“We’re not interested in serving millionaires. We’re interested in growing millionaires,” says Noah Kerner, CEO of Acorns at the 2018 In|Vest Conference held in New York City from July 10-11, 2018.
According to the 2016 Fidelity Investments Millennial Money Study, 86% of millennials are keeping their emergency fund in a traditional savings account. Less than 10% are keeping these funds in a brokerage or investment account, although studies have shown that stocks have delivered bigger returns than cash over the long run. But after witnessing the 2008 financial crisis and being bombarded by tons of other obligations such as student loan debt, a BlackRock study shows that millennials believe investing is “too risky.”
Now, the investing landscape is swiftly changing. More millennials are entering the world of investing thanks to apps like Acorns that have simplified the investing process and made it a part of a financially fit lifestyle.
Acorns, a digital Fintech micro-investing app, is trying to go where no other company has gone before. In 10 years, they want to say they have helped 100 million Americans save and invest every day. And it all starts with something as relatable as spare change.
“You need to start with an idea that people can really hang their hat on. That’s why spare change is interesting. It’s really relatable,” says Kerner as he participated in a question-and-answer with Yahoo Finance editor in chief Andy Serwer. The former DJ turned CEO talks about the importance of offering something relatable that everyone can connect to instead of trying to instantly reinvent behavior.
“The industry talks a lot about skipping coffee and putting $5 into an investment portfolio instead,” says Kerner. “But it’s hard to get people to skip coffee. There’s no way you can get me to skip coffee. But what you can get me to do is invest 50 cents when I buy the coffee.”
Launched in September 2014, Acorns has opened over 3.7 million investment accounts in the United States and has five different products with over 100,000 customers each. The company isn’t catering to the wealthiest Americans in the United States. Instead, they are targeting up-and-coming households with incomes less than $100,000 to tap into an underserved population of investors.
“We made it really simple and effortless to help you save and invest. We started by helping people invest their spare change,” says Kerner. “The way this works is you download the product (app), you link your bank, credit, or debit card, and every time you make a purchase we round up the purchase to the nearest dollar. We invest the spare change into a portfolio of ETFs.”
According to The BlackRock ETF Pulse Survey, 44% of millennials are using ETFs to build portfolios that help them meet their financial goals. ETFs are exchange-traded funds that are bought and sold like shares of stock on a stock exchange but allow you to spread your risk by investing in a group of stocks, bonds, or other assets instead of an individual company stock.
Although Acorns is revolutionizing financial services for many new investors and growing its customer base exponentially every month, Kerner reveals how the company’s purpose is bigger than profits. “What we’re trying to build is a financial wellness system that ensures every American saves and invests regularly. Instead of getting into spending and just trying to promote a card product, what we are trying to promote is actually people saving and investing while they spend.”