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Test planting the Acorns app

Could this intro to investing drain business from traditional players?

A new generation will take financial services into the future. In the "Next Voices" blog a rotating group of bloggers of the younger generation will share what they are learning and doing. Proposals from guest bloggers are also invited.Please email A new generation will take financial services into the future. In the "Next Voices" blog a rotating group of bloggers of the younger generation will share what they are learning and doing. Proposals from guest bloggers are also invited.Please email [email protected]

“I’m investing in the stock market” are not words one would hear Generation Z—or even Millennials—often utter.

Millennials are naturally wary of anybody or anything associated with the financial industry because of their childhood during the financial crisis. Most of Generation Z is still too young to invest in the stock market.

Besides, many of America’s young people are drowning in debt or don’t have enough money lying around to bother investing, anyway.

According to a 2016 Harris Poll, 79% of Millennials were not investing in the stock market. Of those, 41% said they don’t think they have enough money to start investing. Among the sample, 70% said they think it takes $100 or more to start investing in the stock market, and 38% said they think it takes $1,000 or more.1 Essentially, Millennials are afraid to take the risk of investing their limited funds in an entity which they perceive as volatile.

Little information is available about Generation Z regarding their likelihood to invest because most of them are still below age 18. However, research shows that they are a financially savvy generation with a predisposition to save due to their upbringing during a tumultuous economic environment. Fifty-seven percent of Gen Zers say they would rather save money than spend it immediately, and they’re using smartphone apps and other tech to help them reach their goals.2

Looking at Acorns

Recently, an investing app called “Acorns” came to my attention. It’s a tool geared toward young people which allows them to invest small amounts of money in the stock market using Exchange Traded Funds. (View more and read prospectuses here) Users link a credit or debit card to their Acorns account, and the app will round up the change from each purchase and invest it—literally, users are investing their spare change. Additionally, users can make a monthly contribution to the account for as little as $5.

Initially, I was wary of this product before I conducted my research. I grew up during the financial crisis, so I must admit I’m not particularly inclined to place any amount of money, no matter how small, in any sort of account with risk. I knew little to nothing about stocks and investments other than real or imagined horror stories about people losing their life savings and being forced to live out their retirement in a box next to the freeway.

I like my money safely in my ridiculously low interest savings account where it is mostly idle, but risk free.

Then, as I’m wont to do, I did some more research to increase my embarrassingly deficient knowledge of investments. I did not like what I found.

Hard truths about investing

Here’s some of what I learned.

A conservative approach to investing in one’s working years can lead to insufficient funds in retirement. Cash in a savings account can’t beat inflation. The money I’m slowly but diligently saving will most likely not carry me through my retirement. Historically, investments in the stock market can.3 The only way to beat inflation is to make long-term investments that can appreciate and compound over time.4

For young people who grew up watching those close to them lose jobs, homes, and money during the financial crisis, the facts I just recited can be incredibly scary.

What a slap in the face to realize that a comfortable and funded retirement will elude me unless I write the next literary masterpiece to reach the big screen or conquer my fear of the stock market.

But I’m pragmatic. If jumping into the stock market is how I’m going to retire at 65, then that’s what I’ll do.

So, I decided to give Acorns a try.

Using the Acorns app

Acorns is relatively simple to use. First, I downloaded the app, entered my email address, and set up a password. Next, I connected the Acorns account to my debit card and added personal information like my date of birth, Social Security number, employment information, and income. Then I chose if I wanted to contribute $5, $10, $20, $50, or $100 to the account on a recurring monthly basis.

After I finished setting up the account, I signed an investor’s certificate with my finger and had the option to share my new endeavor on social media! (I chose not to.) The entire process took approximately 15 minutes, and after I finished Acorns informed me that the account would be ready in 1-5 business days.

Acorns provides users with a number of illustrations and graphs to help them realize their earning potential, see where their money is being invested, and how they can improve their portfolio. Acorns also sets users’ portfolios at Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive based on the information they provide in the account setup process. Users can change their risk appetite at any time.

Currently Acorns offers a choice of seven ETFs, some advised by BlackRock and some by Vanguard.

Additionally, Acorns offers articles and videos in their online Grow magazine, which helps their users learn more about investing, as well as the ins and outs of the financial industry in general. Push notifications and email messages alert users to announcements, account updates, and offers.

