Covestor Looks to Disrupt Investment Industry with “Mirror” Marketplace

3/26/12Follow @gthuang

If you’ve got $50K or $500K to invest with a financial advisor, you might want to check out Covestor. And well, even if you don’t, the New York-based company tells a pretty interesting story of one effort to make the field of money management more transparent.

Covestor has built an online marketplace for consumers to shop around for money managers, the same way they might for car insurance. So, instead of just investing your money with a big Wall Street shop, say, you can find and follow smaller asset managers, individual traders, and management firms, and check out their portfolios. If you find one whose performance you like, you can “covest” with them—meaning Covestor will set up a “mirroring” account that recreates that money manager’s portfolio, trade for trade.

The goal, of course, is to make more money for investors and managers—and for Covestor, which splits management fees with the 135 (and counting) money managers in its network.

“We let you find and get access to managers you normally wouldn’t get access to if you didn’t have a million dollars,” says Covestor CEO Asheesh Advani, a Boston-area entrepreneur and finance expert (see photo above).

Advani calls it “democratization of access to active money management.” What’s more, he says, Covestor users can compare the performance of money managers in the marketplace and can switch managers whenever they want, with just a click of a mouse. In return, managers in Covestor’s network get broader exposure to potential clients and the financial media (more on that below).

The company didn’t always work this way. Covestor started in the U.K. in 2006, and for the first few years, the firm ran a free service whereby anyone could follow any other investor’s trades. The key technology, … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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