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Ellevest is using its new funding round to add human advisors

Ellevest, the digital investment startup aimed at women, is the latest “robo-advisor” to offer human advisors to its clients for a premium.

The company has just closed a $34.6 million funding round it plans to use to extend the momentum its business started to notice this spring, Krawcheck said in an interview, and grow its offering.

“The feedback we were getting from women was that they wanted us to do more for them,” Krawcheck said. “They looked for ‘real’ financial planners, people they can engage and interact with. That had not been part of our plan but we were hearing so much of it that we thought: when the client asks, and it makes sense, it’s a good thing to answer.”

The premium service, called Ellevest Ascent, will introduce clients to a financial planner to develop personalized action plans with them across their career and family goals, taxes, cash flow, debt, credit, investments, retirement and insurance. The company hasn’t developed the offering yet, though it has done research with some potential users so far, Krawcheck said. It will continue to test and refine the product during its rollout, as it did with its initial product.

Ellevest, which launched in May 2016, gives clients an interactive financial plan that takes things like the gender pay gap, earnings power over time, risk preferences, women’s longer life spans and caretaking responsibilities into consideration. Women generally earn less than men and their salaries peak earlier than men’s. Women may also have a different take on risk than men do.

The new feature is part of a trend that continues across an industry that at first touted robo-advisory as the future, and soon found that clients actually needed and wanted (and were willing to pay for) the human touch.

Last month, Betterment brought flesh-and-blood advisors to its offerings; for a 0.4 percent annual fee, clients with at least a $100,000 balance can have unlimited access to them. Wealthsimple also gives its Black-level clients (also with a $100,000 in balances) access to human advisors via phone, text or email. Ellevest hasn’t yet determined its fee structure for premium clients.

But there can be multiple firms that meet the different needs of the market, Krawcheck said.

“Everybody is our competitor. Inertia is our biggest competitor. The competition will always be there — that doesn’t mean there’s room for just one or two or three players. The market is enormous. It has trillions of dollars in investable assets. Women today have five or six trillion dollars in investable assets.”

 

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Ask a VC: Why Andrew Parker thinks blockchain is past its prime

Blockchain is going to revolutionize financial services. Unless it won’t.

Too often, blockchain solutions for financial services are square pegs trying to fit in round holes, according to Andrew Parker, a partner at Spark Capital. While bitcoin and its underlying blockchain technology are interesting and maybe even revolutionary inventions, they don’t have a significant place in the industry.

Spark has placed some pretty good bets in fintech, having invested in some of the most successful startups across different sections of the ecosystem, including financial API provider Plaid, marketplace lender Orchard, installment payments company Affirm and robo-adviser Wealthfront.

Parker, who has been with Spark, spoke to us about where his attention is in fintech and why it’s important to focus on innovating for the customers’ sake and not for the sake of technological innovation.

Investors know not every idea out there will survive. What makes you want to invest in the next big fad versus the next big thing?
I strive to invest in enduring companies with big ideas that will thrive for many years to come. A common feature I see in fads is that, in hindsight, they look like technology for technology’s sake, as opposed to solving a pressing customer need. So, in evaluating an investment opportunity, I focus on the customer need first and then analyze technology solutions to address that need. I hope that approach keeps my focus on the next big thing.

What consumer-facing fintech trend is most exciting to you right now?
My favorite trend is the continued rise of the robo-advisers. It’s not new (in fact, it’s a decade old), but the evidence is overwhelmingly strong that retail investors are best off focusing on indexing, and I think robo-advisers offer an excellent product to help retail investors into the ideal indexing balance to meet their needs. The benefits that robo-advisers offer in automated rebalancing and tax-loss harvesting provide surplus gains that exceed the fees that they charge, and they save consumers the cognitive load of trying to pick the best index funds from the deluge of options Wall Street has created.

Is there one that’s particularly overhyped to you or has lost your attention?
I find the blockchain to be one of the most interesting inventions of the past few decades. It’s an incredibly elegant way for a group of counterparties who inherently do not trust each other to be able to collaborate and agree on a commonly accepted ledger of transactions together. And, Satoshi Nakamoto’s original bitcoin whitepaper that outlines the blockchain is delightfully readable and wonderful in its simplicity. But the trend that I find overhyped is using the blockchain to solve problems that don’t fit this general use case of a group of untrusting counterparties. The trend that has passed its prime is using the blockchain to solve problems that are more easily and efficiently solved using boring old open-source database software (often run and owned by a single party).

How has activity in the fintech ecosystem changed over the couple years, and how has that affected your work as an investor?
The past couple years have been pretty even in demand for investment in new fintech companies in my experience. Some subsets of the broader fintech market have had more highs and lows. For example, the scandals that led to the firing of LendingClub’s CEO last spring had ripple effects in the funding market for online alternative lending companies for a few months. But for the most part, I’d categorize the market over the past couple years as active, and investors are showing continued healthy interest in new fintech startups.

What’s the greatest lesson you’ve learned from a failed venture?
The greatest lesson I have learned, which has now affected my behavior as an investor going forward, is a need to hire proactively ahead of issues in the senior leadership team. I never have had the experience of saying, “Wow, I think we hired that finance or engineering lead too early.” But, I’ve found myself on the opposite end of that spectrum too many times. This lesson has led me to encourage senior hiring earlier than were previously my instincts.

