Hello everyone! For this issue of Fintech Explorer, I was excited to interview the founder of Moneymap.io, Matt Iverson-Comelo. Matt and I discussed the value of CFPs in an increasingly automated personal finance world, his journey to entrepreneurship, his social activism, and the role of behavioral finance in his business. Without further ado, I hope you enjoy!
Hi Matt! Can you tell us a little about your background and your path to entrepreneurship?
Sure. I got into fintech 15 years ago to try and solve a particular problem. It started when my dad was turning 59-and-a-half and the wraps came off his IRA. He was trying to figure out the optimal tax-advantaged way to move his money out, and he asked me if I could help him find a solution. At the time, I was working for a consumer advocate who had founded and for 25 years directed the West Coast Office of Consumers Union, which publishes Consumer Reports.
As I started helping my dad research his options, I was surprised to find that while there were plenty of solutions for people with significant assets, the average consumer had very few options. That seemed unfair to me. So the two of us decided to start building a solution that would bring financial planning to the underserved consumer.
As for my path to entrepreneurship, that runs in the family. My dad ran a successful business designing and selling DEC computer systems, primarily to Silicon Valley companies. One company he worked closely with, and was the reason he was able to retire early, was TradePlus. In 1994, when TradePlus, which had struggled as a company since the early 80s, lost its last business customer, Quick & Reilly, the only option they had was to go direct to the consumer. So they rebranded as E*TRADE and offered 100 shares for $39.99 and they immediately experienced dramatic growth. One interesting thing about E*TRADE in the early days - as one of the first online fintech companies, they had to have brokers sitting at desks approving each trade that came in.
I never really intended to be an entrepreneur, but in hindsight, I’m really not predisposed to do much else. I’m also grateful that entrepreneurship rewards curiosity.
Can you tell us what Moneymap does and who its primary customers are?
Moneymap started over dinner in Palo Alto with Dan Ariely, who many of your readers probably know is a prominent behavioral economist at Duke. Dan had just received a $7.9M grant from Prudential to build out a lab dealing with financial decision making. At the time, I was trying to figure out a way we could take our financial planning app and get more people to take action to achieve their financial goals. So we decided to start from scratch and together build a new product designed to get people to take the right financial actions.
Over the next 12 months we built and tested what became the Moneymap platform.
Moneymap is a white-labeled service that allows any company to offer human financial advice using our REST API and Certified Financial Planners. We think of it as “Stripe for human financial advice,” by offering our infrastructure to help companies easily offer personalized advice that builds relationships and delivers empathy at scale.
Our primary customers are fintech companies who want an easy, low-cost way to expand their services and drive member behavior. This includes neo-banks, as well as personal finance apps, seeking to differentiate their product by offering something that their customers really want - clarity from experts on what they should be doing with their money.
Because we’re offering a valuable service, which earns a NPS of 55 with tech savvy users, we operate under a “pay what you can” business model. This allows us to align fully with the end user, while also helping our fintech partners drive desired outcomes on their platforms.
Our basic offering allows users to work asynchronously with a CFP, which does not require a live meeting. In a recent randomized controlled trial we conducted with researchers at Duke, we were surprised to find that for low and moderate income consumers that had a strong preference not to meet with their CFP. However, for those that prefer a live meeting, they can easily schedule time with their financial planner. In order to receive highly personalized, deadline-driven tasks from their planner, users have to share some details about their financial goals and situation, and can also record a video or voice memo for greater context. Once the CFP and user agree to an action plan, which appears in the white-labeled dashboard, the planner’s assistant periodically checks in with the user over email and text to keep them focused and to cheer them on.
You can see how it works at Moneymap.io.
How do you think about trends in the financial industry towards more automation and where CFPs will fit in the industry going forward?
First off, I’m a huge fan of automation when it comes to your money. As a rule of thumb, once I have clarity on what I need to be doing, the less I have to think about my money the happier I am.
As AI and machine learning get better, automation is going to shift from robo-advice around asset management to financial planning. I don’t know how long it will take, but it’s inevitable that a computer program will be able to do a better job of financial planning than a human CFP. And probably sooner than we expect.
The question is, when we reach that point, how much will we still value empathy and a human connection. Like school teachers, I think CFPs will be one of the last jobs to be fully automated, since their work is so relationship driven.
From what I’ve seen on our platform, a big part of the value of a CFP is the idea of them. Consumers rightly see them as experts providing clarity on what to focus on, which enhances user understanding and confidence. This dramatically increases follow-through and it’s common for us to hear things like, “I made more progress on reaching my financial goals in four weeks than I have in the last 5 years." I don’t know if a “bot” would be as effective, since they are so much easier to ignore.
We’ll reach an interesting inflection point when a computer program can effectively pass itself off as a human on a phone call or event that is not in-person. Will we be forced to disclaim the interaction? It’s not clear to me, but we’ll have to figure it out.
What have been the biggest challenges/surprises on your entrepreneurship journey?
The first surprise is how valuable persistence is. Maybe I’m an outlier in a fail fast environment - what’s been hugely valuable for me is staying focused on solving the problem of delivering financial planning at scale. Sticking with this challenge and seeing the other entrants take it on over time, using different business models, has largely reinforced my understanding of what works and won’t work in this space.
