In two short weeks, the David and Goliath story that is GameStop, Robinhood and Reddit went from relative obscurity to front page global news, even transcending the confines of the dollars and cents of the business section.
Despite the fact that several of the key players leading this share price stampede owned multi-million-dollar stakes, the ordeal was cast as small investors besting their sophisticated — and supposedly superior — opponents in the hedge fund world.
While this saga is far from over, and the regulatory investigation and rulemaking phase has yet to even begin, if nothing else, the almost mythical short-term gains achieved by a handful of individual GameStop investors has brought attention and awareness to a corner of the market that is normally mocked and ignored.
It may not be the optimal entry point for discussing financial literacy and long-term savings and investment goals, but GameStop has undeniably brought new faces into the proverbial tent and caused people to think and talk about money who normally don’t. In short, the GameStop hullabaloo has created a generational opportunity for the investment advisory industry to connect with an audience that’s finally interested in listening and has something to talk about.
They probably won’t like what they hear, but at least they’ll pick up the phone.
“Financial literacy in America is not where I think we’d all love it to be,” said California-based Yinon Ravid, CEO of the app-based advisory firm Albert, a firm that just received a $100 million investment to help pursue its mission.
“I think people bury a lot of financial decisions under the rug because they are perceived as chores,” he added during a chat with PYMNTS’ Karen Webster.
What Do You Tell Them?
Given that the scale of personal financial literacy is as differentiated as each individual’s economic circumstances, Ravid said two things are needed for people to make sound financial decisions. One is expert advice, and the other is offering “an umbrella of guidance and automation” that simplifies the process for customers and makes it as painless as possible.
In the case of Ravid’s own business, Albert uses a stable of internally trained financial advisors and specialists that it calls “Geniuses” to manage the inquiries of a user base that has now grown to more than 5 million mostly millennial users. Instead of taking a longshot on a hot stock like GameStop, Ravid said the typical newcomer to Albert will start with a text inquiry about saving, budgeting or paying down debt.
“Your financial life is rather complex, and doing it well takes a lot of factors,” he said, noting that a large part of the planning process is addressing the reality that a lot of people don’t really want to think about it.
“Nobody’s waking up in the morning and saying, ‘How can I improve my financial wellness today?’” he said. “Our customers are consistently looking for help making their money go as far as possible.”
Stretching A Buck
Far from a get-rich-quick ride on a rocket like GameStop or AMC, Albert’s approach to democratizing financial advice business is much more about the basics and simply being there at the touch of a button — as he says, to “break the model” of needing to call ahead and schedule an appointment with an advisor.
In addition, the pandemic has ushered in its own set of challenges and economic hardships.
“It goes without saying that the recession caused by COVID has been really tough on our customer base and a lot of other customers,” Ravid said. “But I would also highlight that a lot of our customers never truly recovered from the first recession in 2009. Real wages have stagnated over the past decade, and our customers have very much felt that.”
While an app-based advisory model might seem impersonal to seasoned investors who have access to good advice, Ravid said younger, first timers actually prefer “talking to a more faceless” collective rather than divulging all their personal information.
“Money is a very touchy subject,” he said, adding that Albert does business this way for the happiness of the customer, not because it’s more efficient. “We can build a much better relationship with our customers because we can serve them seven days a week.”
Ultimately customers come to Albert for holistic guidance and holistic financial improvement, he said, rather than for a single wedge product.
“The most common use case we see is really the most important thing to do first in your financial life, which is to save,” he said. “So, once you start saving, you branch out. Maybe you start investing, maybe you start looking at lowering your bills.”