BlackRock Backs a Startup to Find Out What Young Investors Want(wsj.com)
wsj.com
BlackRock Backs a Startup to Find Out What Young Investors Want
https://www.wsj.com/articles/blackrock-backs-a-startup-to-find-out-what-young-investors-want-1525868931
56 comments
As a 27 year old I'll tell you what I want: the ability to invest in REITs. There's no way I'll ever be able to afford a home, especially with values going up by $800/day in San Francisco. From my experience the only way I can do this is via my brokerage account, but I really want to do it from a tax-protected account like a 401(k).
Lots of REIT funds available, the problem of course is that 401k regulations are woefully inadequate for ensuring you’re provided choice and low expense ratios.
I do not suggest investing in a REIT in a rising interest rate environment, but if you decided to, I’d invest through a traditional or Roth IRA and balance the remainder of your portfolio through your 401k and taxable accounts (ensure the funds you buy in your taxable account are tax efficient!).
Alternatively, you might try to see if your 401k provider supports in service distributions (exporting funds to your IRAs without you separating from the company). You could then invest in the funds you’d like, not limited to your 401k selection.
I do not suggest investing in a REIT in a rising interest rate environment, but if you decided to, I’d invest through a traditional or Roth IRA and balance the remainder of your portfolio through your 401k and taxable accounts (ensure the funds you buy in your taxable account are tax efficient!).
Alternatively, you might try to see if your 401k provider supports in service distributions (exporting funds to your IRAs without you separating from the company). You could then invest in the funds you’d like, not limited to your 401k selection.
There's a startup called Fundrise that makes it pretty easy to invest in REIT's. But for some reason, you have to commit your money for I believe 5 years without taking it out. I don't fully understand why or what the deal is with that so I haven't pulled the trigger yet myself and invested with them. It's also mostly commercial focused I believe, as opposed to housing.
But I 100% agree with you. Pretty much every young working person is already extremely over-exposed to the housing market via their rent costs which easily might be 30-50% or more of your after-tax salary and can go up every year. Investing a big part of your savings in your local housing market seems like a smart way to hedge.
REIT's do seem fairly complex and obscure though, and it seems like you usually have to back a single developer or project and put in a fairly large minimum investment. I can easily buy an index fund that tracks S&P performance, why isn't there a simple index fund I can buy that tracks the SF housing market performance? I guess because it's a totally private market?
But I 100% agree with you. Pretty much every young working person is already extremely over-exposed to the housing market via their rent costs which easily might be 30-50% or more of your after-tax salary and can go up every year. Investing a big part of your savings in your local housing market seems like a smart way to hedge.
REIT's do seem fairly complex and obscure though, and it seems like you usually have to back a single developer or project and put in a fairly large minimum investment. I can easily buy an index fund that tracks S&P performance, why isn't there a simple index fund I can buy that tracks the SF housing market performance? I guess because it's a totally private market?
So open a free RH acct and buy some REIT ETFs.. It's free.
Not sure I'd buy into REITs when interest rates are set to go up, if you buy into a highly leveraged REIT and their interest payments go up you're going to lose a lot of money.
edit: Open a Vanguard IRA (Roth if you can), max out yearly contributions, buy VOO and VTI and hold until retirement. Add in some bonds as you see fit. Put at least as much as your employer will match into your 401k, more if you can afford it. Take the steady 6-7% return, you'll be hard pressed to beat it on your own. You'll be sitting on millions of dollars when you retire with this strategy.
Not sure I'd buy into REITs when interest rates are set to go up, if you buy into a highly leveraged REIT and their interest payments go up you're going to lose a lot of money.
edit: Open a Vanguard IRA (Roth if you can), max out yearly contributions, buy VOO and VTI and hold until retirement. Add in some bonds as you see fit. Put at least as much as your employer will match into your 401k, more if you can afford it. Take the steady 6-7% return, you'll be hard pressed to beat it on your own. You'll be sitting on millions of dollars when you retire with this strategy.