Consumers are willing to pay for value and getting to work with a CFP to make progress on their money, it delivers a lot of value. The trick, as I’ve discussed with Dan, is not asking them to pay up front but getting them to pre-commit to a fair amount, based on delivering the value they expect in 3-4 weeks. Because Moneymap’s white-labeled service surpasses their expectations, they’re happy to pay a reasonable price for the service they receive.
The other surprise is how transferrable a founder’s generalist skill set is. I used to lament my lack of technical expertise, but in the last year, I’ve seen how helpful my generalist background can be.
At the start of the pandemic, my wife, Anita, who is a public school principal in East Oakland, started worrying about the mother of one of her students who had been unexpectedly widowed and didn’t have any source of income. Like a large percentage of the families at the school, she wasn’t going to be receiving any federal aid, so when we realized we were going to get a stimulus check, we decided to give our check to her. And then Anita, along with other principals and teachers started discussing giving up some or all of their stimulus checks for families that couldn’t pay their rent. In Oakland, many immigrant families live together in shared accommodations and are not listed on the lease, so they don’t have any renter’s protection. So once we realized that there was broad interest in helping the families, that weekend I created the website and coded a simple app that would allow people to pre-commit their stimulus check or make a donation directly. Over the next two months, as an all-volunteer effort, StimulusPledge.org raised over $250,000, which was disbursed as direct cash payments to families that schools had identified through wellness interviews.
Another area where my skills have come in handy is starting up a non profit organization with friends from my consumer advocacy days. We’ve modeled it on a coaching methodology that is similar to Moneymap’s, but in this case it powers social justice advocacy campaigns. The first campaign is in partnership with the NAACP to get the Oakland Unified School District board to improve literacy outcomes, particularly for Black, Latino and Pacific Islander students.
What are some common mistakes people make in managing their money that you’ve observed from your CFPs?
The planning process is so personal, but it’s true that there are common mistakes when it comes to managing money. One mistake that we’ve seen clients make is not taking advantage of the employer benefits being offered to them. That obviously includes the 401(k) match, as well as reimbursements for things such as gym membership or child care.
Another mistake that people can make is prioritizing debt repayment without having any emergency savings. We all want to be debt free, but people sometimes overlook building up enough of a rainy day savings account that they’re covered if there’s an unexpected expense. Related to this, some people end up buying a more expensive home than they can realistically afford, with little to no emergency savings. This is even more risky than prioritizing debt - when you don’t give yourself room to maneuver or just think that everything will magically work out.
Another mistake that many of us face is postponing getting important policies and documents in place. That includes a will, power of attorney, medical directives, life Insurance or disability insurance. I read your interview with Jennifer at FreeWill and was so happy to see how they’re working on making this process easier that I went and signed up right away. Our experience is that great tools as well as working with someone, such as a CFP who can hold you accountable to following through, makes a big difference.
A couple more common mistakes that people make are co-signing on loans, delaying saving into retirement accounts and not being diversified on asset allocation.
How does behavioral science play a role in Moneymap’s product - can you give some examples?
Behavioral science is at the core of the Moneymap platform. When we built the product with Dan Ariely, the core problem we were solving was the intention-action gap. That is, most people have a pretty clear idea of what they can do to make progress on their money, but they don’t get around to actually doing it.
By designing Moneymap the way we did, it directly addressed this issue using a number of behavioral strategies, chief among them is accountability. To reinforce accountability, we match every user with a dedicated CFP who persists with them throughout the program. We send just-in-time messages based on the deadlines and we clearly communicate the planners role and expectations. As a user, when you've made a commitment to your planner to take action, and you know that they're going to follow up with you, you don’t want to have to explain why you didn’t do something that you agreed to. This type of accountability to another person who is investing their time in you translates to users who are much more likely to follow through.
Additionally, we rely heavily on inducing confidence in users and promoting self-efficacy. We know from the research, that if someone is more confident they are more likely to take action. Instead of showing someone what they're missing or not doing correctly, we highlight all the positive things that they've done so far with their money, based on that information that we're collecting. Also, we use positive social proof to let people know that there are many people, just like them, who have similar financial goals.
We also use pre-commitment as a mechanism to get people to commit to the program, such as how much time they are willing to spend each week on money tasks. We also ask them to complete a non-binding commitment contract highlighting key aspects of our program. Though it sounds a little silly, we also get people to commit to the program by typing “I have what it takes to complete the program,” which has proven to be effective. Additionally, we ask users to pre-commit to how much they're willing to pay if they’ve had a positive experience at the end of four weeks.
Overall we use about 10 different behavioral strategies, but one more that I think is particularly helpful is goal-setting. We ask users which one financial goal they care the most about, and then we use that as a way to motivate them. We refer to their goal repeatedly to amplify their intrinsic motivation to achieve it. And like any smart program, we send just in time messages based on deadlines that either the user agrees to or sets for themselves within the app.
As Dan has said in the past, behavioral strategies are not a magic bullet, but taken together, these complimentary behavioral strategies result in significantly more behavior change than anything else I’ve seen or been involved in.