By adaptive - February 22nd, 2016
Consumer savings software maker Acorns has generated lots of buzz with its nascent app. Co-founder Jeffrey Cruttenden shared his thoughts with OMM’s Robert Gray on the confluence of form and function as the company works with a Nobel Laureate to encourage people to save a few coins, like so many acorns, for less bountiful times ahead.
OMM: What’s the company’s overall design philosophy and strategy for its app?
Cruttenden: Acorns believes that people need tools that aren’t just powerful, but that are easy and delightful to use. That’s why we approach everything we do with a commitment to design that’s purposeful, simple, and beautiful. We’ve been fortunate to have that focus recognized with many major design awards, including the Fast Company Innovation by Design award (received last fall).
OMM: There are lots of financial services companies and apps, how do you differentiate your app and services from the competition?
Cruttenden: Acorns wants the path to financial health to be accessible to everyone, so we didn’t want to just put a pretty face on old business models. Instead, we started from scratch and created a specialized and fully integrated brokerage system. Then we built a proprietary technology engine on top that allows for things like automatic micro investing (buying fractional shares at sub-dollar amounts) on the go. In other words, we’ve done a lot of heavy lifting so that it’s easy for anyone to save and invest.
OMM: How many users does Acorns have and how active are they?
Cruttenden: By the first anniversary of launching our iOS app (in August), over 1 million people signed up for Acorns, with about 500,000 brokerage accounts, and 65 percent active in any given month. By focusing on making saving and investing accessible to everyone, and gathering micro investments every day, we see our assets under management (AUM) increase every week. We see micro investing alongside everyday purchases not only circumventing traditional fees, but allowing small accounts to generate new sources of income.
OMM: How important is your mobile product to your overall growth success?
Cruttenden: Having the right product and features at the right time is of course essential to success. But even more important is understanding what is driving the market opportunity. It’s not new that millions of people struggle to save and invest. Filling that space by repackaging the same old financial services, along with their high minimums, focus on AUM, and lack of innovation, misses the big opportunity. It’s clear that the possibilities opened up by technology today, with micro investing and new algorithms that help find money tied to purchases, is what will move the industry well beyond where most financial companies are today.
OMM: And does product design compare to marketing in your growth success?
Cruttenden: They work together – the ocean and the wave cannot be separated. A beautiful design helps to inform our market and directly helps our customers, while consumer preference helps inform design.
OMM: You’ve been lauded by some as having a clear viewpoint on how we live our lives right now. What is that viewpoint and how do you communicate that?
Cruttenden: We know that people are good at shopping, but lousy at saving and investing. Building an app that links the two just seemed like common sense. Most people want to go about their daily lives, not focus their time on investing. Having an app that automatically rounds up loose change, and finds money that can be automatically invested in the background of life, fits in with what people want and need.
OMM: This app has been described as perfect for Americans without stock portfolios—how do you reach this group and what’s the profile?
Cruttenden: Most people don’t start their first investment account until their mid 30s, when they have a lump sum saved up. By creating a product that allows micro investments tied to making daily purchases, people can get started sooner, stay with it more easily, and enjoy the benefits of dollar cost averaging and compounding from an early age.
OMM: Do you also attract people who do have 401ks or own stocks?
Cruttenden: We don’t offer 401ks yet, but we do see people that already have other investments opening accounts. Acorns gives them a new way to supplement what they’re already doing, investing small amounts at a time without having to think about it.
OMM: How did you land a Nobel laureate to work on your team?
Cruttenden: Dr. Harry Markowitz loved the idea of helping people save and invest small amounts automatically, and saw it as a great way for more people to get started investing at an earlier age. And we love his Nobel Prize-winning Modern Portfolio Theory, which delivers market returns with slightly less volatility than typical portfolios. Coupling his approach with our micro investing technology was a perfect match.