Thrive on Behavioral Budgeting, Financial Literacy and the Future of Financial Management – Part 1
June 17, 2009 by Lauren Fairbanks
We recently sat down with Thrive (a free online personal finance manager) co-founder, Avi Karnani and Lead Scientist, Matt Wallaert to talk about Thrive’s offering to the rapidly evolving world of personal finance. We met up in their office in Chinatown to discuss their recent acquirement, current work in financial literacy, and their competition with one of the most recognized financial management site, Mint.com. Since we covered a lot of ground, we’re going to publish this interview in two parts: the first of which is below. [Part 2 is here]
How long has Thrive been around? When did you guys launch?
Avi: We launched in October, so we were in development for quite a while. We got acquired [by Tree.com] in January. Mint had just been out longer. I think the idea for both of them came around the same time. I had packed up my stuff and moved out west with some notes. So I find out through the grape vine — actually a coffee shop — I overhead an angel investor talking loudly to another angel investor friend about this company that he just funded. This was right when [Mint] had raised their first seed round. They had started working on the product and pitching the company to investors for I think six or so months. And that’s right around the time I began, actually before I met Ori. I met Ori in Fall of ‘06. We had started in the beginning of ‘07 in a formal way, so they had been in development for a little longer [than we had].
What about user demographics? I’ve spoken to other online financial startups and they always tell me that their users are men and women in the 35 year old age range, and I’ve always found that surprising since younger people in their early and mid-twenties have grown up using the web and it would make sense for them to extend that to their financials.
Avi: That might be a function of the fact that many other sites out there don’t actually offer advice, and that’s what young people need. They need direction and advice and guidance, and not so much reporting tools that track the financial lives of people who have lots of money.
Matt: I think that Avi’s 100% right. The Mints of the world are made for people who have money. They’re made for affluent men. They’re cannibalizing straight from Quicken, so the people that ten years from now would be using Quicken, are instead using Mint. But these are people who have actual money to manage, and are people who are probably trying to beat the stock market, for example.
Avi: And you can tell this by the way they design the investment reporting section. We were talking to a financial advisor today, and their complaints were [that they] had looked at Mint’s investment reporting section and it just kind of focuses on reporting your investment results differently, in a way that makes you think more about performance, and that’s fine. It’s a perfectly valid view onto your portfolio, if that’s the one you want to have. But I would argue that many of the people in our demographic don’t yet have a portfolio. We want them to have some kind of portfolio and retirement funds to focus on, and we’ll show that in some way. But the focus of Mint and some other sites is a bit more for people who already have that [base].
Charles Schwab is a really interesting example. We now kind of think of it as this big company that helps wealthy people who are dramatically older than we are. But they started out as a company who looked at a market that was being grossly underserved — people who were gonna hit retirement soon, they were in their forties, they had families , they had homes, and what they needed was something that wasn’t like a big white shoe broker like Morgan Stanley or Goldman Sachs for the uber wealthy, but where they could still talk to somebody who knew what they were talking about and get products that were relatively inexpensive and invest for not a whole lot of money. So Schwab was built and they built this new industry — discount brokerage — and it helped a segment of the population that was massive — 80 million people in the baby boomer demographic.
The similarity for us is that you’ve got 80 million people in the 18-36 demographic and we don’t really work well with a Charles Schwab or Fidelity, in much the same way the people who Schwab helped didn’t work well with the existing old style brokerage. And so, we thought “what kind of model would we like?”
I would like to take the kind of advice that a Charles Schwab person would give you, for investments, but instead, apply that to the things that you would care about as a reasonably young person, which will include budgeting and what kind of credit card you get. Schwab isn’t so interested in talking about some of these less investment focused areas. And also with investments, we want to have you covered on your 401Ks and IRA’s and stuff like that, because everyone is confused by that 401k book you get from your HR department. But, it’s not going to dominate what we do. So instead, we’re re-thinking a financial services company for our demographic, in much the same way that they re-throught a financial services company for the people that they were serving.
Matt: So, back to demographics, the users of Thrive are not 35 — the average user is in their late 20’s. There’s more women than men. You won’t find that in other places. The average age fluctuates between 27 to 29. The average person logs in twice a week. People between 18 and 30 — about a third of [our users] take an account recommendation from us. So, there’s a huge brand of trust immediately, in terms of people who are really willing to go out and take this advice — and that’s because they’ve been waiting for it. That’s the demographic that we’re trying to help.
