Stash enters robo-advice with Smart Portfolio

Self-directed investing app Stash has officially made its debut into the robo-advice space with the roll out of Smart Portfolios, designed for its five million users to access automated managed accounts for the first time.

Stash announced the launch via its website on Wednesday, providing users information on how the new tool works alongside explanations of investing terminology like what a risk profile is and how rebalancing a portfolio works. 

Smart Portfolios doesn’t charge fees based on portfolio size, instead, users can access it as part of Stash’s tiered subscription plans, which range from $1 to $9 per month. Users with “growth” and “plus” subscription plans can start a robo-adviser account at a minimum of $5. 

Smart Portfolios are managed by a team of financial professionals with decades of asset management experience, said Vinod Raman, vice president of product for investing at Stash. These professionals are also members of the Stash Investment Committee. 

“Through the combination of their investment decisions and Stash’s proprietary portfolio management tools, we are able to create ‘smart mixes’ for customers,” Raman said in an email.

The launch of Smart Portfolios completes the fintech’s product offering for new investors, Raman said. Users can choose a more self-directed approach, investing in the specific companies and exchange traded funds they believe in, or opt-in for a fully-managed approach. 

“From day one, Stash was built for long-term, diversified investing, not day trading,” Raman said. “It’s why we operate with just four trading windows, and do not offer options or margin trading.” 

Construction of diversified portfolios using risk profiling methodology is the antithesis of day trading, and it’s clear that Stash is not going down that road, said William Trout, Javelin Strategy’s head of wealth management. 

If anything, the Stash approach has always steered clear of the transactional model. Over the past three years, for example, Stash has launched a number of loyalty-inducing programs, including Stock-Back rewards on debit-card purchases, which aims to help Stash users become investors in the companies whose products and services they consume. 

“These initiatives underscore the extent to which Stash wants customer relationships that are sticky and focused more on the realization of long-term goals rather than the quick buck,” Trout said. “This is another way Stash can help its clients accrue wealth, one which helps Stash draw analytics on their behavior as they do so.” 

Instead of relying on frequent trading to generate revenue, Stash’s best way to outpace the competition is to focus on building on their success of attracting new and young investors for the long-term, said David Goldstone, head of research for Backend Benchmarking.

“Stash differentiates itself by making investing approachable for first-time investors and by offering investing rewards with their debit card,” Goldstone said. “They do not currently have strong financial planning tools like Betterment or Wealthfront, but their younger client base may be more attracted by the budgeting tools Stash offers than focused on long-term planning.” 

Smart Portfolios should be understood as an additional quiver in its arsenal of services, Trout said, as well as a move into the advice business, and not as an attempt to compete in the commoditized robo advisory space. 

“It’s more a natural evolution of the Stash business model into the ‘one stop financial shop’ approach that SoFi and others have spearheaded.” 

Stash manages $2.5 billion in assets, according to a company announcement. Smart Portfolio’s launch comes just a month after it raised $125 million in funding. 

Related Topics: Managed Accounts, Robo-Advisers, stash