4 ways financial companies are targeting millennials

financial firms target millennials

Many financial companies are searching for new ways to market to millennials. It makes sense: as millennials age, they have a growing appetite for financial services. Fintech startups are particularly adept at marketing to millennials because many of these companies were founded and run by people in the same demographic. Companies are acquiring customers through online marketing online, but some are finding that going old school and offline is a surprising way to grab a millennial’s attention.

Here are a few ways companies are reaching out to millennials, both online and offline:

Oscar

A photo posted by Oscar Insurance (@oscarhealth) on


Oscar is a new type of health insurance company using technology as a means of simplifying the healthcare system and making it more accessible online, as well as at a lower cost. The company has raised over $300 million to date. Oscar’s been advertising in subway stations in New York since October 2013, before expanding its reach to New Jersey, in an attempt to raise more awareness of the company.

In a quote to Adweek, VP of Marketing at Oscar, Veronica Parker-Hahn said: “We knew we needed a way to drive awareness of Oscar, but we didn’t have the money and we weren’t quite ready to dive into the pool of TV.”

Through eye-popping, colorful and cute ads, Oscar speaks to millennials of its accessibility through technology – you can even interact from a couch at home. The company offers an easy-to-manage website, app and even perks and rewards for staying physically active through a free health tracker.

Wealthfront

Wealthfront uses TV ads to publicize its low-cost, automated, online investment management services. Through goofy, scripted skits, Wealthfront manages to target millennials during their favorite TV shows on Comedy Central and when their favorite sports games are on commercial break. The commercials have aired most recently on sport channels like Pac-12 Network, during college football games this past fall. This way, Wealthfront can reach the young (and mostly male) population it’s targeting. The 30-something bros starring in its ads may be representative of their target audience of mostly 20- to 30-somethings (the focus on men might have been a good thing as many women commenting on the video were aghast that the men knitting didn’t actually know how to knit).

The roboadvisor built its investor base by targeting newly-minted millionaires from big tech firms, like Twitter and Facebook. The company employs many of the same type of people it aims to land as clients and has made some high profile hires like Andrew Johns as VP of Growth. Johns, who graduated college in 2006, spearheaded growth initiatives at companies like Quora, Twitter, and Facebook.

Upstart

Upstart, a company that bypasses traditional lending models to extend loans to people without an extensive credit history, also targets millennials. Upstart believes that to stand apart from the soup of ads streaming in through social media and online channels, it needs to take a noticeably different course.

Upstart’s Chief Marketing Officer, Mike Osborn, thinks direct mail is a better way to get his prospects’ attention:

“When we think about where we’re going to find our next customers, we’re definitely looking at the offline opportunity. We’ve been positively surprised in volume and profitability with offline channels. When you get an email offer to refinance your debt, it’s pretty easy to ignore it. But when you get your credit card statement in the mail and a couple of days later, receive an offer to help pay it off, the offer has relevance and timeliness when it comes via direct mail.”

And he should know — his last job was on the marketing team at Uber, a company renown for marketing well to millennials. The marketplace lenders, like Lending Club and Prosper, continue to invest in direct mail, sending tens of millions of pieces every month via the mail, according to the WSJ.

Bank of America


Bank of America has been using Pinterest as a social media platform to reach out to the millennial generation.
To prepare for its social media campaign, the 2nd largest U.S. bank in terms of assets created Better Money Habits (BMH), a website with rich personal finance content for its target group. The company used Promoted Pins on Pinterest to creating digital image with pinpoints, each linking back to their pool of resources on BMH. Pinterest shows these Pins to users based on their search terms and Boards that have a personal finance bent, like buying a home, saving for a vacation, and wedding planning.

Besides being the social media platform with the fast growing percentage of millennials using it, Pinterest is primarily used by women (85% of users). Bank of America is targeting its messaging using digital pictures to connect with millennial women, like pins about wedding dresses titled “Save your way to the perfect dress”. “We are utilizing Pinterest as a visual search engine to reach consumers with the right message at the right time and tailoring our content to what consumers are searching for most often,” said Christopher Smith, the company’s Enterprise Social Media Executive.

Photo credit: TheeErin via VisualHunt.com / CC BY-ND

The online investing course — with Mesh Lakhani

james valentine and analyst training

It isn’t every day you stumble upon your doppelganger.

Mesh Lakhani may very well be mine. He’s the investor and author behind the Future Investor Course (www.futureinvestor.co ), a great new course that teaches all about online investing tools like Wealthfront, Acorns, Betterment, and more.

