Nicole Goldin's Case Study Paper and Presentation on Stash
In February of 2015, Stash Investments LLC was co-founded by Brandon Krieg and Ed Robinson. Krieg and Robinson at the time were working together on electronic trading in a large global bank. As two people who understood trading and investing well, Krieg and Robinson were often utilized as a resource by friends and family for advice on investing and trading (Rogers). This caused them to wonder why and how people outside of the finance community feel they don’t know enough to invest on their own, so they set out to research and find an answer. They began initially by asking questions to everyday Americans on the street, and they learned the most common answers consisted of “No, I don’t invest, but I really want to. I just don’t understand it. It’s really confusing to me, so I’ll do it later” (Rogers).
Immediately, Krieg and Robinson identified the lack of knowledge, understanding, and education as the major reasons why many Americans don’t spend time investing. Another influential discovery they made was many Americans were under the impression they should wait until they are rich to begin saving (Patel). In an effort to “democratize investing and empower everyone to learn … financial literacy,” Krieg and Robinson created a simple and easy to use platform that provides investment advice and the opportunity to create a portfolio with as little as $5: Stash (Patel). Krieg and Robinson designed and developed the Stash platform themselves with their own personal investments because they wanted to prove their mission could be realized. The company was bootstrapped in the beginning, however once it grew a customer base it began relying on its monthly fees to fund the company (Rogers). Currently, Stash charges $1/month for users with investments less than $5,000("Stash"). After users exceed the $5,000 mark, they are charged a percentage usually around 0.25%("Stash"). For Stash’s retirement accounts, there is a fixed fee of $2/month for users with less than $5,000("Stash). These fees continue to vary depending on the type of account held by the users. These accounts include Personal Investment, Retirement, Custodial, and Banking accounts.
Stash’s mission statement is as follows: “Stash is on a mission to provide financial opportunity to all. We believe that every American should have the tools, guidance, and confidence needed to grow personal wealth and live a better life ("Stash")”. Stash is focused on ensuring not only that Americans know how to save but will save. Close to 50% of Americans could not come up with $500 in the case of a medical emergency, and with Stash, Krieg and Robinson are working to change this (Patel). Stash is attempting to normalize investing and take away the intimidating stereotypes that deter everyday people who could benefit. Stash is also creating a way to incorporate personal passion into investing by encouraging users to invest in companies they would normally spend at. This includes environmentally friendly companies, companies that value LQBTQ and diversity, sustainable companies, etc (Barret). Increasingly more consumers are thinking about where their products were created and in what environments they were made. These topics are subjects consumers care about and Stash allows consumers to choose from over 30 combinations of packages that cater to those needs.
Stash’s target consumers are usually people who have less than $100,000 to invest. 86% of Stash’s users are one time investors and many of those are Millennials and Generation X("Analyzing Stash Invest..."). This is approximately 109 million adults in America between the ages of 23 and 55, and influences Stash’s average user age of 29 ("Analyzing Stash Invest..."). Millenials have been described as the “most skeptical investors” which is why the Stash model works so well for them. Due to Stash’s ability to give users the complete power to invest as much or as little where they want, skeptical investors feel more in control of their investing.
Within the investment application market, Acorn and Stash are the two most competitive companies. Acorn, similar to Stash, accesses customer purchases and rounds the totals spent to use the change for the user investment fund (Digalaki). Where Acorn and Stash differ is Stash waits to deposit this money in investment funds until it totals $5. Stash tends to offer more fund options as compared to Acorn, however the fund expenses through Stash are slightly higher. The options Stash is offers is what sets it apart from its competitors as they have significantly less options. While it is not a direct investment application, Robinhood also shares this space with Acorn and Stash as a free trading platform for users. Each of these companies represent new investment, earning, and saving methods in the FinTech space.
To develop, Stash uses Google GO programming language ("Development Guide"). Go is an open source language and is often used to develop software for applications. It is similar to C, and it is meant to be a more simple and decluttered programming software with less required typing. The application is mainly based on a mobile phone with less access through the online application. This is a newer addition and is still being developed. Stash also uses machine learning to “drive the product experience”(Nordli).
