparisons.
- limited planning: Cake is focused on retirement planning. Walt was disappointed that other goals-based planning isn’t offered like saving for college. I’m not sure I find this objectionable — this is a retirement product and I’m sure Cake will role out something similar for other goals if it thinks there is demand for such things.
- limited view: Because the system is simplified to make it easy, it can’t possible take an entire financial picture of a client into account. That would take hours but Mossberg felt it should have a more 360 view.
- 401(k) restrictions: Mossberg is maddened at the fact that Cake Premium isn’t “smart enough” to understand which mutual funds are offered under a specific plan when it makes its suggestions, so it recommends things you can’t possibly own in that account.
I plan on digging in some more. Mossberg is very influential but he’s not typically active in the investing space, so take this with a grain of salt. But if he’s at all representative of large numbers of people out there, we are going to want to see Cake Premium account for the 401(k) administrator’s parameters in terms of which funds can be held in such an account and therefore, further tailor the advice Cake provides.
