Speaker 1: This is Bloomberg Business Week with Carol Masser from Bloomberg Radio.
Speaker 1: We talk a lot about robin Hood, founded a few
Speaker 1: years ago, and how we've seen it really explode in
Speaker 1: popularity this year. We continue to see the financial sector
Speaker 1: being disrupted by a lot of newer companies. One company
Speaker 1: that really came on the space a few years ago. Uh,
Speaker 1: I'm really one of the first firms to start disrupting
Speaker 1: financial investing and the industry was Wealth Front, changing how
Speaker 1: investors manage their investments, taking it online. So let's bring
Speaker 1: in Andy Rackliffe. He is co founder and CEO of
Speaker 1: wealth Front, and he joins us on the phone in California. Andy,
Speaker 1: it's great to have you here with Paul and myself.
Speaker 1: Thank you for having me. So, first of all, we
Speaker 1: do want to talk about some of the new features
Speaker 1: that you've got. But first up, I just want to
Speaker 1: ask you about what your world has been like since COVID.
Speaker 1: I mean take us back to March and then kind
Speaker 1: of where we are today and where you guys are
Speaker 1: with your teams and and everything. Well, uh, first leveage
Speaker 1: it a little bit of contact so I can I
Speaker 1: can answer that question. So for your listeners who are
Speaker 1: not aware where a next gen banking service that helps
Speaker 1: young professionals manage their money. So we provide high interest
Speaker 1: checking and low cost investment management services all through a
Speaker 1: five star rated app, and our vision is to automate
Speaker 1: all of your finances. We call this self driving money
Speaker 1: and buy that. What I mean is you can direct
Speaker 1: deposit your paycheck with us. We automatically pay your bills
Speaker 1: and then route the remaining money to the most appropriate
Speaker 1: investment or savings account depending on your situation and goals.
Speaker 1: So with that in mind, the thing I think that's
Speaker 1: effected us for most are I think there's been a
Speaker 1: bunch of people rather than wanting a diversified and managed portfolio.
Speaker 1: I think that day trading has really taken off this year.
Speaker 1: And the other big thing that we've noticed is that
Speaker 1: with the dropping interest rates, people are more inclined to
Speaker 1: day trade or try to pick securities in order to
Speaker 1: make up for the fact that they're not earning that
Speaker 1: interest on their seats. So andy, during this pandemic, I've
Speaker 1: upped my digital banking game pretty substantially, I must say,
Speaker 1: um and I find it with a number of financial institutions,
Speaker 1: so it seems like these big players, they're investing money
Speaker 1: in fintech, they're investing money in their front end platforms
Speaker 1: as they integrate with their consumers. How what's your competitive
Speaker 1: advantage going against maybe some of the big commercial banks
Speaker 1: or brokerage firms and things like that. Well, I would
Speaker 1: say that it's business model and technology. So first, let
Speaker 1: me talk about business model. Traditional banks use branches, and
Speaker 1: what most people don't realize is that the average branch
Speaker 1: costs the average consumer two hundred dollars per years. So
Speaker 1: if you take the cost to operate the branch and
Speaker 1: divided by the number of people that it serves, it
Speaker 1: costs you about two hundred dollars a year. A cost
Speaker 1: the bank two hundred dollars a year to allfer that branch. Well,
Speaker 1: they've got to pay for that, and the way that
Speaker 1: they pay for that is to a number of fees
Speaker 1: that most people don't like. Uh. Next generation banking services
Speaker 1: like wealth Front don't charge those nickel and dime fees.
Speaker 1: So you're gonna be far better off, first of all,
Speaker 1: just not from not having the fees. Second of all,
Speaker 1: we pay interest on our balances, we pay point to
Speaker 1: be five. I use Wells Fargo. They pay me zero
Speaker 1: percent on my checking balance. So the fact that they
Speaker 1: have to support branches is a real negative for young
Speaker 1: people who don't want to go to a branch. It's
Speaker 1: probably a positive for a baby boomer who likes that
Speaker 1: personal interactions. So it's a very generational thing. On technology,
Speaker 1: thanks are terrible at developing software, you know. Uh JP
Speaker 1: Morgan Chase got quite a bit of attention a few
Speaker 1: months ago because they rode off your personal finance app
Speaker 1: called Skin. In contrast, Wealth Fund is the highest rated
Speaker 1: financial app in the app store. Just because both companies
Speaker 1: offer software doesn't mean that they're of comfortable quality, you know.
