It looks like the investment service Acorns may turn into an oak faster than expected.
Billed as an automated investment manager for the people, Acorns is off to a blistering start with its new retirement account service picking up 100,000 accounts in its first month.
Unlike other investment services, Acorns takes spare change from transactions and rewards agreements with certain retailers to invest in a managed portfolio. The company’s initial “spare change” investment service cost $1 per month and its new retirement-focused account costs $2.
“If you’re an Acorns customer, within 60 seconds you can open up a retirement account,” says chief executive Noah Kerner.
Those fees ($2 per-month for the retirement account) are in place until a customer hits the $1 million investment threshold.
Kerner says that most of Acorns more than 3.5 million customers are investing roughly $50 to $60 per month into their core accounts, which is ideal for investors who aren’t particularly savvy about investing in the stock market.
“If someone put $10 into an Acorns account and that was all they ever did, it’s not a great deal,” says Kerner. “But that’s not what we’re trying to do. We’re trying to get people to save and invest.”
The average age of an Acorns customer is 32 years old with a median income falling somewhere between $50,000 and $60,000, Kerner said. And the accounts are coming from all over the country, rather than concentrated on the coasts like other automated investment managers, he says.
“The types of problems we’re trying to solve is that 70 percent of Americans don’t have a $1,000 emergency fund set up and 66 percent don’t have a dollar saved for retirement. Another 66 percent can’t pass a basic financial literacy test,” Kerner says.
And unlike other services, Kerner says that Acorns tries to be as transparent as possible about its pricing. “The way we think about pricing is from a subscription pricing perspective and to be really clear with our customers about exactly what they’re paying and exactly what they’re getting,” says Kerner.
Earlier this month, the company signed an agreement with BlackRock involving shared development resources for new product development in financial services.
“Acorns is a pioneer in creating innovative ways to engage investors in a mobile-first world. By deepening our understanding of how their customers use investment technologies, we can apply those learnings across BlackRock to evolve the products we build for our distribution partners,” said Rob Goldstein, BlackRock’s Chief Operating Officer, in a statement.
Financial services and investment apps continue to proliferate driven by a booming stock market, low interest rates and the rise of cryptocurrency speculation. While other companies have moved aggressively to incorporate more tools to encourage speculation, Acorns has taken the opposite approach.
The company emphasizes savings and portfolio diversification rather than day trading, margin trading or betting on the latest token offering from an unknown company.
This approach may actually prove more beneficial for the company’s customers in the long term. Kerner admonishes that customers should be as concerned about free trading services on the market as they are (arguably) about the free services they’re receiving from social networks, repeating that if a customer isn’t paying for a product, then they likely are the product.