If you — like me, members of my family, and many friends — were a victim of the Equifax security breach, there’s a way to monitor your credit reports free without having to sign up for a paid monitoring program such as LifeLock.
The free monitoring is courtesy of CreditKarma, a financial-technology company funded in part by local private-equity shop Susquehanna Growth Equity LLC. Founded in 2007, CreditKarma pays for consumers to access their credit reports and scores from credit bureaus; it earns fees by matching borrowers with lenders. As of last week, if you set up an account at CreditKarma.com, the company would send you an alert if there were changes in your credit reports, including suspicious activity or errors.
To get the free monitoring, create an account, then click on “Profile” and “Settings” in the top right corner, select “Communications & Monitoring,” and check the “Credit Monitoring” box.
I have already paid both TransUnion and Experian to freeze my credit — credit freezes cost more in Pennsylvania; they are free in New Jersey. I froze my credit free at Equifax.com — deservedly so, by the way, since it exposed our information to hackers. Like CreditKarma, Credit Sesame and Quizzle offer free monitoring services; you can try all three.
Susquehanna Growth Equity, based in Bala Cynwyd, is part of the much larger Susquehanna Investment Group and generally doesn’t accept outside money, according to managing directors Amir Goldman and Scott Feldman.
“We have really focused on financial tech, payments companies, and credit, and we thought some parts of that were ripe for disruption,” said Goldman.
Why did they invest $30 million? “CreditKarma.com created a business that provides the consumer with their own personal info for free — it’s theirs, and they have that info available persistently. So you can get it whenever you want it, not just once a year for free,” said Feldman.
CreditKarma makes money as it pairs consumers, through a matching engine that sees what type of credit they’re looking for (auto, credit card, mortgages, etc.), with banks or other lenders.
“The company has challenged the incumbent model, and they get paid when a match is made,” Feldman said.
Susquehanna Growth Equity met one of the company’s founders, Ken Lin, in 2012, and invested the $30 million in 2013. It has since invested in subsequent funding rounds; the market currently values CreditKarma at about $3.5 billion.
For a list of the start-ups in which Susquehanna Growth has invested, visit https://sgep.com/companies.
What do we pay in fees?
Good question. Personal Capital breaks that down in a new survey: Ameriprise topped the list, with a total estimated fee for investors of 2.25 percent to 3.5 percent annually; UBS is at 2.94 percent, and Morgan Stanley at 2.92.
Personal Capital, of course, looks good in its own survey: It charges 0.97 percent, less than some of the other Wall Street firms, although more than Charles Schwab and Vanguard, which charge 0.44 percent and 0.38 percent a year.
Though it’s not perfect — Fidelity, for instance, isn’t included — the fee breakdown gives a window into how much investment advisers charge. Finding that out can be a bear — just ask your own adviser.
Personal Capital’s CEO, Jay Shah, said the most important finding was that 46 percent of investors polled “mistakenly believe their financial advisers are legally obligated to act in their best interest. In most cases, that’s not true.”
I asked Adam Holt, founder and CEO of Philadelphia 100-ranked Asset-Map, which I’ve profiled, about the survey. Remember, he replied: Good advice isn’t just about fees.
“It’s not clear whether annuity or hedged products are exposed in their clients’ outside portfolios, which would tend to skew the internal cost structures,” Holt noted. Plus, he said, smaller accounts tend to have the highest all-in fees.
What the survey does show: “The value of guidance and advice with low cost. While Vanguard and Schwab round out the lowest fee positions in their own study, Personal Capital makes the argument that having access to financial advisers/advocates is worth coming in third place for fees in their own study.”
Asset-Map does one-page breakdowns for advisers and investors and includes everything: monthly budgets; investments; insurance; legal and tax perspectives.
“While the costs of investment management tend to dominate the perceived cost of advice, the real long-term impact actually comes down to good and suitable financial decisions,” Holt said. “Think about the person who has the lowest-cost portfolio but, because of how it’s owned, subjects it to unappealing taxation, which magnifies the total cost significantly.”