"there's no way I'll ever be able to afford a home".
That's how I felt in 2007 but in 2012 many of those homes were then selling for 30cents on the dollar.
I am not saying that 2018 feels like 2007 (or maybe...), but your are only 27 so there are likely a few 2007s that will occur in your lifetime.
That's how I felt in 2007 but in 2012 many of those homes were then selling for 30cents on the dollar.
I am not saying that 2018 feels like 2007 (or maybe...), but your are only 27 so there are likely a few 2007s that will occur in your lifetime.
yeah, no.
in sf, 2008 saw houses back to 2004 prices, just to skyrocket above the record a year later.
in sf, 2008 saw houses back to 2004 prices, just to skyrocket above the record a year later.
As they say, past performance is no guarantee of future results.
> There's no way I'll ever be able to afford a home
I know it's super difficult to move for lots of reasons, but just in case you're not aware: there are lots of places where you could both get a job and buy a house.
I know it's super difficult to move for lots of reasons, but just in case you're not aware: there are lots of places where you could both get a job and buy a house.
REITs will be terrible investments in a rising interest rate environment. Right now its survivable but as interest rates keep going up, they will get hammered in value.
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>Acorns is a financial-technology firm that allows customers with balances as small as $5 to invest in groups of funds based on their risk tolerance. Users link their debit- or credit-card accounts to Acorns, and the firm rounds up the users’ purchases to the nearest dollar and invests the change on their behalf.
So their entire business model is investing change from transactions into index funds? Why couldn't any major bank or credit card company implement this and blow them completely out of the water?
>Two of the seven ETFs that Acorns includes in its portfolios are run by BlackRock, while the remainder are run by Vanguard.
I guess I don't get who this service is for. People who want to invest but don't want to "invest" any of their time? Why not setup a Roth IRA and get the same thing but tax-free?
So their entire business model is investing change from transactions into index funds? Why couldn't any major bank or credit card company implement this and blow them completely out of the water?
>Two of the seven ETFs that Acorns includes in its portfolios are run by BlackRock, while the remainder are run by Vanguard.
I guess I don't get who this service is for. People who want to invest but don't want to "invest" any of their time? Why not setup a Roth IRA and get the same thing but tax-free?
This is one of those interesting knee-jerk HN reactions that miss the entire point. Acorns built a product that people love.
As to "why couldn't any major bank or credit card company implement this and blow them completely out of the water", why not ask instead why they haven't successfully done so? They've certainly tried and failed, and for the most part seems like they are turning to investments/acquisitions of companies in this space since they can't build something successful on their own.
As to "why couldn't any major bank or credit card company implement this and blow them completely out of the water", why not ask instead why they haven't successfully done so? They've certainly tried and failed, and for the most part seems like they are turning to investments/acquisitions of companies in this space since they can't build something successful on their own.
>Acorns built a product that people love.
I'm sure they'll love it right up until it gets scrapped. Businesses can't run on love alone. Startups need growth to survive, as soon as this product gets big enough to interest the banks or credit card companies they will make their own and it will be better and cheaper since they can eliminate the middleman.
Maybe they're positioning themselves for an acquisition, but anyone who bought them would just be buying the idea of investing change. The app itself would be killed as its functionality would be combined into the buyers existing app ecosystem, and the backend that takes the change and makes the investments would be largely unnecessary as the banks already have the infrastructure to nickel and dime people.
The context of this article was BlackRock trying to get younger customers. To accomplish this, they invested in a startup whose target audience is apparently people who want to invest, but don't really want to put in the effort. To me that sounds like a questionable investment.
You could argue that they're providing the change investment thing as a loss-leader to try to get people interested in investing, but something like RobinHood already gives inexperienced traders the tools with which to bankrupt themselves.
I'm sure they'll love it right up until it gets scrapped. Businesses can't run on love alone. Startups need growth to survive, as soon as this product gets big enough to interest the banks or credit card companies they will make their own and it will be better and cheaper since they can eliminate the middleman.
