Swell Investing, a digital advisory firm that specializes in socially responsible portfolios, is closing down. It stopped accepting new clients and deposits as of Wednesday and will cease operations on Aug. 30, according to a notice on its website.
Investors are advised to transfer their funds to another investment platform by Aug. 15, to the same type of account, or to a bank account by Aug. 30. IRA account holders are advised to begin that process by mid-August. Otherwise Folio, the robo’s custodian, will sell out account positions — which could result in tax penalties if the account has capital gains and early withdrawal penalties for retirement investors under age 59-1/2.
“Swell was not able to achieve the scale needed to sustain operations in the current market,” reads a notice on the robo-advisor’s website signed by The Swell Team.
The robo-advisor, which launched in May, 2017 after an incubation by Pacific Life, had amassed just $34 million in assets under management and 14,122 accounts as of April 9, 2019, according to its latest Form ADV filing with the Securities and Exchange Commission.
What Your Peers Are Reading
David Goldstone, research analyst at Backend Benchmarking, which publishes The Robo Report, is not surprised by the news of Swell Investing’s demise. “The digital advice market is maturing. Independent players who have not reached scale or have not been acquired by larger companies may be in trouble,” says Goldstone.
“Robos have low costs and low margins and have to reach scale to reach profitability,” Goldstone explains. “Swell was late in launching and the industry is extremely competitive.”