Mesh joins us to discuss his personal journey to adopting these tools and how today’s investors are using them. Check out the interview.

About Mesh

mesh lakhani and future investor courseMesh Lakhani is an investor, a teacher, and the founder of the Future Investor course.

Listen to the FULL interview

Resources mentioned in the podcast

Even more resources

Photo credit: ♔ Georgie R / VisualHunt.com / CC BY-ND

Betterment vs. Wealthfront, per their CEOs

online investing

There’s a very interesting conversation happening over on Quora about the merits of the two online investing services: Betterment and Wealthfront.which is better

What makes it even more compelling is that it’s being held between the CEOs of the two firms, Jon Stein and Andy Rachleff, respectively.

Betterment’s argument

Stein (Betterment) used the following framework to describe why he thinks Betterment is the better solution:

  1. automation: Users seem to agree that Betterment is better integrated and more fully automated
  2. for serious investors: There’s more personalization available for Betterment users, as you can change your allocation and make trades square away.
  3. integration: Probably related to #1, but Betterment is both a broker and investment advisor, which means everything is branded Betterment, making a smoother ride for clients (Wealthfront uses Interactive Brokers as its brokerage and clients have to contact IB with questions on the actual account).
  4. better deal: lower fees
  5. tuned to behavioral finance: Betterment realizes how poorly most of its users would probably behave so it uses smart defaults to automate decision making.
  6. customization: Instead of just getting a model portfolio like you would at most RIAs, you can tweak things on Betterment to get it just the way you want.

Rachleff (Wealthfront) counters

Andy takes a different approach when sizing the two firms up. Here’s his framework why Wealthfront beats out Betterment.

  1. focus: WF targets young tech employees.
  2. sophistication: WF uses Modern Portfolio Theory (MPT) and therefore, Betterment should return less for every level of risk.
  3. determination of risk: WF uses a 10 question survey to set risk parameters and allocation while Betterment requires you do it yourself.
  4. minimums: $5k minimums at WF and they don’t charge until a client tops up to $25k or more. Betterment charges a subscription fee for small accounts.
  5. fees: it’s interesting to see that both firms feel they’ve got the better model here
  6. transparency: you get an allocation and portfolio recommendations before you open an account with WF, which you can then take and manage yourself. At Betterment, you don’t get rec’s until you open.

Of course, CEOs should behave as beknighted cheerleaders of their firms, so readers should understand where both Jon and Andy are coming from.

But what an awesome world we now live in where CEOs are engaging in the conversation to help users/investors understand which investing platform is right for them.

Read What are the main differences between Betterment and Wealthfront (Quora)

***FYI, I was contacted by Betterment’s Community Manager with the following clarifications:
Betterment is actually founded on modern portfolio theory. As you mentioned, it is intersected with Behavioral Economics so people actually implement the practices of MPT.

Regarding risk – Betterment makes recommendations for allocation based on goal type, time to goal i.e. if saving for retirement in 30 years, I can allocate more to stocks, say 80% stocks, 20% bonds. If saving for a major purchase, Betterment would recommend I allocate more conservatively. Then, the product shows me, in real time, the best and worst case scenario. Based on this information, I will understand my appetite for risk, and adjust the sliders accordingly.

[presentation] optimizing your portfolio with ETFs

P2P Lending's Developing Debt Market

Wealthfront is pivoting — away from the marketplace of RIAs model like Covestor employs and towards fundamental, portfolio management delivered over the Internet.

The firm appears to be joining a growing bunch of firms focusing on the online delivery of financial advice, like:

  • Personal Capital:  a portfolio manager with A-team management, providing portfolio management over the Interwebs (see my interview with the president of Personal Capital)
  • LearnVest: Focused on a younger, female demographic, delivers financial advice, courses, bootcamps, and now, a subscription model that gives clients financial planning and access to CFPs for ongoing advice.
  • Hedgeable: up over 10% in 2011, this upstart — founded by two experienced hedge fundies — provides institutional-type strategies to individuals for insanely affordable fees (some services are free).
  • Jemstep: Plug in your portfolios at different brokers and the Jemstep platform analyzes everything and makes suggestions to help your optimize your holdings. (here’s my interview with Jemstep)
Wealthfront’s new approach is to emphasize its adherence to MPT (Modern Portfolio Theory) and this is the first presentation from the newly-focused firm. I think it’s pretty sweet.

