Future of Investing

In inclusion move, SoFi opens up to customers ignored by wealth managers

  • Online lender SoFi announced that it's making its wealth management service available to non-borrowers.
  • Beyond a financial inclusion play, analysts say the move is motivated by a need to scale the business and acquire new customers.

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In inclusion move, SoFi opens up to customers ignored by wealth managers

Score another for financial inclusion.

SoFi’s announcement that it’s offering wealth management services to a broader range of customers Tuesday may be a sign the startup is growing its business lines to compete with the big banks. The target is the 25 to 40-year old professionals who are ignored by traditional wealth managers and often stuck with high minimums if they want the advice of a professional.

“SoFi is the only wealth management offering at this low price point to offer unlimited access to non-commissioned, licensed financial advisors, who are available via phone or chat, which certainly makes it more accessible to those who otherwise have been ignored,” said John Gardner, general manager of SoFi Wealth.

Over the past year, the online lender, which recently acquired mobile banking startup Zenbanx and signaled intentions of applying for a banking license, has moved away from a “great loans for great people” branding message to one that emphasizes financial freedom. New customers of SoFi Wealth will also be able to access SoFi’s mentoring and networking events.

The SoFi Wealth product’s management fee is 0.25 percent (a fee that’s waived for the first $10,000), and a $500 minimum initial investment or recurring monthly deposit of $100 — a means to open up SoFi to a much larger slice of the population.

But industry watchers say SoFi’s interests in attracting a broader clientele are motivated by the imperative to grow.

It’s more of a customer acquisition strategy than an inclusion play, given other moves, including the application for a banking charter,” said Emmett Higdon, mobile practice leader at Javelin Strategy and Research. “All signs point to them going broad with a banking offering.” 

With SoFi positioning itself to offer more products, partly enabled by the Zenbanx acquisition, added Higdon, acquiring these customers would provide an added customer base to whom the company could market additional services.

According one wealth management analyst, broadening SoFi Wealth’s availability may be an important tool to help the company stay competitive.

The main thing is achieving scale — that has to be their mantra,” said Seth Freeman, senior managing director of EM Capital Management. “They have to scale up to survive and prosper, and they also have to develop and maintain a relationship with their customers.”

For analysts focused on financial inclusion, the SoFi Wealth product may be a step in the right direction, but a long way from giving underserved populations a needed leg up.

Even $500 is hard for low-income customers, these people are borrowing $200 to make ends meet — but it’s better than a $10,000 [minimum]” said Ashley Harrington, counsel at the Center for Responsible Lending. What’s more likely, Harrington added, is that the availability of the product could benefit borrowers of color who have access to more capital.

“It will be interesting to see how they market this product and who takes advantage of it,” she said.


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