Maybe they're positioning themselves for an acquisition, but anyone who bought them would just be buying the idea of investing change. The app itself would be killed as its functionality would be combined into the buyers existing app ecosystem, and the backend that takes the change and makes the investments would be largely unnecessary as the banks already have the infrastructure to nickel and dime people.
The context of this article was BlackRock trying to get younger customers. To accomplish this, they invested in a startup whose target audience is apparently people who want to invest, but don't really want to put in the effort. To me that sounds like a questionable investment.
You could argue that they're providing the change investment thing as a loss-leader to try to get people interested in investing, but something like RobinHood already gives inexperienced traders the tools with which to bankrupt themselves.
Honestly, I don't get this product. Aren't you dealing with minimal amounts?
How much can a customer who adds a few dollars a month to his account be worth anything to an asset manager? Won't it take years before even the user acquisition cost is recouped?
How much can a customer who adds a few dollars a month to his account be worth anything to an asset manager? Won't it take years before even the user acquisition cost is recouped?
I don’t really think it’s an investment in the product itself, but rather a nice touch point that will be used to market other investment vehicles.
I have an account and it's up to $2k in under a year. I think I have an automated $100/month deposit too. It's money I don't notice missing that's bring saved. It's not a lot but it's easy and a lot better than nothing.
> They've certainly tried and failed
I'm not sure they have tbh, not because they couldn't but because it's not high priority even without regulatory and institutional hurdles to cross. Moving additional pennies around doesn't radically alter the fees banks and credit card providers already get from customers they already market savings products to; a neat little app to start building up savings is an opportunity for investment providers that don't do retail services to gain consumer attention and potentially bigger deposits in the long run though though.
I'm not sure they have tbh, not because they couldn't but because it's not high priority even without regulatory and institutional hurdles to cross. Moving additional pennies around doesn't radically alter the fees banks and credit card providers already get from customers they already market savings products to; a neat little app to start building up savings is an opportunity for investment providers that don't do retail services to gain consumer attention and potentially bigger deposits in the long run though though.
Acorns is also expanding their services, roundups isn't their only offering anymore
Not investing into index funds, but Bank of America checking account provides an option to take some money out and put it aside.
But as you said unless they are banking on moving fast and getting the market share first, this is a very low entry product. BoFa and JPM Chase, which has both consumer and IB/trading operations can do this in a week.
But as you said unless they are banking on moving fast and getting the market share first, this is a very low entry product. BoFa and JPM Chase, which has both consumer and IB/trading operations can do this in a week.
> BoFa and JPM Chase, which has both consumer and IB/trading operations can do this in a week.
They can "do it" in the same way everyone on HN can build a Facebook clone in a week: by skipping all the parts that make it hard.
Banks are huge, bureaucratic, political organisations with fifteen layers of CYA and red tape around everything that moves. They couldn't change the favicon on their website in a week if the survival of the human species depended on it -- to build and deploy a product that actually shuttles consumer cash around in the market, you're looking at years of planning alone.
They can "do it" in the same way everyone on HN can build a Facebook clone in a week: by skipping all the parts that make it hard.
Banks are huge, bureaucratic, political organisations with fifteen layers of CYA and red tape around everything that moves. They couldn't change the favicon on their website in a week if the survival of the human species depended on it -- to build and deploy a product that actually shuttles consumer cash around in the market, you're looking at years of planning alone.
I worked for one of the two banks I mentioned and while it is definitely slow compared to the tech companies, it's not even remotely close to years to ship a product. Things have changed with banks with people more open to MVP's.
I think acorns is targeted to the low end of the consumer finance spectrum so they are not sophisticated or knowledgeable enough to do this.
Also regarding banks it’s likely not high enough ROI?
Also regarding banks it’s likely not high enough ROI?
