While there are no shortage of personal finance tools out there, they tend to focus more on day-to-day spending and savings goals, rather than understanding how today’s purchases affect tomorrow’s financial health. NYC- and Mountain View, CA-based startup SmartAsset is launching today to help bring transparency to the financial implications of life decisions. The company, which was founded in 2011 and is in startup accelerator Y Combinator’s current class, has developed financial modeling technology that shows users the implications of purchasing a home, with more major life decisions to be added later this year.
SmartAsset CEO Michael Carvin used to work in finance, helping companies understand whether financial decisions were sound. When he set out to buy his first property a year and a half ago, he was getting conflicting advice from realtors and brokers, he didn’t understand the tax consequences of his purchase, and wasn’t sure if the decision made sense. “If anyone should have understood the economics of home ownership it should have been me,” Carvin said. “I wasn’t sure if the decision made sense. I wanted to make sure that I wasn’t just throwing away money.”
SmartAsset’s financial modeling platform helps people get personalized advice on buying a home, everything from what they can afford, to what financing alternatives make the most sense, to the tax implications of their decision. Users enter their income, assets, and debt, and Carvin emphasized that it doesn’t require users to provide bank account information or their name. The platform can then help a potential homeowner understand what kind of property they can afford, the mortgages that would best suit them, the down payment required, a rent vs. own comparison chart, and details around the changes to their taxes on a federal, state and local level. Users can play with the numbers, for example changing the amount they want to put down, and it will explain why that change is a good or bad idea. “We built SmartAsset to bring a new level of transparency to important personal finance decisions so you can take better control of your money,” Carvin said.
Right now the platform can help users understand the implications related to a generic approximation of their desired home, but they’re fleshing it out so users can input a specific property and get insights related to that location. The company will eventually answer 200-300 questions surrounding 24 other major life decisions with significant financial impact, from getting married to going to school to having a baby, and will start adding them before the end of the year.
Carvin is quick to clarify that their value proposition is different from other personal finance tools on the market. “We’re not Mint, we’re not a platform where you can aggregate your finances and see how much you spent on taxis or coffee last month,” he said. “We’re a tool designed to help you make big financial decisions.” Carvin said third-party partnerships are a possibility though, and they intend to release an API so they can become a platform for other technologies to integrate with.
The company does have a direct competitor in San Francisco-based Planwise, which aims to help people understand the future financial impact of their decisions. Carvin said they have a similar application, but SmartAsset’s financial modeling technology and tax engine set them apart. “Planwise will show you how your bank balance may change if you did something like buy a car,” Carvin said. “They don’t really provide the same advice that we do – we answer specific questions in a really personalized way.”
Similar to Planwise, SmartAsset makes money by offering financial products to visitors, and charging a referral fee to those financial institutions. Right now it’s only available to users in the U.S., due to the tax engine. Carvin said they built their tax product with the iPad in mind, and will be developing mobile versions of the tool.
SmartAsset’s platform is a value-add for anyone looking to purchase a home, but users might feel that the financial products being recommended to them are influenced by the referral fees the startup makes, though Carvin said that they receive the same fee for all leads, so there’s no incentive to promote one product over another. And right now repeat users will be scarce, since buying a home usually only happens at most once every few years. If they can open up the platform to more life decisions while also remaining unbiased in their recommendations, they could find a devoted base of users who are trying to understand their financial decisions in a post-recession world.