Speaker 1: And you have seen a lot of cycles in the
Speaker 1: financial industry. You co founded where general partner at Benchmark Capital.
Speaker 1: You've been an investor in the likes of juniper Um Equinox.
Speaker 1: I mean, you see the world from a lot of
Speaker 1: different angles when it comes to specifically though the financial industry.
Speaker 1: What do you make of something like a robin Hood. Well,
Speaker 1: every once in a while something comes along that really
Speaker 1: just captures the industry's imagination, and Free Trading really did that,
Speaker 1: and they've done a superb job of growing the business
Speaker 1: as a result of offering something that people really wanted.
Speaker 1: It's interesting, Andy, I think you know we're all in
Speaker 1: the old enough. Sadly, I guess to remember the dot
Speaker 1: Com boom day trading that kind of thing. It turned
Speaker 1: didn't turn out very well for some of those folks,
Speaker 1: and it kind of signaled in hindsight that was clearly
Speaker 1: up peak in the market. Any concerns about that here
Speaker 1: or do you just feel it's different this time? No.
Speaker 1: One of the funny things is that every fifteen years
Speaker 1: or so there is a day trading boom, and it
Speaker 1: usually coincides with a market that's gone up by fort
Speaker 1: in less than six months. Because when the market trades
Speaker 1: up very, very significantly, it's like shooting fish in a barrel.
Speaker 1: Any stock pitch is going to go up. The the
Speaker 1: mistakes that individual industris make is they confuse absolute performance
Speaker 1: with relative performance. You know, if the markets up in Europe,
Speaker 1: you think you're a genius and you're actually terrible. It
Speaker 1: always happens when markets go up very very by a
Speaker 1: large amount, very very quickly. So does this one end poorly? Then?
Speaker 1: You think for a lot of investors who maybe only
Speaker 1: think the market goes up of course it always does.
Speaker 1: So Andy, I know you at Stanford Business School, UH
Speaker 1: teaching courses on technology entrepreneurship. I'd love to get your
Speaker 1: thoughts about the feeling. And you're close to Silicon Valley.
Speaker 1: What does pandemic may do, if anything, to the sense
Speaker 1: of entrepreneurship UM in this country. Maybe the willingness to
Speaker 1: finance risk. Do you think it's gonna have any impact?
Speaker 1: Or innovations? Innovation and it will find its way. The
Speaker 1: louder innovation is innovation, and it's going to find its way.
Speaker 1: I think that the big change that's going to result
Speaker 1: from the pandemic is a greater embracing of remote workers.
Speaker 1: You know, our company is an example. We shut down
Speaker 1: on March when we went to shelter in place, and
Speaker 1: we no one has been to our office since. And
Speaker 1: you know, you can either fight it or you can
Speaker 1: embrace it. And we've learned that there are many things
Speaker 1: that we now do that actually lead to better productivity.
Speaker 1: So when we are allowed to go back to the office,
Speaker 1: and we've told our employees that we won't expect them
Speaker 1: to go back until there is a widely available vaccine,
Speaker 1: we think that actually not everyone will go back and
Speaker 1: will embrace that what works better? Because I know that
Speaker 1: there's a really big debate andy about productivity and depending
Speaker 1: on who you talk to, some say it's it's fine
Speaker 1: or it's even better, some say not so much, and
Speaker 1: that you miss people miss that face to face, that
Speaker 1: running into somebody you know with an idea and then
Speaker 1: you you move off of that. I think you need
Speaker 1: to drill down into it. What we have found is
Speaker 1: that our productivity among our younger single employees has going
Speaker 1: up because they actually don't have something else to do,
Speaker 1: so they tend to be working more. Our productivity for
Speaker 1: our employees who are parents with young kids has plummeted.
