As fintech matures, many of the early pioneers in the space are realizing how important it is to become a user’s primary account. Wealthfront, which began as a robo-adviser, looks a lot like a bank nowadays. The company recently rolled out new checking account features.
Chris Hutchins is the Head of Autonomous Financial Planning at Wealthfront. He joins us on the podcast to talk about his firm’s vision of Self-Driving Money and how the future of financial services will include more autonomous banking services.
Chris was previously the co-founder and CEO of Grove, which was acquired by Wealthfront and co-founder of Milk, which was acquired by Google.
The evolution of Wealthfront
We started as an investment company with the mission to democratize access to sophisticated investment products. We were one of the first robo-advisers on the market, setting a precedent. Now, almost every financial institution has a robo-adviser. Since then, we have spent a lot of time focused on other parts of the financial ecosystem.
We recently launched checking features for our Cash account we launched last year. It was kind of crazy — I think we had like $1 billion in deposits in the first month. We’re focused on growing that by adding a lot of features like direct deposit of a paycheck so a client can get paid up to two days early, pay your bills, pay your friends and stuff like that.
Why launch checking
First of all, our clients have been asking for checking. We really take into account how people use our products. People were putting a lot of their money into their Cash accounts and wanted to do more with their money.
Checking is a really strong support for our vision of self-driving money. We have a goal of automating and optimizing our users’ finances. Imagine a world where you could direct deposit your paycheck, access it two days early and Wealthfront can figure out exactly where it needs to go to reach your goals — whether that means leaving some in cash, putting some away for retirement, or topping off an emergency fund. This could happen all behind the scenes during that two day window that your previous financial institution wouldn’t have even given you access to your paycheck.
When we talk with our clients, we really hear that people want to retain control over their finances but they don’t want to deal with the mundane process of managing it and scheduling money movements. It’s really important to have your money work for you and have a lot of these things happen in the background, because it’s hard to prioritize all these administrative financial tasks. Automation ultimately increases the chances people reach their goals.
Right now, our core audience is Millennials and young professionals who chose us for their primary relationship over banks. There’s a stigma that Millennials are broke and don’t save money, but there are about 20 million who are active savers and accumulate significant wealth over their lifetimes.
As we start to introduce more self-driving money and banking features, those have a wider appeal. You don’t even need to think about it. I expect to see this resonate with more people.
Competing against banks
At its core, Wealthfront is a product company. We build software. More than half our team are engineers. If you look at the banking industry, it spends more than $200 billion a year on IT. JPMorgan spent billions on tech, launched a product called Finn and it didn’t really work out. It’s not their core competency. The greatest technology innovation in banking to date is probably the ATM card — that’s how slowly they’ve innovated.
A lot of big institutions spin up these product teams focused on innovation, but at the end of the day, they are very slow moving companies. You can see it in their response to what’s happened with the pandemic. People are sitting on hold for hours as banks try to figure out how to stop being focused on branches.
We have only a handful of product specialists which are similar to what a customer support rep would be somewhere else. But we have a belief that we should automate everything. So, we think their jobs are to understand the deficiencies in the product that prevent it from being automated and inform the product roadmap so we can automate them. We’ve been able to scale to hundreds of thousands of clients with just 12 of them. We haven’t had the long wait times that a lot of banks had.
Wealthfront during the pandemic
We fared pretty well. We didn’t have clients sit in wait. We transitioned the entire company to remote work and it didn’t impact clients. Clients had questions about the pandemic and we quickly built them into the product with in-app Q&A to avoid email and phone calls. We’re still focused on innovating our core products and we launched these banking features during the pandemic.
Most of our new clients are coming from traditional banks. If you look at the average checking account in the industry, it’s hard to find one that doesn’t have fees. Some people are fed up with their banks. Branches aren’t even relevant anymore. When we talked to our clients about branches, we found that something like 40 percent hadn’t gone to their financial institution’s branches within the last year.
Our research showed that the average customer pays about $400 a year to cover the cost of their bank branch. I think our customers would rather get that money back in the form of products, interest, and features.
Future banking products and features
We’ll always continue to add more features to the banking product until it meets all needs. We think we started with a core feature set that delighted our early customers when we tested it. We’ll continue to make progress on our self-driving money concept.
I’m working on a product that starts all that automation. An account like this, whether it’s at Wealthfront or not, could auto-sweep money to the place I want it to go. You can see that evolve to the point of sweeping money to the best place possible when an account gets to a certain threshold. You’ll see this coming out in the coming months.