Few notes to consider as well... Acorns was thought to be one of the best designed apps in the App Store back in ~2014[1]. The original target demographic and way they got such a huge user base (AFAIK) was going after a specific group of people who had never heard of the Vanguard/BlackRocks of the world and instead were looking for an entry point into investing. Coupling an amazing user interface with the simple idea of turning pennies into dollars proved to be a good enough value proposition to get the first mover advantage on all of the young 20 somethings who had never even heard of a Roth IRA in the first place.
Now look at customer acquisition costs and lifetime value of customers for investment firms and IMHO it makes perfect sense on why BlackRock would want to become a large stakeholder in a company like Acorns due to the brand loyalty.
[1]. https://drivenxdesign.com/USAPPS14/project.asp?ID=13420
Now look at customer acquisition costs and lifetime value of customers for investment firms and IMHO it makes perfect sense on why BlackRock would want to become a large stakeholder in a company like Acorns due to the brand loyalty.
[1]. https://drivenxdesign.com/USAPPS14/project.asp?ID=13420
Back when I was living in New Zealand, this was basically possible.
I could get my bank to round up all my debit card transactions to the nearest $1 to $10, and put that money into a savings account. I could then transfer all that money from my savings account at the end of the month into Sharesies [0], an ETF investment platform, where the minimum investment is $5.
It's not quite seamless, but it's close to seamless. I wouldn't want it to be more automatic than that, personally.
[0] https://www.sharesies.nz/
I could get my bank to round up all my debit card transactions to the nearest $1 to $10, and put that money into a savings account. I could then transfer all that money from my savings account at the end of the month into Sharesies [0], an ETF investment platform, where the minimum investment is $5.
It's not quite seamless, but it's close to seamless. I wouldn't want it to be more automatic than that, personally.
[0] https://www.sharesies.nz/
Bank of America had a similar program for debit card consumers years ago, called Keep the Change (iirc) and I believe other firms have tried it too.
It was designed to move money into a savings account, but there's nothing stopping from getting their massive customer base to start using their MerrillLynch products with an offering that competes with this (across debit + credit cards).
That said, Im not sure how they can sustain rounding up credit card transactions without taking a big financial hit.
It was designed to move money into a savings account, but there's nothing stopping from getting their massive customer base to start using their MerrillLynch products with an offering that competes with this (across debit + credit cards).
That said, Im not sure how they can sustain rounding up credit card transactions without taking a big financial hit.
It's sustainable because it isn't their money they are using to round up the transactions.
https://www.bankofamerica.com/deposits/keep-the-change/
https://www.bankofamerica.com/deposits/keep-the-change/
I meant this firm BlackRock's backing and specifically credit cards. BoA's program's limited specifically to debit cards and money is just moved to savings account from your checking account.
Seems people here have missed the news that they are diversifying, and going public. Acorns is now called Raiz (a rubbish name). I use it myself, for lack of any other financial infrastructure with which to put my money. Low barrier to entry, and yeah, don't have to invest lots of time into it.
A product like this makes sense for Blackrock because they also are in the privileged position of creating the ETFs in the portfolio.
Contribution limits?
As in they're abysmally low? $5500/yr as a 1099 or W-2 employee is pretty pathetic.
26 year old here. I want a simple interface that automatically invests in tax-saving schemes and wealth generation schemes.It should do this by understanding my income, my goals, my risk profile and tax policies. It shouldn't ask me what I want to invest in or give me jargon about my portfolio. All I would care about is, how much money is being invested, how much money I save through tax and how much money I could have for a rainy day. If I want to know about my investment profile, then hit me with all the jargon in the world. I asked for it.
Lastly, the most important thing to me, how you (the platform) makes money. This part should be absolutely transparent. I should know exactly how you make money, how much money you have made off of me etc.
I'd be more than willing to pay a subscription fee for such a service or a commission fee for the hard work put in.
Lastly, you may say, well these are readily available. Not really. These services are fragmented (not as one platform), not available, at least in India.
