A New Threat to the Financial Industry's Status Quo

This story was updated 10:15 a.m. May 10, 2012 to include a response from money-manager Fidelity regarding hidden fees.

The following commentary is from an investment professional with Clear Harbor Asset Management who is a participant in TheStreet's expert contributor program.

NEW YORK ( TheStreet) -- SigFig, a new online service for retail investors, appears to make real strides toward bringing a level of transparency to the financial industry that has been sorely lacking.
SigFig's founders aim to turn trickle of investors choosing independent, lower-cost advisers into a flood.

The rise of the Internet has been a boon for consumers in so many ways, but when it comes to the financial industry, the fruits of the digital revolution have been slow to ripen. There is still little pricing transparency in the industry, and people with limited financial acumen often struggle to find credible information they can rely on to make intelligent decisions about managing their money.

The founders of SigFig aim to change that.

"Wall Street has done a very good job of obscuring information and leaving people in the dark about what they're really getting and what they're actually paying to get it," says Mike Sha, co-founder and CEO of SigFig. "Most people don't have access to very good investment advice, and they're targets for some of the firms out there that are peddling self-serving information and not offering a good value proposition."

Such firms should be worried about SigFig. It's a free service that can sync up securely with your investment accounts -- including 401(k), IRA, brokerage and investment adviser accounts -- so you can track your entire portfolio in one place. Once you have signed up and entered the login information for your accounts on the SigFig website, the service analyzes your portfolio and transactions using a trove of information and third-party data from sources such as Morningstar ( MORN) and Lipper. It then makes judgments about how your investments are performing and what kind of deals you are getting from the institutions you are patronizing.

Based on those judgments, SigFig makes recommendations on changes you can make to save money, get better service and achieve higher returns in short order. It will also monitor your accounts over time and send you alerts when concerns arise or if you need help with things such as tax-loss harvesting.

It's unclear to me how well SigFig's service really works, but I was impressed by a demonstration of the site's capabilities. It's definitely on the right track in terms of addressing a need consumers have that digital technology can and should be tackling. Whether it can execute effectively on the concept remains to be seen.

There are already plenty of sites that provide financial news and investment advice and can track an investment portfolio and analyze performance and fundamentals. Also, there are sites such as Mint.com that pull your disparate accounts together into one personal finance dashboard for planning purposes, but SigFig is new in its attempt to pull back the veil on what you're being charged for specific investment products and how those products stack up with the alternatives.