Positioning the Future of Investing

The Brand Position of Personal Investment Apps Gives a Fascinating Window into the Future of the Financial Services Industry

Recently, the Wall Street Journal reported that in the first quarter of 2021 the financial services app Robinhood generated $331 million in revenue from routing stock orders, triple the amount of revenue compared to the same quarter in 2020. Those three months corresponded with the run on so-called “meme stocks,” including GameStop and AMC Entertainment, in which members of Reddit forums used Robinhood to drive share prices into the stratosphere.

Robinhood isn’t the only app betting on a future without traditional stockbrokers and financial planners—other apps include Acorns and Ellevest. While all three of these personal finance apps offer a user experience targeted to the same audience of young, digital-first investors, each has a unique brand position that attempts to set it apart from the competition and earn the loyalty of specific segments of young investors.

Here’s a quick look at the brand positions of these three apps, as well as what each can tell us about the future of the financial services category.

The Gamification of Investing

According to Robinhood’s CEO, Vlad Tenev, the goal of the app is to “democratize” investing. The mission itself is laudable—only 55% of Americans own stocks, down from 67% in 2002. In recent congressional testimony Tenev pointed out that Robinhood encourages first-time investors, and that the median age of its users is 31. In addition, 25% of the app’s users are Black and Latino, two demographic groups whose participation in the stock market has long lagged behind others.

However, Robinhood’s many critics use a different phrase to describe its appeal: the gamification of investing. An article in Fast Company chronicles how the UX of the Robinhood app is intentionally designed to “delight people who are new to active investing, taking advantage of the same psychological motivators that drive game behavior.” The app achieves this through the use of emojis, digital confetti, push notifications, and other interactive elements that create what Fast Company calls a “game play loop.”

By combining the gamification model and its advertising centered around “Commission-Free Trading” and “Investing for Everyone,” Robinhood has created a populist product, but one targeted to a narrow segment of potential young investors: mostly male and very online gamers.

The Takeaway: You can’t argue with Robinhood’s success, at least for now. The company identified a target consumer and then positioned its brand right in their wheelhouse. However, federal regulators might soon deem the brand’s position too irresponsible to allow it to continue operating.

Investing Your Spare Change

Acorns is part of another group of investing apps that, like Robinhood, target first-time investors. However, its brand position is very different: Instead of marketing the game-like thrill of investing, Acorns likens investing to something as easy as collecting your spare change in a jar.

A Harris poll found that nearly 80% of millenials are not invested in the stock market and that 40% explained their lack of participation by saying they feel they don’t have enough money to start investing. Acorns is a direct response to this generational perception by offering what are sometimes called “spare change” or “round-up” apps. Acorn rounds up users’ daily credit card purchases and then automatically invests the difference. So if you buy a coffee at your local roaster for $2.75, Acorn will round the purchase up to $3.00 and then route the “spare” $0.25 to a low-cost index fund.

Acorns’ brand position is simple: Don’t think of investing as a risky activity reserved only for the mega-rich; instead, think of investing as part of a holistic personal budget in which every cent you’ve earned is working toward a more financially stable future.

The Takeaway: By offering such a low barrier to entry (Acorn has a $5 account minimum), spare change apps make investing seem less risky. However, that same attitude toward risk also means users see far less return on their investment than a standard mutual fund. What’s good for a brand position isn’t always good for the consumer.
Smartphone with Robinhood trading app displaying line graph
Photo by @techdailyca

Investing in a Better Future

Impact investing apps such as Ellevest occupy a slightly different position in the world of personal finance. Like spare change investment apps, Ellevest has a low minimum investment level—for the basic Ellevest Digital, there is no minimum investment required. However, instead of investing users’ money in ETFs, Ellevest puts its users’ money into what are called impact funds: funds that seek to generate positive social and environmental change, along with positive returns. Ellevest takes impact investing a step further. It’s an investment app targeted to women who want to invest in other women—in this case, companies that are owned or run by women.

A recent survey found that 76% of women are unhappy with the financial services industry, which might help explain why 75% of women under 40 don’t have a financial advisor. Ellevest positions itself as a solution to this obvious inequality. And that position has clearly resonated with women: As of March 2021, Ellevest now has $1 billion in women’s assets under management.

Ellevest also goes beyond other automated investment apps by offering personal, one-on-one career and financial planners, online workshops, and financial courses given via email. Ellevest’s investment algorithms also take into account women’s pay gaps, career breaks due to family, and longer lifespans.

The Takeaway: Investing with intentionality is the brand position most likely to endure for a simple reason: young investors want their money to do more than just bring a steady return. They want their money to actually make a difference in the world.

Investing in a Better Future

Impact investing apps such as Ellevest occupy a slightly different position in the world of personal finance. Like spare change investment apps, Ellevest has a low minimum investment level—for the basic Ellevest Digital, there is no minimum investment required. However, instead of investing users’ money in ETFs, Ellevest puts its users’ money into what are called impact funds: funds that seek to generate positive social and environmental change, along with positive returns. Ellevest takes impact investing a step further. It’s an investment app targeted to women who want to invest in other women—in this case, companies that are owned or run by women.A recent survey found that 76% of women are unhappy with the financial services industry, which might help explain why 75% of women under 40 don’t have a financial advisor. Ellevest positions itself as a solution to this obvious inequality. And that position has clearly resonated with women: As of March 2021, Ellevest now has $1 billion in women’s assets under management.Ellevest also goes beyond other automated investment apps by offering personal, one-on-one career and financial planners, online workshops, and financial courses given via email. Ellevest’s investment algorithms also take into account women’s pay gaps, career breaks due to family, and longer lifespans.

The Takeaway: Investing with intentionality is the brand position most likely to endure for a simple reason: young investors want their money to do more than just bring a steady return. They want their money to actually make a difference in the world.

Is Real-Time Access a Boon for the Consumer?

One thing is clear—the trend in the financial services industry is to take investing out of a stockbroker’s office and put it at the fingertips of the masses. Whether that level of personal empowerment is good for consumers or just another income stream for a new class of tech giants is yet to be determined.

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