Acorns has partnered with a number of organizations in order to offer “Found Money,” a program where companies such as Barnes & Noble, Apple, Macy’s, and other large national brands will invest a percentage of shoppers’ purchases into their Acorns account when they use their linked card. If users like Acorns, they can easily invite friends to join, and the user and their friend will each gain a $5 reward.

What I liked most about Acorns is that I can “set it and forget it” if I choose. It requires little attention on my part, but if I want to become more involved in investments and the stock market the information is at my fingertips. I do not have to set up a meeting with some person I barely know to make adjustments to my portfolio. I can learn at my own pace. I get rewarded for shopping with the companies I love.

Should banks be worried about Acorns?

Truly, Acorns—and apps like it—were made for Millennials and Generation Z. They get it. But, are these types of technology a threat to financial institutions?

Absolutely. Financial advisors, you should be quaking in your oxfords.

Acorns charges $1 per month for account balances below $5,000, and 0.25% of the account balance per year for accounts over $5,000. Generally, a financial advisor costs anywhere between 0.75% and 3% of a portfolio’s assets, an hourly rate between $200-$500, a commission, or a flat fee or retainer that might cost between $1,000 to $5,000.5 That kind of money to pay a financial advisor is simply not feasible for many young people who are still struggling with debt.

When those young people reach a point in their life where they do have money to pay a financial advisor for their services and expertise, what would make them want to use anything but their convenient and affordable smartphone app?

Not a whole lot, really.

A survey conducted by LendEDU showed that 53.6% of Millennials are not working with a financial advisor to invest or save for retirement—but 46.4% are. Millennials do trust human financial advisors more with their money than a robo-advisor. They want a personalized human touch, and that may be a bright point for traditional financial advisors. If it becomes apparent that robo-advisors do just as well or better than human advisors, though, will “wanting a human touch” be enough to convince Millennials or Gen Z to dish out a higher fee?

The same LendEDU study revealed that only 24.3% of Millennials said they have used a robo-advisor6—but 61.6% of those respondents said they haven’t because they have never heard of a robo-advisor.

Only 16.6% of participants who had never used a robo-advisor said they would rather work with a human.

Additionally, 37.2% of Millennials said they weren’t working with a human financial advisor because they couldn’t afford it. And 27.5% said it was because they didn’t see enough benefits to outweigh the cost. Another 24.9% said they would rather do it themselves.

Apps may trump banks

As the simple act of living becomes more expensive, I do not expect Millennials or Generation Z or any of the generations following them to flock to financial institutions and their financial planning services for help saving and investing for retirement. Apps like Acorns will become better, get smarter, and undoubtedly attract and retain young customers once they figure out how to market their product more effectively.

Like many aspects of the financial industry, investing and financial planning may get taken over by technology once Millennials and younger generations develop the guts to jump in.


1“Stock Market Investing is for Old, White Men, According to More than Half of Millennial Women,” Business Wire, last modified March 31, 2016, accessed March 6, 2018.

2Deep Patel. “10 Insights on Gen Z Spending That Business Leaders Need to Know,” Forbes, last modified Aug. 15, 2017, accessed March 6, 2018.

3Young, Ambitious, and Scared: Can Millennials Shed Their Crisis Mentality?” Legg Mason Global Asset Management, last modified Feb. 2017, accessed March 7, 2018.

4“The High Price of Prudence,” Legg Mason Global Asset Management, last modified Feb. 2017, accessed March 8, 2018.

5Larry Light. “How Much do Advisors Cost?Forbes, last modified July 26, 2012, accessed March 8, 2018.

6Mike Brown. “Robo Advisors vs. Financial Advisors—Millennials Still Prefer Real-Life,” LendEDU, last modified Sept. 19, 2017, accessed March 9, 2018.

Kelsey Neisen

Kelsey Neisen is junior research associate at The Copper River Group, a community bank consulting firm based in Fargo, N.D. She graduated from North Dakota State University with degrees in Anthropology and Public History. In 2011, she won The Center for Public Anthropology Award for Excellence in Writing on Public Issues. Kelsey previously worked in a variety of historical institutions, including Bonanzaville, USA and the North Dakota State University Archives, where she focused on the preservation of historical documents and making them available to the public for research.

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