Financial advising has traditionally been exclusive to wealthy people. However, more and more start-ups today have realized that there's an underserved customer segment that is not rich and want some "hand-holding" in terms of financial planning. This reminds me of Walmart, which slowly occupied retailing in small towns where people did not have easy access to department stores and where there wasn't much competition. Targeting an underserved population may turn into a huge business.
What do you think about this business model? Would it revolutionize financial advising?
http://www.nytimes.com/2014/04/12/your-money/start-ups-offer-financial-advice-to-people-who-arent-rich.html?ref=business&_r=0
It is possible to make quite a bit of money off of this under targeted group. These people probably aren't very confident in their own money and planning abilities, so I fear that they would get taken advantage of. However, if this business is done honest and correctly, many average households may benefit from financial services, increasing their well being in the long run.
ReplyDeletethis article does not provide a clear definition of "rich" versus "not rich". i'm assuming "not rich" is alluding to people who need financial management assistance of $50K and plus, then that is not a revolutionary idea. when i read financial services for "not just for the wealthy" i immediately think we are talking about poor people. i find it interesting how financial institutions that make up a large part of the national economic activity completely avoid and neglect the poor. i want to see financial institutions like vanguard making news headlines that read "counterbalancing the traditional investment management practices and initiating programs to help the poor manage money" or something along those lines.
ReplyDeleteIf you mean the poor, then we probably want to talk about Microfinance and the Nobel-winning Grameen Bank model. When it comes to the kind of financial services mentioned in the article, I think the target group will be the middle class and low-middle class in the future.
ReplyDeleteAccording to wikipedia, http://en.wikipedia.org/wiki/Grameen_Bank
"Micro-credit loans are based on the concept that the poor have skills that are under-utilized and, with incentive, they can earn more money. A group-based credit approach is applied to use peer-pressure within a group to ensure the borrowers follow through and conduct their financial affairs with discipline, ensuring repayment and allowing the borrowers to develop good credit standing. The bank also accepts deposits, provides other services, and runs several development-oriented businesses including fabric, telephone and energy companies. The bank's credit policy to support under-served populations has led to the overwhelming majority (96%) of its borrowers being women."