The robo-adviser's new investment product allows lower-balance investors to invest $10,000 now in ETF portfolios with a $4000 initial investment, with the rest split into monthly installments.
InvestSMART's fundlater loans the investor the remaining $6000. The investor then pays back the amount over 20 monthly installments of $320 each. This includes a $20 per month fee.
They can choose to pay off their remaining amount of the $6000 at any time, with no exit fees or the remaining $20 monthly fees.
The ETF portfolios on offer are InvestSMART's four diversified funds (high growth to conservative) which hold six to eight ETFs where yearly fees are capped at $451 p.a.
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InvestSMART is promising no margin calls for investors. The company is using its cash to fund the loans for the product at the minute but plans to use other lenders as demand grows.
InvestSMART chief executive Ron Hodge said the product is the first of its kind and allows the firm to tap into lower-balance clients who are excluded from InvestSMART's other offering of professionally managed accounts which require a $10,000 minimum.
As it scales up, the firm also plans to marry the repayment stream from the fundlater product with its high-net-worth clients who seek a high-yield income product.
"We have a lot of high-balance clients because of our capped fee...And all of those guys are looking for high-yields and this is a pretty safe product. So the whole idea is how do we match up our high-balance clients with low-balance clients," Hodge said.
"There's other [considerations] with respect to the peer-to-peer lending products as to how do we structure it, whether we do it through a retail corporate note or something."
He said fundlater is in its pilot or first phase. The firm is aiming for $20 million in the second phase, followed by $100 million in the third phase.
For lower-balance investors, the firm wants to make the distinction between buy-now-pay-later providers and its product.
"We don't want people thinking it's sort of like an AfterPay. It's a way for you to get a significant investment upfront and then pay it off over 20 months," Hodge said.