Speaker 1: But the vast majority of our company is made up
Speaker 1: of young people who are single, so when you average
Speaker 1: them out, our overall productivity is up. And what do
Speaker 1: you what's the feedback you're getting from your students at
Speaker 1: Stanford Business School here? How are they maybe viewing the
Speaker 1: world here? I mean it's a you know, they're gonna
Speaker 1: be a generation coming out in the pandemic um. I'm
Speaker 1: wondering if that's changed their views of the world or
Speaker 1: maybe beginning to change their views of the world. Are
Speaker 1: you sensing any of that. You know, I tend not
Speaker 1: to fall into that because the current environment is not
Speaker 1: indicative of the future. You know, this is an important
Speaker 1: consideration and investing. The biggest mistake that investors make is
Speaker 1: that they project the current environment onto the future, which
Speaker 1: is why, you know, the biggest mistake researchers that found
Speaker 1: an individual investors make is that when they buy when
Speaker 1: the market goes up, and they sell when the market
Speaker 1: goes down because they think that's what's going to continue.
Speaker 1: So I councel my students not to pay attention to
Speaker 1: this at all. It's likely to make h finding a
Speaker 1: job a little bit more difficult, but longer term, I
Speaker 1: don't think it's going to change their prospects. What about
Speaker 1: the prospects for colleges and universities. We know some of
Speaker 1: them are financially having a tougher time right now. And
Speaker 1: I know you're on the board of trustee trustees and
Speaker 1: and chairman of the endowment committee at University of Pennsylvania,
Speaker 1: and I do wonder what do you see when it
Speaker 1: comes to academia, what happens maybe where there might be
Speaker 1: some longer term impacts because of COVID, and what might
Speaker 1: those longer term impacts speed well, maybe more hybrid or
Speaker 1: maybe some fallout among some universities that aren't as financially stable.
Speaker 1: I almost feel like, just like we've gotten over retailed Andy,
Speaker 1: I feel like we've gotten over schooled here, especially when
Speaker 1: it comes to higher education. You know, that's been the
Speaker 1: case for decades though, and that doesn't seem to win.
Speaker 1: Oh Out the less financially stable universities, they seem to
Speaker 1: make it through, So I guess I'm not as concerned
Speaker 1: about that. So you don't really see any fall out.
Speaker 1: And you think, even even financially if schools might have
Speaker 1: a tough time for for maybe this year, maybe next year,
Speaker 1: they'll be okay, they'll weather through exactly. You know, the
Speaker 1: same was said during the financial crisis in oh eight
Speaker 1: and oh nine, and everyone seemed to have made it
Speaker 1: through that. Hey, before we go, you guys did have
Speaker 1: an announcement, and I know you guys have a new service.
Speaker 1: Talk to us a little bit about that, because I
Speaker 1: do feel like companies, especially because of COVID maybe or
Speaker 1: maybe it was in the works anyway, are kind of
Speaker 1: you know, thinking of you know, some initiatives that maybe
Speaker 1: we're in the works they pushed out even sooner. Well,
Speaker 1: with software development, you can't push something out that's that's
Speaker 1: fair like being pregnant. You have to finish writing the
Speaker 1: court so I wish or the team or a software company,
Speaker 1: maybe a services company, you can do that. But in
Speaker 1: our case, I talked earlier about our vision of self
Speaker 1: driving money, and a few weeks ago we launched our
Speaker 1: first feature UH in the self driving money area that
Speaker 1: we call autopilot. It automates your savings and it makes
Speaker 1: banking and investing work better together, so you can think
Speaker 1: of autopilot as a financial assistant. But basically, the way
Speaker 1: that it works is you pick the account that you
Speaker 1: wanted to monitor, be it your checking account or your
Speaker 1: wealthfront cash account, and whenever your balance goes at least
Speaker 1: a hundred dollars above the threshold that you set, we
Speaker 1: automatically move the money to an investment account of your choice.
Speaker 1: And that way you can make sure that your money
Speaker 1: is much better optimized than if it's just sitting around
Speaker 1: and not earning anything. And so that's the first of
Speaker 1: many features that you're going to see in our self
Speaker 1: driving Money initiative, and over time you're going to see
Speaker 1: more sources and destinations for that money, and we're going
Speaker 1: to move that money much faster. Well, I hope you'll
Speaker 1: come back and talk some more, Andy, because I could.
Speaker 1: I think we could easily sit down for you for
Speaker 1: an hour and just keep on talking because you just
Speaker 1: look at the world in so many different ways. Andy,
Speaker 1: Thank you so much. Andy Ratcliffe, he's co founder and
Speaker 1: CEO at well Front, on the phone from California.