What is the biggest mistake entrepreneurs make when pitching you?
The biggest mistake is failing to convey a really ambitious vision for the future. No company is ever perfect at the outset; they all have significant issues that must be overcome to become valuable. The big ambitious vision is how investors fall in love with a company in order to embrace the significant issues, overcome their doubts, and get on the train. The big ambitious vision is also the opportunity for a founder to show their passion for their mission, which can be very persuasive when done well.

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Why robo-advisers are looking to former magazine editors for the human touch

Robo-advisers Wealthsimple and Ellevest believe in the human touch after all.

Both have plucked editors from top publications in order to personalize the often-dry world of investment advice by focusing on lifestyle matters. Ellevest hired chief design officer Melissa Cullens, who was an independent design strategist that Vogue.com recruited to lead the re-design of its website. Canada-based Wealthsimple, which expanded to the U.S. last week, hired Devin Friedman, a former GQ editorial director, as brand editor to lead its section that features interviews with people about the role money has played in their lives.

“The human side is something I don’t think a lot of people in our space have done a great job of, and it’s one where we excel,” said Wealthsimple chief product officer Rudy Adler. “It’s easier to do when you have a great voice; you’re coming at them with humor and not boring them with dull finance articles. We’re trying to find an emotional way in.”

At Ellevest, the investment platform for women launched by Wall Street vet Sallie Krawcheck, Cullens focused on the role money plays in helping people feel safe and express their values, like having control over their lives. That thinking was expressed in the design of the platform but also the user experience, including how many steps users have to take in the on-boarding process, what information they hand over and what the form field experience is like.

For example, similar services often ask questions about a user’s investment experience and risk preferences, and they’re usually laden with jargon and can take at least 10 minutes. Cullens designed the Ellevest on-boarding experience to include the client’s life goals, not just financial goals, and streamlined the process.

“We wanted to try to create an interface and experience that gave her the reins she was already taking and make investing work for her instead of making her learn more, work harder or be better to fit into the mold of a system that ultimately has excluded women,” Cullens said.

Robo-advisers, which dole out artificial intelligence-driven investment advice through a website or app, have been one of the fastest-growing parts of the U.S. fintech market. But that growth has leveled off as banks and other traditional financial institutions have piled into the space, creating new competition for customers.

Traditional financial services have mostly targeted high-net-worth individuals. But fintech depends on being able to relate to young people who are new to investing and may have lived through the last recession and distrust traditional finance. That’s where people with luxury brand experience can help robo-advisers differentiate.

“In the early days, no one thought about client experience; they just thought that if you log in, then you can make a transfer,” said April Rudin, chief executive of wealth management marketing firm The Rudin Group. “By bringing talent that has experience in creating a luxury experience, the idea is [fintechs] will take their functionality and give it client experience.”

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Hi 5! The five fintech stories we’re following this week

top 5 weekly fintech stories

Time to get slowly, cautiously, enthusiastic about blockchain

Tradestreaming would be the first to acknowledge that a lot of blockchain news is more buzz than substance. Heck, we even have a monthly Blockchain Hype Meter to show just that. However, we’d also be just as soon to admit that not all blockchain developments can be written off as speculative fiction. On this week’s episode of the Tradestreaming Podcast, we explore why financial professionals should start paying attention to the blockchain.

Oh, and also why making transactions completely anonymous isn’t going to go mainstream.

Robos continue to gain footing in finance

Robos are beginning to take on more prominent roles in banking. Though CEO slots are safe (for now), as far as customer service goes, banking chatbots are the up and coming thing. Bank of America’s solid — though overly simplified — understanding of what makes banking customers tick in the current market has them focused on chatbots and roboadvisors alongside digital payments.

Meanwhile, the Department of Labor has taken a large step forward in helping to define technology’s role in asset management. This week, the DoL published a Q&A about its new fiduciary rule, and it’s beginning to make more sense.

Women in fintech support one another

It’s either a monumental or severely disappointing week for women worldwide, depending on the outcome of the 2016 presidential elections. While they may not have the nuclear codes, powerful women are using a combination of traditional and techie means to in an attempt to bankroll other women, seeding them with capital and support mechanisms to help them be successful.

Some of these initiatives are being made possible by the 2012 JOBS Act. To be honest, though, the crowdfunding revolution the ruling was supposed inspire hasn’t really taken off. Of course, women are also shaping fintech by simply working in the field. Tradestreaming got an inside view into a workday in the life of Crystal Eastman, head of marketing at online SMB supply chain financing firm, Behalf.

Closer than ever: ecommerce and finance

Ecommerce and finance have always been tight, and innovation in fintech has helped blur the lines between these two sectors even further. One example of this is a new collaboration between Provenir and Klarna, which has lowered cart abandonment rates by pre-approving consumer financing before a user even inputs all his or her deets. In other words, the transaction has been separated from the payment.

Another prime example of ecommerce/finance crossovers is Payoneer, which powers international mass payouts on marketplaces like Airbnb and Amazon. The startup is trying to fix the the terrible, horrible, no good, very bad sending and receiving of international payments for stuff.

Just one week left until Tradestreaming Money 2016!

Tradestreaming Money 2016 is the event to end all financial service events (well, until our next one). It’s turning into the premier top-tier digital financial services event of the year, with top digital execs from Citi, Fidelity, NYLife, CSFB, Vanguard, US Bank, MIT, BBVA, Cornerstone Advisors, Two Sigma, and QED Investors.