Podcast 388: Mike Sha of SigFig

Despite the early successes of some of the robo-advice platforms, good financial advice is still something that is difficult to scale. The wealthy often work with professional advisors and the rest of us manage it ourselves where there is limited advice and often the accumulated assets just sit in retirement accounts being ignored. But that could be able to change.

My next guest on the Fintech One-on-One podcast is Mike Sha, the CEO and Co-Founder of SigFig. They are on a mission to deliver quality advice at scale and are working with some of the largest financial institutions in the country. But even Mike agrees much more needs to be done and they are looking at advice beyond wealth management to provide a more holistic approach.

In this podcast you will learn:

  • How Mike’s time at Amazon helped shape his thoughts on customer experience.
  • The founding story of SigFig and what preceded it.
  • How their first commercial product, a portfolio tracking tool, was developed.
  • The behavior patterns of the two types of investors.
  • The opportunity provided by the coming massive transfer of wealth from baby boomers.
  • How they work with banks and wealth management firms.
  • Some of the bigger clients they serve.
  • Why people hire financial advisors today.
  • How SigFig has expanded beyond investments.
  • How their new platform called Engage grew out of the pandemic.
  • Mike’s view on the UBS-Wealthfront acquisition/breakup saga this year.
  • How he thinks about the direct-to-consumer robo-advisor model and why they chose b2b.
  • What’s next for SigFig.

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FINTECH ONE-ON-ONE PODCAST 388-MIKE SHA

Welcome to the Fintech One-on-One Podcast, Episode No. 388. This is your host, Peter Renton, Chairman and Co-Founder of Fintech Nexus.

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Peter Renton: Today on the show, I’m delighted to welcome Mike Sha, he is the CEO & Co-Founder of SigFig. Now, SigFig’s a really interesting company, this is how they describe themselves, “technology that delivers unmatched advice and service experiences for your consumers.” That’s from their home page and I always thought of them really as like a robo-advice company, but they’re business-to-business and not direct-to-consumer, but they are doing, as you will find out in this episode, they are doing a lot more than robo-advice. They have sort of trying to put themselves in the center of sort of this experience of the consumer and helping large institutions and small institutions alike kind of deliver a better quality experience for their customers. 

But we also, we talk about lots of things, we talk about the huge wealth transfer that’s about to happen from the baby boomers to millennials, we talk about how the investment approach of consumers has changed since Mike began and we talk about how they are partnering with some of the largest institutions in the country. Mike also provides his insight on to the UBS breakup with Wealthfront and he talks about his bullishness for the retail robo-advice industry and much more. It was a fascinating episode, hope you enjoy the show.

Welcome to the podcast, Mike!

Mike Sha: Great to be here, Peter.

Peter: Okay. Well, let’s kick it off by giving the listeners a little bit of background about yourself. I know you’ve been doing SigFig for a long time, but tell us a little bit about sort of the arch of your career before that.

Mike: I grew up on the East Coast, my parents were first generation immigrants. After having a bunch of fun jobs that, you know, real companies they eventually decide to start their own company so I grew up in a kind of an entrepreneurial household and we started a small business together and then I went to school during the dot com boom. And what was interesting about that and how it actually connects to SigFig is one, you know, the first stock market boom, you know, people were day trading from their dorm rooms, feels like what they felt like, you know, in 2021 when people were on Robinhood, but, you know, I think that was kind of an early era for individual investors trading stocks, right, it’s like the first stock market boom post the Internet. 

And then the other thing is, you know, obviously people were starting companies. I think between all those things coming together plus the fact that, you know, my Mom has been really kind of a life long passionate, self-directed investor, all of that kind of eventually led to starting SigFig. You know, before SigFig, it was interesting, my first job out of school was at Amazon, it’s obviously, gone on to grow quite a bit from the era when I was there, but I think at its roots, the most important things I probably, took away from Amazon was just like ultimate and utter obsession around customers, like how do you build things that make customers happy. You know, that has always been part of like the Amazon way of thinking is, you know, what’s the opportunity that we have to disrupt things for the betterment of the customer. You know, the other thing is the sheer and ultimate power of technology.

Peter: Right.

Mike: When you think about Amazon, compared to many other e-commerce companies, the vast majority of e-commerce companies think of themselves as retailers whereas Amazon always thought of itself as a software company and that’s a big difference even though it sounds subtle. I think it explains a lot of how they think about the world of given that, you know, I had my early career experiences, you know, a lot of times people’s early career experiences kind of imprint on them, you know, like a perspective on the world and, you know, I think that ended about coming back to, again, becoming kind of related to helping SigFig eventually get off the ground,

Peter: Let’s just dig into that for a little bit. Can you just tell us the founding story, I know it wasn’t called SigFig initially, just tell us sort of how you came up with the idea and what it was like when you launched.

Mike: The first product that we built was called Wikinvest and it was really a Wiki for investing. So, if you remember in the mid-2000’s, this little site that started to get big called Wikipedia was pretty interesting. You know, at the very early days people are like, can you really trust what’s on Wikipedia, you know, you can’t trust that, like random people on the Internet write stuff on Wikipedia. You know, over time, it became pretty evident that like the power of the platform and community collaboration and proof editing and editorial process, like all of that ended up actually creating quite a powerful source of information. 

And so, as we were thinking about getting, you know, what was then called Wikinvest but really SigFig off the ground, you know, we’ve always been united around this idea that high quality financial advice has really only have been available to people with a lot of money and was something that’s transformative as technology and the Internet, you have an opportunity to bring good advice to more people, right, and make it more scalable and make it still high quality. 