Lunch price inflation: 8 strategies to profit in the age of social media

With the 24/7 nature of financial news, commentary and data,there are no more free lunches for investors.  In fact, given that access and dissemination have improved tremendously, lunches have gotten a lot more expensive. It’s harder and harder to cut through all the noise.

Financial content sites like Seeking Alpha and Stock Twits provide a window into long tail investment content.  Expert investment communities like Covestor and Wealthfront take this up a notch and provide real-time access to the tradestream — the collective flow of real, audited trades of investment advisors.

With these platforms, we no longer have to lose our lunch money.  We can play smarter by following the truly exceptional investors with well-documented, long-term investment returns.  Why recreate the wheel when you can copy others who are so successful?

I discuss these mimicking strategies at length in Tradestream.  In short, there are eight different types of investment mimicry, from cloning top hedge fund managers’ stock picks to identifying and piggybacking the next Warren Buffett.

  1. Blog bigwigs: The financial blogosphere has created a virtual stock research bonanza and enabled top researchers to strut their stuff.  These investment bloggers provide institutional-grade advice at the fraction of the cost.  How is $0 for your own, personalized stock research team?
  2. Present-day gurus: While most investors underperform, there are those few who are exceptional (for those interested, check out Forbes editor Matt Schifrin’s new book, The Warren Buffetts Next Door).  While you and I may not be gurus, Warren Buffett is.  Eddie Lampert is.  Seth Klarman is.  These superinvestors exhibit great long-term performance.  We can win, as well, by strategically  following their moves and tools like AlphaClone help a lot.
  3. Undiscovered experts: Thousands of people manage virtual and real portfolios, competing against one another for top performance.  As time elapses, expert investors emerge from the rabble.  Previously unknown and unsung top performers bubble up to the top.  Following their moves can lead to the promised land of profits.
  4. Rumor mills: Strategies can be developed to harness the information — or disinformation — inherent in most rumors.  Monitor these in real time or view them in the aggregate.  The information here is important even if you don’t trade on it.
  5. Insiders: Corporate insiders are notoriously good investors in their company’s stock, even when they trade legally.  And they should be: Given access to sales forecasts and operational metrics, these investors have a knack for buying low and selling high.  They too can be followed and followed profitably.
  6. Historical gurus: Stock screening allows investors to sort quickly through thousands of stocks for those select few that exhibit specific criteria.  Mimic screens allow us to search for the same parameters historical investors like Peter Lynch and Benjamin Graham used in their hunt for great stocks. Validea has created a whole business around helping investors do just that.
  7. Crowds: There is a lot of predictive power in the wisdom of the crowds.  Crowdsourcing can be used to locate good investments.  Here, changes in sentiment can be an investor’s key in determining the next winning investment.  Piqqem has made a lot of strides here and new firms like RecordedFuture (hear my recent podcast where I interview them)
  8. Co-lateral information: Not all tradable information is purely investment related.  Much of it exists in other forms.  Learn to recognize valuable resources that can be gleaned to aid our search for investing profits.  Google search data is just one example.

Some of these forms of flattery have been studied closely while others are so new that they’re just beginning to inspire research.  Regardless, all have been inspired by the sheer transparency that today’s Internet provides.

New investment managers added to Wealthfront

Wealthfront announced the addition of 3 new investment advisors on their investment platform.

As per the firm:

Towle & Co. (Value Strategy | Min. Outside Wealthfront: $500,000)
Towle specializes in a long-term, deep-value investment strategy that seeks to uncover significant discrepancies between stock market prices and underlying company values. Through Towle, you can invest in well-run companies with strong market positions and low price-to-sales ratios: a way to buy operating leverage and economic activity on the cheap!
Barton Investment Management (Growth Strategy | Min. Outside Wealthfront: $1,000,000)
Barton believes the market fails to appreciate and correctly value the full potential of enterprises that create new markets. Its concentrated portfolio of carefully-selected younger growth company stocks allows investors to capitalize on these market inefficiencies while supporting innovation.
CWC Advisors (Small Cap Strategy | Min. Outside Wealthfront: $1,000,000)
CWC began providing investment services in 2000 to high net worth individuals, and within a few years, attracted the interest of institutional investors. Its strategy consists primarily of contrarian U.S. companies with recent price under performance, corporate liquidity and/or fundamental valuations at historically low levels. Now you can invest with CWC, too.