August 17, 2012

Introduction to the business startup SmartAsset

The US-based business startup SmartAsset was founded in 2011, and the company promises that it will help you to make better financial decisions. If you plan to buy a new house, SmartAsset will answer all your questions and guide you through the buying process. If you need a new car, should you buy the car or should you lease the car? Ask SmartAsset and you will find all the answers you need. This is the vision of the company:
"The vision for the company is to bring a new level of transparency to financial decisions. We want to be your first point of reference for any decision in life - if you're thinking of going back to school, or buying a house."

The company is still in the development phase, so you can't yet find all the answers you may need - but when the service is ready, you will find about 20 categories. The only category available today is related to first-time home buyers. You can find out if you should buy or rent, compare different mortgages, find out how much you can borrow, and much more.

The service is easy to use, you just need to add the data needed and the result will appear instantly. You can now interactively play with the result to test different settings. You will never need to pay any money for the service since it will always be free, and the company plans to make money by connecting their customers to relevant financial companies.

Why SmartAsset is a good idea
  • Buying a house is often difficult for someone with a college degree in mathematics. You have to learn many different parameters - from ever changing taxes to changing mortgage rates. The results found by SmartAsset is that a $400,000 house can actually be cheaper compared with a $350,000 house
  • The service is free, and it can't hurt to use something that's free
  • The focus of SmartAssetFocus is on what's best for the buyers - not what's best for the banks.  Online mortgage calculators focuses on how much money you can borrow. SmartAsset is more conservative, the company will also tell you that you may need an emergency cushion in a savings account. SmartAsset will also give you a warning like "We don't think you can afford that" if they believe that your future house is too expensive
Why SmartAsset is a bad idea 
  • I'm a little bit worried about their claims. They say: "We provide all the information and analysis you need to make the best possible financial decisions." If we remember something from the 2007 US-housing-bubble, it was that mathematical models are not always accurate. So, the claim to make the "best possible financial decision" may be a little bit too wild. A financial mathematical model should be robust - not optimized, according to Nassim Nicholas Taleb, who's the author of the book The Black Swan. So, the question is whether the mathematical models used by SmartAsset can survive a similar event as the 2007 crash. The best financial decision may actually be to wait - can their models predict that?