Banks, start-ups race to gain millennial investors with low-cost apps

Global Business

JP Morgan recently launched a digital investing service that comes with discounted trades and free access to its stock research. Anyone who downloads its mobile banking app gets at least 100 free trades in the first year. The bank is the latest to enter the low-cost investing app arena, which has produced fierce competition among both traditional brokerages and startups.

Banks and brokerages are scrambling compete with investment apps that are becoming increasingly attractive to young people.

The zero-fee stock trading app called Robinhood now has more than five million customers and is valued at more than $5.5 billion.

“We also had the crazy idea that if we made it free, if we made it really easy to use on mobile, that we’d see a new generation of customers,” Robinhood CEO Beiju Bhatt told a crowd at the Techcrunch Disrupt Conference.

For 20-something newlyweds Stephen and Kathryn Fernandez, financial guidance comes in the form of an app called Twine.

“It sort of translates investing into the language of people our age,” Stephen Fernandez said. “Because we aren’t used to going into the bank. We’re used to doing all our banking on our phone. So person to person contact isn’t a normal thing for our generation apparently.”

The couple, who have separate bank accounts, used Twine to create joint accounts to help them save for everything from vacations to a home.

The app encourages them to hit goal points, making them feel like a virtual someone has a vested interest in their success.

“I live my life on my phone,” Kathryn Fernandez said. “Everything I do is on my phone, so the fact that this is one less thing that I have to worry about, of taking an hour out of my day to go drive somewhere, physically get out of the car, meet someone, build that relationship. The relationship is really with the app.”

Twine released the results of a consumer survey on investing habits of 1,000 U.S. adults and found that while most millennials have a strong understanding of investing, 46 percent are not investing outside of a pension plan.

“I think a lot of folks, they spend more time on Facebook or emojis than investing. It’s one of the things you know it’s good for you in the long-term, but there’s a lot of fear around it, frustration and uncertainty,” Uri Pomerantz, CEO and Co-founder of Twine said. “So people just don’t get started, or get started much too late.”

Twine’s headquarters has a slew of programmers working to make the app more intuitive and attractive, especially to millennials.

Twine’s portfolio gets expertise from its financial services parent company John Hancock, but it’s up to algorithms to better understand each investor.

Pomerantz said its research shows nearly half of millennials believe they need at least a $1,000 to start investing.

With Twine, users can begin with just $1.

“The big thesis and why we are so excited about it is democratization of finance,” Pomerantz said. “Basically saying no matter how old you are, no matter how much money you have, you can get started with this financial adviser and get sort of what really sophisticated investors previously got and bring that down to everyone’s level.”

While Pomerantz said companies like his continually work on putting the knowledge of a human financial advisor into software, the biggest challenge is still convincing a tech savvy generation to start planning and saving early for their financial future.