Over the last six months I have travelled extensively in the US meeting some true visionaries who are transforming the way financial advice is being delivered to Americans. One of the most inspiring people I have met was Matt Fellowes, founder and CEO of Hello Wallet, a social enterprise business which sees its mission as democratising access to independent financial guidance.
Although founded three years ago, it’s only a year and a half since the enterprise business launched to customers. Since then, over 500,000 subscriptions have been sold to clients including Marsh MacLennan, Heinz, T. Rowe Price, United Technology Corp, the New York Stock Exchange and Dun & Bradstreet. As part of their social contribution, for every four licenses they sell, the company distributes one to someone who cannot afford the service. Notably they also provided 20,000 licenses to support the White House Summit on Financial Capability and Empowerment. The company benefits from a long list of high profile supporters including former President Bill Clinton.
Citing his background at the Brookings Institute, an organisation that amongst other things explores how to use markets to drive social outcomes, Fellowes says that advice is both a maths problem and a behaviour problem, but that with the right support he believes consumers can take control of these challenges and achieve significantly better outcomes.
He also identifies that not only do companies have a vested interest in ensuring their staff are well taken care of but that, if it is possible to positively influence how people spend their pay checks, this can have an overall positive effect on the economy.
The company’s current focus is on the $1.5 trillion spent annually in the US on employee rewards programs, which Fellowes insists includes a profound amount of waste. He gives the example that of the £115 billion in matched pension contributions provided by employers, employees pull out $70 billion a year in non-retirement spending despite there being tax penalties for doing so.
The Hello Wallet proposition includes powerful tools to enable employers to optimise the value they derive from benefit spend. At its heart is a behavioural finance-driven software proposition which helps employees using the service take better control of their money.
This is delivered both via a website and using iOS and Android smartphone apps. When I first met with Hello Wallet back in the summer they were especially excited about their Android app as it was demonstrating the ability to reach consumers with a very different demographic. Wealthy people buy iPhones, poor people buy Android so the latter has been especially important to them in their social activities.
The impact of the service can be
dramatic. Typically 30 per cent increase their 401K contributions, on average increasing their monthly savings by 80 per cent. Users pay down their debt twice as fast and overall 90 per cent report feeling more in control financially.
Subscribing employers receive quarterly reports including over 40 metrics to help them understand the financial wellness of their employees. These include breakdowns by demographics, changes in savings levels across a range of vehicles, the impact this will have on their staff’s retirement outcomes and compares these against national averages.
The business is supported by an advisory board made up of the world’s leading authorities on behavioural finance and related issues, all acting on a voluntary basis. Hello Wallet recognises the science of behavioural finance is in its infancy and launches new experiments to try to help their customer base every thirty days.
While their targeting of US-based global corporations makes it inevitable that at some stage they will extend their operation beyond the US, Matt Fellows insists that currently their focus remains in the USA.
This will probably come as a relief to many working in benefits businesses in the UK, at least for now. It is clear that Hello Wallet will have a hugely disturbing effect on the benefits industry. This will be great news for employers but it is hard to see how firms taking a traditional UK type approach will be able to compete with Hello Wallet when they do finally arrive on these shores. To survive they will almost certainly need to entirely re-engineer their operating methodology.