Lastly, the most important thing to me, how you (the platform) makes money. This part should be absolutely transparent. I should know exactly how you make money, how much money you have made off of me etc.
I'd be more than willing to pay a subscription fee for such a service or a commission fee for the hard work put in.
Lastly, you may say, well these are readily available. Not really. These services are fragmented (not as one platform), not available, at least in India.
According to the sub-35 crowd in my office:
1 - Early retirement. Not from the "give it to me" perspective but from the make it easy to budget, save, use frugality as a mechanism to retire early and have reliable 4% withdrawals.
2 - Access to Cryptocurrency trading, and intelligence.
1 - Early retirement. Not from the "give it to me" perspective but from the make it easy to budget, save, use frugality as a mechanism to retire early and have reliable 4% withdrawals.
2 - Access to Cryptocurrency trading, and intelligence.
Wanting intelligence in a readily available manner is a strange ask for Crypto because that’s where your edge would be.
If you want an edge in the market, readily available intelligence is the last thing you want.
A good example is Google Trends. Useful product. But drastically less useful than if you were the only person in the world with access to it.
A good example is Google Trends. Useful product. But drastically less useful than if you were the only person in the world with access to it.
What do you mean by "intelligence"?
Articles with substance rather than the currently obvious and thinly veiled shilling/FUD even from traditionally reliable news outlets.
I'm quite certain GP meant intel / information / analysis. Slightly abnormal word choice
"intel" is of course a shortened version of "intelligence."
@saagarjha
Ambiguity is unfortunately a 'feature' of English and the main complaint of those non-native speakers who learn it, though I agree a more focused version like 'intel' provided the necessary context to non-native speakers or folks unfamiliar with this usage of 'intelligence.'
Just pointing out that 'intelligence' is accurate in this usage.
Ambiguity is unfortunately a 'feature' of English and the main complaint of those non-native speakers who learn it, though I agree a more focused version like 'intel' provided the necessary context to non-native speakers or folks unfamiliar with this usage of 'intelligence.'
Just pointing out that 'intelligence' is accurate in this usage.
Sure, but the fact that it's only used in certain contexts and in a certain way provides a great way to disambiguate its usage.
Brain augmentation through nanite implants.
Their actual business model is dependent on mining data from your transactions - by linking your credit card they can track every swipe at Chipotle...
Anyone have a non-paywalled link?
http://web.archive.org/web/20180509153040/https://www.wsj.co...
Use with Javascript removed/disabled/"Reader Mode"/etc.
Use with Javascript removed/disabled/"Reader Mode"/etc.
Firefox extension that every time you connect to the Wall Street Journal or the Financial Times changes you referer to "Facebook" to bypass paywall:
https://addons.mozilla.org/en-US/firefox/addon/read-ft-wsj/
https://addons.mozilla.org/en-US/firefox/addon/read-ft-wsj/
We want crypto and that is all. The sooner you realize this the better.
If you want to assume lots of risk, trade options or futures instead.
How hard is it to know? Young investors want to invest their free time. Make a product, which lets you invest your time and gives you return on that without doing anything.
For example, if a homeless kid wants to go to Thailand to have fun. BlackRock's startup should offer ROI for doing this.
For example, if a homeless kid wants to go to Thailand to have fun. BlackRock's startup should offer ROI for doing this.
> Make a product, which lets you invest your time and gives you return on that
The product is already invented, it's called "work".
The product is already invented, it's called "work".
I have no clue what you are trying to say
I think she/he is trying to say that young investors want to take their free time and get a strong yield on it with a good ROI. And doing that with a homeless person in Thailand is the correct approach to resolve this difficult situation.
Copy new hotness roboadviser interfaces (“delight your users”), provide straightforward index investment advice at the lowest possible expense ratios.
Young investors want to make the best investment decisions with limited financial knowledge. Enable them to do so while stil acting as their fiduciary.
Vanguard’s iOS app is getting there in the above regard, but still has room for improvement.