We speak to Max Rofagha, Co-founder of financial education fintech Finimize about why he and his colleagues set it up, what’s behind the rise of financial education start-ups and how the financial crisis affected millennials.
What’s the thinking behind Finimize? What made you set it up?
It all started when we had some savings ourselves and couldn’t figure out what to do with them. Everyone tells you to budget and save. But no one tells you what to do after that. You know you should be doing something smart with your money, but who do you listen to? You’ve read about cryptocurrencies, researched robo-advisers – but when it comes down to it, you don’t feel confident in handing over your money. A financial adviser could help you, but you either don’t trust them or can’t afford to pay them.
Among which millennial subsets do you get the most engagement from?
The most engaged users are those that are actively trying to solve the same problem that we came across. It’s difficult to know what to do when it comes to your savings. The whole Finimize community is incredibly engaged. Our users are involved in every decision we make, from the launch of new products to the visual design of our brand. Working together with our 250,000 users helps us create products that they genuinely need.
Finimizers are typically successful in their own careers but the financial world still seems inaccessible to them. So, Finimize gives them a way to stay up to date in a few minutes a day, learn new concepts and have the confidence and knowledge to make more informed financial decisions.
This generation wants to take control of their own financial lives. The first step to this is wanting to understand the facts. Jargon is a huge barrier to entry for anyone looking to stay up to date in the world of finance, whether you’re an expert or a beginner.
Secondly, the world has changed, information is digested in minutes rather than hours. Brands are building products that fit into their lives, not the other way round. People just don’t have the time or brain power to sit and read complex finance stories for an hour every day.
Finally, there’s been a proliferation of fintech start-ups in general. These have mainly been focused on removing the friction from the investment process and reducing fees. What we have found is that knowledge, confidence and trust are in fact the biggest hurdles to overcome before making an investment decision. So tackling literacy will be the next leap forward for fintech to make.
How close do you think we are to solving the low levels of financial literacy among millennials?
The challenge is finance, particularly good investing, can be quite dry, even boring. Encouraging people to make long-term decisions today that will benefit them in the future is hard. However, look at the success brands like Nike and Headspace have had in encouraging users to make the same kind of decision for their physical and mental health. As more companies focus on the end consumer and really understand the problems the user has, we will hopefully begin to see a greater impact.
We find it bizarre that industries such as travel and restaurants have platforms that put data in the hands of the end consumer so they can make their own informed choices. Think of how Expedia and Tripadvisor help you choose the right hotel or restaurant for you. We want to be the platform that you check before making any financial decisions. Which is why we launched our user review platform within our app. So you can now see how people, just like you, rate their experience with brokerages, robo advisors and crypto exchanges.
How important do you see technology in the drive to improving financial literacy?
Of course technology is important. Technology provides the ability to solve problems at scale. Here, technology will enable us to remove the information asymmetries between the traditional finance world and the rest of us.
On the flipside, the explosion of fintech leaves the end consumer with an abundance of choice, which often results in choice paralysis – and not doing anything is often the worst outcome.
How do you think the financial crisis has affected the way young people approach finance?
It’s made millennials more cautious.* They’re more cautious in their investments and more cautious in making sure they understand what they are getting into.
You recently held an investment education event. Can you tell us a bit more about it?
From conversations with our community, we identified a large group all struggling with the same problem: where to take the first step. By getting 200 of these people in the same room with fintech CEOs and investment experts, just the conversation alone can ease people’s anxiety.
Apart from Finimize, can you recommend any resources for millennials looking to improve their knowledge of personal finance?
The FIRE (financial independence retire early) movement in the US has started to gain global attention and there are some great learnings from the UK community there on Reddit – https://www.reddit.com/r/FIREUK/
*”There are marked differences in equity allocation between millennials who started investing at Vanguard before the crisis and those who started after. For both groups, the median equity allocation is around 90%. Yet comparing those who opened their accounts after the crisis with those who did so before, twice as many households have zero-equity portfolios (22% after the crisis versus 10% prior) and fewer households have allequity portfolios (14% after the crisis versus 33% prior)”.