Stash is considered an investment technology domain company within FinTech. Investment technologies aim to simplify, improve, and make more accessible the investment process. 90% of US Investors believe personalized investment advice is the most important aspect of a technological finance tool (Viens). In addition to personalized advice, investors also believe that features such as best returns, customizable analysis, personalized portfolios, and personal budgets are amongst the most important features technology tools should have within finance. While investment technologies have not grown as rapidly as other FinTech domains in the past five year, the growth is still substantial. In 2015, EY reported only a 17% adoption rate of Savings and Investment technologies, however in 2019 the adoption rate is reported to be 34% (Viens). One suggested reason investment technology has not surged as much as other domains such as money transfers involves the advisement methods. One of the biggest draws to investment technology is the robo advising, however this is also a big drawback for many. 81% of US Investors still hold the belief that a human advisor could never be replaced by an electronic one (Viens).
Many of the larger companies and developments in the investment technology domain of FinTech are trading platforms such as Robinhood, E-Trade, and the new online applications that larger banks like JP Morgan have begun to release. Many of these companies are also removing trading and commission fees to give users more ability to trade when and how much they want. Investment apps include broker apps, spare change apps, and Robo-advising apps. Each of these technologies provides a different aspect of investment, and there are many companies attempting to break into the space. Betterment, a robo-advising tool, advises users on how to best manage their portfolio using AI technologies (Wang). Stockpile, is a trading platform which allows users to buy and sell pieces of shares rather than entire shares (Wang). Wealthfront is also a Robo-advising platform, however it specializes in advising for family saving (Wang). What the investment domain has seen is an increase in tools such as Wealthfront which as geared specifically towards niches of users with different investment motivations.
The largest business contribution Stash has made is a transformation of which users take part in investing. As part of their mission, Stash set out to create a form of investment that was easy enough for everyday people who do not work in finance to understand. This trend of accessibility and ease is driving the creation of new technologies in FinTech spaces, and Stash is greatly contributing to this. Because Stash encourages investors to invest in companies they care about, Stash is taking part in the sustainability movements that are influencing consumers and businesses across the world. Even though as mentioned earlier, Saving and Investment technologies is one of the slower growing areas of FinTech, Stash makes up a large part of that change and does not show signs of slowing down. Stash’s founders also contributed to the business community because all of its code was created from scratch by the co-founders. Krieg and Robinson realized there was not technology that existed in the same way they wanted it to, so they created their own instead. Stash is generally viewed to be one of the best and most competitive investment apps amongst the current investment technology applications. While it does not have an IPO, it is estimated to be worth around $350 million (Lunden). Acorn, Stash’s largest competitor, however is valued to be around $860 million (Digalaki). Acorn launched in 2014 while Stash launched in 2015. This as well as Acorn’s lower fees could be the reason they are valued higher. However, Stash is projected to grow rapidly within the next few years due to their recent addition of their web application and level of success with first time investors.
Stash’s ability to reach first time investors is one of the signs used to gauge their success. 86% of Stash users are first time investors meaning Stash is one of the reasons they became interested in saving ("Analyzing Stash Invest..."). Stash’s mission as a company is centered around encouraging people to learn how to save and invest, so this means they are already wildly successful. Additionally, Stash has only existed for four years yet has one of the highest net values of the FinTech startups and has 2.4 million users. Acorn has 3.5 million users which is not a huge amount more than Stash.
As a college student, one of the feature Stash’s competitors Acorn has that they should adopt is waived management fees for college students. Because first time investors are such a huge part of Stash’s business model, reaching out to college students to begin investing early is a great way to create brand loyalty with Stash for when the college students graduate and begin investing with their salaries. This would also be advisable because a $1/month fee is incredibly high if users do not have a large sum in their balance. College students with no steady or regular income should not be charged such high percentages. Additionally, it might be an interesting idea for Stash to create a simulation investor to allow users to become comfortable investing before they use their own money. It would be a hands-on education and it would make first time investors more comfortable with an action that likely already feels quite uncomfortable. This technology would likely result from both company and gaming engineers to work together to create a game that modeled Stash investing while also creating a fun way to learn. Even if a user never creates a Stash investment account, it will achieve the company’s mission of generating more financial literacy.
There are also many Stash users who would appreciate a more human advisor. This is likely because they are uncomfortable and don’t understand how the Robo-advisors may work. This is why Stash should create videos with people to explain how the robo-advising works. This again would make Stash customers feel more comfortable and trusting of the company and technology as well as possibly inspire users to learn more. Not only would this benefit customers but it would also benefit the company because customers would use the advisors more often, therefore it would provide the company with more opportunities to improve the machine learning. Explanations are also very useful to older generations who have experience investing. To someone who has always trusted a human with their assets, to provide them with a deeper explanation and understanding of the technologies at play would make them feel more comfortable.
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