At TechCrunch 40, Cake Financial unveiled an alpha release of its social network-based financial planning service that has a good chance of survival in a crowded space. It mashes up stock portfolio data and social networking to leverage the wisdom of the crowd--a market of 40 million online investors--for investing.
"Without paying for an advisor you get complete context for how you are doing as an investor," said Steve Carpenter, CEO of Cake Financial. "There is nothing 'fake' about cake," he quipped.
"Unlike Yahoo Finance, we have community with credibility. You can see what members are really holding," Carpenter said. "We are the only one who can aggregate all historical data so you can see what top people are doing in real time."
You select your brokerage accounts, with up to 10 years of historical data, for Cake to scrape, and it calculates daily, monthly, year to date, average annual return and other performance metics across all an individual's portfolios, charts it against the standard indices, and more interestingly, plots them against others in the "Cake" network.
By aggregating the data, members can see the actual portfolios, trades, asset allocations of all other Cake members (anonymized unless they are part of your friends network) who are holding a particular stock. An At a Glance feature shows Cake members holding a stock by rank (top performers) and those who are watching the stock. It also shows what stocks are being bought after Cisco was sold, for example. Members can compare their overall performance against the performance of friends, selected groups, or other Cake members.
Users can get access to some of the member data without submitting a portfolio, but not to the top performing members of the service, Carpenter said.
In terms of security, Carpenter said, "We are built like a bank. All of our standards around privacy and encryption are bank-like." The company would also reimburse customers in case of a hack that impacted members, he said.
In his blog, Carpenter wrote:
"There's little evidence that investment professionals and pundits are any better than the rest of us at selecting stocks that outperform, and mutual funds touted by various financial magazines often fail to perform as well as the market. Cake Financial is designed to free investors from an industry that fails to offer transparency by empowering individuals with information to overcome these well-documented industry shortcomings.”
Cake Financial has garnered a series A round of less than $10 million from Alsop Louie Partners and angel investors. The company hasn't yet decided on how to make money, but it clearly could come from subscriptions and fees for services.