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FutureAdvisor co-founder Bo Lu

Sequoia Capital is investing $5 million in FutureAdvisor, a two-year-old Seattle startup that’s looking to transform the way people choose their investments and eliminate those pesky fees along the way. Total funding in the company, a graduate of the startup incubator Y Combinator, now stands at $6 million.

In addition to the funding, the company is rolling out a new service that allows investors to analyze how much they are paying in fees associated with 401(k) retirement plans.

“FutureAdvisor promises to democratize access to financial advice, save consumers thousands of dollars on annual fees, and enable customers to retire more comfortably,” said Sequoia Capital Warren Hogarth.

FutureAdvisor CEO Bo Lu, who previously worked as a program manager on the Windows Phone team at Microsoft, said that the company’s average customer is in his or her 30s with multiple investments they have to manage.

“They have a 401(k), an IRA and a brokerage account and an old 401(k) they’ve forgotten about,” said Lu. “They come to us with this disarray in their portfolio and we help them make sense of it all, put it all in one place, but more importantly tell them what to do about it.”

Lu said that the average American family pays about $1,000 in annual fees for their investment portfolio, fees they oftentimes don’t know about. FutureAdvisor helps identify funds that have exorbitant fees, and then recommends alternatives. Providing transparency into the process of 401(k) fees is something that Lu said no one is doing, adding that the biggest competition at this point is “apathy.”

“Really, lack of education among the populace is our biggest hurdle,” said Lu, adding that they hope to replace the traditional financial planner with the FutureAdvisor service.  The company primarily recommends index funds to its customers, with Lu saying that their goal is to make the financial industry more transparent.

“When you make a market more transparent, the best players win,” he said.

FutureAdvisor now analyzes about $4 billion in assets and offers recommendations for 401(k) plans of more than 11 million Americans. The company primarily recommends Index funds,

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