That aside, individual investors usually like their current funds and are loathe to leave them just for something that promises better results.
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What I envision is a site that simplifies the current technical and quantitative trading tools into something usable by the common trader.
That way if your company says pick from stocks A to Z to invest in June, you can decide which stock to pick. For example, don't pick A because seasonal trends dictate they always fall 8% in June. Or don't pick B because it is overbought because it is nearly touching a resistance band and has only broken resistance once in the past 5 years.
My examples are from technical analysis, but quantitative techniques work just as well.
The tools available are good, but require a lot of theoretical knowledge before use.
For a common investor, using a algorithmic tool with fewer options, sensible defaults, and automatically applied backtesting would be a huge step upwards from listening to Fast Money or the musings of their coworkers.
You do realize that the 2nd sentence isn't necessarily supporting evidence for the first, that the basket and the funds matter.
Regardless, the big 401(k) providers already have advice services. (Schwab's is provided by a 3rd party.) And, independent financial advisors will take your company's list and generate a plan. (such as ricedelman.com .)
Yes, I realize that there are employers who don't use such providers or won't pay for the advisor service, but how can your service address that problem?
People who aren't provided financial services by their employer or investment company simply take their financial advice from free or traditional sources. Or they attempt to do stock planning themselves, which is only ideal if you are already knowledgeable about the market and can invest time each day to study it.
The service could bridge the 'knowledge gap', allowing those who want to plan themselves to do so without pitfalls. And since its a system of sensible defaults as their knowledge of the market increases they can tweak the parameters of the program to better suit their needs. In a black box program such as a neural network on the algorithmic side, or a financial planner on the human side, this is impossible.
Yes, but since those folks are already ignoring the many for-pay services, what are you going to do differently.
The answer better not be "I'll take their list of choices and produce a plan" because folks at ricedelman.com (among others) have done that for years. (I mention him because he has a nationally syndicated radio show advertising his services. There are many others who don't. How are you going to complete with that?)
You seem focused on how the plan is created. I doubt seriously that that will be enough to make you successful in the 401(k) advice biz.
My free advice is to sell your investment tools as tools instead of saying that you're in the 401(k) advice biz. The tools are independent of 401(k)s.
Which reminds me, you keep saying "stocks". Do you really think that there are many 401(k)s that allow specific stock purchases but don't have employer-paid advisors? I haven't looked at a lot of 401(k)s but in my sample the (few) employers who allow individual stock purchases also have employer-paid advisors. Some of the plans with lots of fund choices (but no "individual stock" option) also have employer-paid advisors.
For the most part, the plans with no employer-paid advisors are the ones with crappy mutual fund choices and no "buy specific stock" option (with the possible exception of the employer's stock). What can you do for them?
I don't believe that such a stock exists.