Envestnet’s Plan to Keep Up With Consumer Behavior
By Nicole Casperson
Are you familiar with impulse purchases?
It’s the moment you’re in a store’s checkout line, and you see all the little goodies on display.
You grab it. You buy it. You didn’t even think twice about it.
This is an example of how stores leverage human behavior to induce impulse purchases right in front of you to make more money.
Do you know the average American spends $300,000 on impulse purchases in a lifetime?
Now, imagine if we placed that type of human behavior and put it into a savings or retirement account.
Fintech, like impulse purchases, has done access well – like too well.
Fintech is so good at providing access that users are now oversaturated with finance apps.
This oversaturation can lead to some significant analysis paralysis for users.
And while access has been a great way of placing our industry from behind the curtain to center stage as a part of cultural narratives, one big problem is still unsolved:
How do we help people build wealth whether your fintech company is B2C, B2B, or B2B2C?
With the right mix of behavioral and embedded finance, there’s a significant opportunity to turn access into meaningful wealth building.
Just ask Dani Fava, Head of Product Innovation at fintech giant Envestnet.
(ICYMI: Envestnet develops and distributes wealth management technology and products to financial advisors and institutions).
And it’s one of the biggest companies to do it – with trillions of dollars in AUM.
The company is working on launching a pilot of a new app it’s calling Embedded Investing in January with a community bank in Missouri.
It’s an app that’s inside another app – very meta.
Since embedded investing can implant in any finance app, users can open an account digitally and experience financial advice and professionally managed accounts right through the app they already trust in the place where they’re already spending time and money.
Dani shared the details of the new initiative during the Future Proof Festivalearlier this month.
Through embedded investing, Dani said she believes fintech companies could single-handedly solve the retirement crisis.
That’s a big task. So, to meet that solution, Envestnet partners with DriveWealth, a digital custodian behind the scenes of this embedded investing solution, so that users can digitally open accounts and trade fractional shares of equity – and it can happen through whatever app Envestnet enters.
So, what type of apps should Envestnet drop into?
Let’s take the gig economy, for example.
The estimated total earnings of gig workers were $1.6 trillion, and 59 millionAmericans participated in the gig economy in 2020.
That’s 36% of the US workforce.
Only 16% of gig workers have access to retirement plans.
“We need to give [employers] a way to deliver good advice and retirement accounts through their app,” Fava said. “We need to park an investing solution right next to where gig workers are making their money – right next to where they’re thinking about their money.”
If you had a digital and easy investing solution inside of something like Uber’s app, they could incentivize drivers to use their app versus Lyft by giving matches into the investment account.
Now, imagine seeing embedded investing inside of apps for the creator economy.
There are influencers making millions and then spending those millions without considering savings and retirement because they’re underserved.
Imagine putting an embedded investing solution with sound financial advice and a connection to a financial advisor in something like TikTok for a creator.
Let’s talk about how else we can improve users’ experience money by switching over to small businesses (another place that is completely underserved by financial services).
In 2021, the number of small businesses in the US reached 32.5 million. Many of these small businesses do lean on financial professionals for support.
The smaller ones can’t, however. About 34% of small businesses don’t have any support whatsoever.
Imagine if we can deliver tools for these small businesses to be better entrepreneurs.
With fintech, we could deliver solutions to registered investment advisors (RIAs) for them to be better entrepreneurs and understand their businesses.
Imagine we could deliver technology to all small businesses so that they could value their trade and see where they’re missing an opportunity.
Only a handful of fintech companies focus on supporting freelance workers and small business owner wellness. Jean Smart, Founder and CEO of Penelope, and Kristen Anderson, Founder, and CEO of Catch, are some of the few.
Fintech should provide SMBs with tools that enable entrepreneurs to value their business.
One way to do this is by ensuring that the financial advisors that work with small businesses can deliver technology tools that allow them to look at their credit and loans and decide where revenue opportunities are.
Envestnet is launching a portal geared toward small business owners to fill the gap, Fava said.
Now, in the portal, there’s a button asking the business owner to connect with a financial advisor.
“We could start directing a whole generation of entrepreneurs toward financial advice,” she said.
This is more than just a concept. It’s a step in the right direction to helping solve the financial crisis America has faced for years.
We have the technology. Let’s give entrepreneurs the tools, so they have the option to self-serve and contact a professional.
Let’s target fintech users so we can direct them into choices that are right for them, not just choices that increase engagement.
After all, fintech apps know everything about users.
Fintech companies know their income, assets, debt – everything. But are we doing anything significant with that data?
As millions of Americans sit on desktops, clicking a button to connect users with a financial adviser is a no-brainer because of where you just targeted them – their finance app.
That impulse purchase could lead to greater wealth building and equity in financial systems (instead of more debt).
That’s how you move from good intent to impact. At least, that’s how Envestnet is betting on doing it.
Imperfect action is better than perfect inaction.
I’d love to see more fintech companies actively working on leveraging human behavior to help money, and purchase habits go from inducing engagement and debt to rewarding savings and education.
We need to approach embedded finance with empathy and redesign the future we want for users and our industry.
We can’t just let the future wash over us or be dictated by people who say the future of fintech will be X.
The future isn’t a distant place. It’s not a noun. It’s a verb. It’s something that you make.
If we want to steer away from this iceberg that we’re heading towards, we don’t need a great fintech solution to do it for us.
We need collective action.