Millennials are jumping into the stock market in greater numbers. However, there’s still a sizable segment of Millennials who are afraid of or do not understand investing, therefore they keep their money out of the market. The missed monetary gains of these uninvolved Millennials could mean the difference between retiring or not retiring at all. Instead, this fearful segment of the Millennial generation keep their money safe in a checking account. Neel Ganu realized the money sitting in a checking account should be put to work earning you money, since the interest returns from a bank are nil compared to stock market returns. He and his team created Finch. Finch is a consumer fintech company providing financial accounts to invest your checking account balance on your behalf. The startup is located in Cambridge, Massachusetts.
Finch founder Neel Ganu.
Neel Ganu
Frederick Daso: What was the idea’s genesis to invest a portion of one’s checking balance into the stock market?
Neel Ganu: Typically, people keep money in up to three accounts: a checking account that is easy to use provides instant access but virtually no returns, a savings account that provides relatively easy, yet limited access, but earns minimal returns and an investment account that holds and grows your money, but provides limited access with several restrictions.
These accounts each have rigid and defined roles. It’s how people have been managing money for a long time, but that’s because it’s been the only option.
The few individuals that optimize their finances utilize a combination of these accounts. Individuals must manage the flow of money between their funds through an ongoing manual process to put their money to work. This friction helps to explain why 86% of Americans do not invest outside of their retirement accounts.
Daso: How did you come to realize that cash sitting in checking accounts was an untapped resource for everyday Americans?
Ganu: This means that a massive part of the population is missing out on the opportunity to build long-term wealth. We know it’s not without reason. For the majority, investing is overwhelming and intimidating. Plus, it means their hard-earned money is out of their immediate reach during moments of need. But by keeping their money idle in a traditional checking account, they could be missing out on up to 50% of their wealth every ten years!
The good news is that the last ten years have seen fintech innovators’ advent challenging the status quo. By introducing commission-free trading, fractional investing, and removing account minimums, they have helped democratize investing. These innovations have made it easier than ever to start investing today. Despite this, an overwhelming number of people still stay on the sidelines, signaling that an even simpler solution is needed.
We knew that to help transform the way people manage their money, we needed to create a solution where customers could unlock the benefits of investing without changing their behavior significantly—the process required to be as frictionless as possible.
Finch’s debit card (left) and mobile application (right).
Maya Nijhawan
Daso: The combination of returns of an investment account and a standard bank account liquidity seems to imply a certain level of risk. How did you assess the everyday person’s appetite to accept that risk and develop a related financial product to meet their needs?
Ganu: Our investment options are carefully curated to reflect the level of risk we consider appropriate for an everyday account. We only offer large, low-cost, diversified exchange-traded funds (ETFs) created by some of the largest asset managers in the market on our platform.
We take the time to better understand people’s risk tolerance and investing experience. Using this approach, we provide personalized investment recommendations to our customers based on their risk profiles and needs.
Finch offers two types of portfolios: Stable and Growth.
The Stable portfolio consists of cash and a mix of ETFs that invest in short-term government and corporate bonds. The goal of this portfolio is to allow you to dip your toes into investing while aiming to preserve your capital. This portfolio gives you the potential to earn a return marginally greater than, but comparable to, what you would make in a high yield savings account. Over the past ten years, if you had kept your money in Finch’s Stable portfolio, you would have earned 9.0x more than a checking version and 1.8x more than a high yield savings account.
The Growth portfolio consists of cash and a mix of ETFs that invest in US large stocks and bonds. The goal of this portfolio is to help you to unlock the benefits of investing and build long term wealth. Over the past ten years, if you had kept your money in Finch’s Growth portfolio, you would have increased your wealth by 33%.
As a reflection of our values, and growing importance to Millennials, we also offer a sustainable version of both portfolios that invest in companies with a positive environmental impact, are socially responsible, and commit to high governance standards. Within these portfolios, we also help you customize your portfolio mix based on your unique risk profile.
Daso: Why did you pick your first customer segment as individuals who are not active, but financially focused users?
Ganu: When I came up with Finch’s idea, what I knew was that I had a great innovative product, and it solved a personal problem that many of my peers and I faced. Our customer research validated that this problem resonated throughout my generation.
Our target customers are millennials who know that investing is right for them, but various reasons may not have taken the first steps to get started. Three out of five millennials do not invest today, and the two main reasons we hear is that they find the process complex and that they can’t afford to have their money locked away. Finch addresses both these challenges.
Millennials have been frequently overlooked when it comes to managing their money. They have less flexibility to save than other generations, with 62% of them living paycheck to paycheck. Millennials are investing less than before, with almost 20% fewer investing today compared to 2008. Adding to this, Millennials need more retirement funds than other generations due to longer lifespans and reduced Social Security. The good news is that retirement is still a long way off, and they have time to get back on track. We picked this group because we believe they stand to benefit the most from what we offer at Finch.
Daso: How did you focus on building your team to address each portion of Finch’s business’s key risks?
Ganu: Finch has three significant areas where we needed to build the team to set ourselves up for success.
The first was marketing. Being able to articulate our purpose, create a strong narrative and community, identify our target audience, and develop a go-to-market strategy for this group was a massive task our marketing team was tasked with. Hiring our Head of Marketing and our Digital Content Manager helped address these key marketing initiatives.
The second was customer service. Being a digital-only account, superior customer experience and support is a must. The only time we will ever interact with customers in person (over the phone/chat) is through our customer service team. We have a strong focus on having customer service and experience in house to ensure that our customers get the best service and we can help them when it comes to their money as fast as possible. Hiring our Customer Success Manager to design our support program from the ground floor helped address this necessity, and we will look at scaling this team as we grow our customer base.
The third was product and operations. Being able to execute our plan and have our product closely integrated with operations ensures that customers have a seamless experience regardless of how they interact with us. Managing this ensures that we are building a product and platform that our customers love. Hiring our Head of Operations and our Product Manager has played an essential role in execution and ensuring we are aligned with regulatory and compliance requirements.
Our team members help address core risks and develop growth, service support playbooks for critical parts of what we are building, and have allowed taking our product from zero to one.
Daso: What personally drew you to working on this problem?
Ganu: I was always perplexed by why investing was so hard.
Despite spending the majority of my career leading financial institutions through their investment decisions, when it came to managing my own money, I always felt I could do better – but I didn’t, and ended up holding my balance in cash.
Having discovered that a staggering three in five Millennials do not invest at all in the US, I realized I was not alone in my inertia. Compounding this with the growing financial debt among Millennials, with 62% living paycheck to paycheck, opened my eyes to how significant this issue is.
Many people express that investing is too complex, while others feel they have very little financial flexibility to think about investing and other economic opportunities. But by keeping their money idle in a traditional checking account, they could be missing out on up to 50% of their wealth every ten years.
Determined to empower younger generations and help close the wealth gap financially, I set out to find a more straightforward and more impactful way to support financial growth while pursuing my studies at MIT.
What if investing was less intimidating, unlike choosing a wine at a fancy restaurant? What if people could earn investment returns directly on their checking balance rather than needing to sweep their money all over the place? What if it were possible for people to spend their invested balance whenever they wanted?
These “what if’s” led to the creation of Finch (formerly Trio), your new productive everyday account that integrates the benefits of investing and the flexibility of checking into a seamless all-in-one account.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