Now that you’ve brought it up, there are a lot of financial management sites popping up all over the web. What sets you apart from the Mints of the world?
Matt: Mint – they made sort of a different design decision than we did. Their equivalent of me — I sort of do new product here — is a visual guy. So, they were in development for less time because they don’t actually [crunch] any data, basically just visual processing. Since they’re not processing this data in any way, it was fairly short to market. And actually, if you recall they just launched with checking accounts and savings accounts and just recently added in investments. We chose to stay in development longer to put out something with a different focus.
I think there is a place for the Mints of the world — it was built as a [replacement] for Quicken. They have a whole lot of charts that detail your spending, and that’s what they do. I think most of us need some guidance.
Moving on to financial literacy, we just interviewed the guys over at the D2D Fund. I spoke to their Director of Innovation and Development about what they were doing, and then I read that some of the Thrive team members went to speak to members of Congress recently about financial literacy.
Avi: Yeah, that was just last week actually. [Week of April 27, 2009]
Where are you guys planning to go with that? Are you trying to come up with a separate product for high school students or something to that aspect?
Avi: No. We talked with a lot of young people and generally in public policy they’re sort of under represented. You’ve got banks and their lobbying groups. There sort of isn’t that voice in the dialogue for young people who are starting out or in college or graduated and making these big financial decisions for the first time, and I think they’re actually more affected by the legislation and things that are being discussed than the folks at the AARP and other groups, and so we went in there and were invited [to Congress] to kind of lend that expertise, and we did.
Matt: We have some product initiative around it — we’ll do an educational version at some point that allows people to use mock data, so teenagers and other people who don’t have real data, we can populate their account with fake credit cards so it’ll allow them to play with the system and transactions.
So, it’ll be kind of like a video game?
Matt: Well, yeah, so that a teacher can use it as sort of a teaching aid. To be like “and now we’re going to go into the spending section and look at ways to pay down our debt and how debt is conceptualized and why debt to income rate matters.
That’s a cool idea. Do you anticipate distributing that to high schools?
Avi: Yeah. Any organization that wants to use it, and there’s many out there that teach healthy financial principals, like budgeting, knowing where your money is going, keeping track of all the information you have.
I believe they were talking about bringing in personal finance classes to high schools in New Jersey.
Matt: Well, it’s required in some states. So, Jumpstart is sort of the national organization that does a lot around this. It’s required in some states and not in other states, and the requirements are hazy. It’s like sex ed. You can go to one school and they have a fabulous sex ed program and another school have a very shitty program, but they both meet the state requirements. So, it’s an emerging field. And I think that’s one of the things in Washington right now that we were weighing in on is “what’s the right way to do this”.
When you look at a program, you should evaluate its efficacy, and the evaluation of almost every financial program that’s out there is that it’s not efficacious — that they don’t actually fix many things. Actually next Friday, we have some people coming to the office that are doing a program that are working on a project that’s bolting onto TFA (Teach for America) so that TFA teachers will have models for financial literacy or even that kids that come out of school with an economics degree rather than going into TFA teaching full-time, will be teaching financial literacy part-time and then working in housing projects, providing one on one financial counsel part of the time.
Have you guys had a big increase in users since the economy has slown down?
Avi: We’ve definitely seen a lot more attention. I think “yes” is sort of the resounding answer across the board.
Matt: I mean, our launching happened at the same time the economy [went down], so it’s hard to know. I think certainly the current economy is raising people’s awareness, but I think people have always wanted advice. I don’t think this is a new message. I don’t think Avi would have started with the idea of advice, had it not been for the fact that all his friends were looking for advice. And that was long before the economy tanked, years ago.
Avi: You know, if I had to guess, it’s closer to the top of people’s minds right now. And that’s certainly helpful with getting people to think more about personal finance, to take advice.
Read Part 2 here.
Related posts:
[...] Stayin’ Alive: Lauren from Lifestyler Mag interviews the founders of Thrive on behavioral budgeting and personal finance management. [...]
[...] from Lifestyler Mag interviewed the founders of Thrive. Here’s Part 1 and Part [...]
It is best for future.No other option to it.
[...] to think about budgets is actually rather abstracted,” said Matt Wallaert, Lead Scientist at Thrive. “We’re trying to guide your behavior by looking at the numbers that sit on top of [...]