You know, we started with essentially people like my Mom, people where investing as a hobby, what’s funny is over the years, you know, I think we’ve come to kind of figure out that for the vast majority of people investing is actually not a hobby, it’s a chore. Our first product was really designed for people who enjoy investing and so we kind of built this thing called Wikinvest. It was a, think of it as almost like equity research, but done by the crowd, right, like people could come to the site and write their analysis of different companies and what’s interesting about their business model and the macro forces that are helping it and, you know, instead of like Goldman Sachs producing equity research, it’s like the wisdom of the crowd, right. So, that was the original kind of product concept and, you know, over the years I think we’ve always been really good at trying to understand like what are the pain points for our users and is there more that we can do for them and Wikinvest was always just the beginning. 

It wasn’t like we built Wikinvest and then, you know, it didn’t work so we pivoted to something else. The concept of the company was always to kind of build like multiple different products all related to like this idea of helping people make better financial decisions. And so, eventually, you know, what we saw in the user base was for these people who enjoy investing, they actually have their moneys spread across a lot of accounts so it’s very common in the US that people have multiple accounts. You know, some of that is an artifact of the 401(k) system and the fact that for every employer you have you open a 401(k), you end up with like more and more and more accounts through your career and a lot of people, you know, that money is a little bit asleep of the wheel. 

They contributed that money to get a match, you don’t really know exactly what kinds of assets are the account, they’re not really paying much attention to it, but these are assets that are like the assets that are going to help you retire one day. If you optimally invest that money, you’re either not going to make it or you’re going to have to work longer and you’re going to get there slower than you otherwise could if that money were well managed. Basically, what happened was we ended up building this portfolio tracking tool so, you know, if you remember the early days, you know, there’s that thing called Mint.

Peter: Oh, yeah, I was a Mint user, Mint user in the mid-2000’s, yeah.

Mike: The first version of this portfolio tracking tool was a little bit like Mint for investing, you know, like we didn’t focus on like bank accounts and credit cards aggregation, we just focused on investments and we really tried to build a tool that would let you see all of your portfolio in one place. And then one of the fascinating things that happened after that was we started signing partnerships with other companies who wanted a better portfolio tracking tool and it turns out that the vast majority of people were like tracking stocks on the Internet at that point. Were doing them on what we think of as the traditional finance portals, Yahoo Finance, CNN money, AOL Money, you know, sites like that and they all had like some version of portfolio tracking, but all of them were like really pretty terrible experiences. 

So, we basically went to those big portals and said hey, we’ve got this really great portfolio tracking tool, it syncs with all your accounts, beautiful design, makes it really easy, we’ve real-time quotes, you know, like all these things that those customers wanted and we’ll offer to kind of power this for you. And so, over the course of a few years, we ended up partnering with almost all of the big, major finance portals and as you can imagine, part of our thesis was hey, the more people we can reach, the more people who will use our products and that turned out to be true. You know, within a few years, we ended up tracking almost half a trillion dollars worth of assets across a couple of million accounts, that’s kind of the beginning of what happened at SigFig. 

What happened was we looked at all that data and we basically found that the vast, vast, vast majority of people who have investments in this country are just asleep of the wheel making kind of not good decisions or making no decisions at all and that’s eventually what led us to building, you know, this whole like investment management business which is what people call robo-advice. For us, we really focused on the B2B model so we kind of partnered with third party institutions.

Peter: Right. Now, you’ve been doing this for a while, even before the financial crisis and now we’ve had a crazy, you know, couple of years in the investment markets and now things are, who knows what the future holds, but we’ve been going down for the last, at least, a few months. So, have you found that the average consumer who has investments, which obviously many consumers don’t, those who have investments, are they getting better at investing through your platform and others or is the behavior, they’re still…sell at the low point and buy at the high point.

Mike: You know, let’s be overly simplistic for a second. You know, I said before like to some people investing is a chore, some people investing is a hobby, another way to split the world is, especially people who use investments to save for the long term and people who are like trying to get rich quick, and again this again over simplification. What you find is that people saving for the long term, they’re essentially investing because investing is the new way to save. Our parents’ generation, they saved in CDs and savings accounts and they have pension plans, you know, like 40 years ago, people saved for retirement in very different ways than they do today. 

Today, like people are told, save for your own retirement, you decide, you know, if you want to open a 401(k), you decide how much to contribute to it, maybe your employer will like incentivize you by matching a little bit and then once you put your money in your 401(k), you’ve got to manage it yourself, no one’s going to manage it for you like a pension plan. And so, that’s part of why the investment industry has grown so much in the last few decades because all of that long term wealth accumulation that happens in the world now, most of it ends up in some sort of investment vehicle, right. And so, you know, that customer base, what’s important to them? They want to save for those long term goals, they need to make regular contributions over time, they need that money to not be like 100% in Tesla stock, in GameStop or, you know, whatever happened during the pandemic, they need it to be in a healthy, diversified portfolio with an appropriate amount of risk. 

You know, at some sense they want to take the burden and the fear doing that well off, they want to like find someone to help them do it and that’s why the vast majority of assets that are managed in this country and in the world are advised, right, like there’s someone who’s a professional helping people do that and, you know, that’s kind of one big bucket. And then the other bucket is people who are like DIY, do-it-myself, you know, I’m going to day trade, I’m going to try to beat the markets, I’m going to get those stock tips, I’m going to be able to  brag to my friends about how I picked the right stock and it did well and that’s a very different persona, right?

Peter: Right.

Mike: And what you actually find is sometimes one consumer is both personas. They take 80 or 90% of their portfolio, they have someone else manage it so it’s done right and then they keep 10 or 20% as like play money, but the behavior patterns of money in each bucket are really different. So, the kind of play money, self-directed investors trying to pick stocks, what you find is that retail investor interest in that segment is very cyclical, it comes and it goes, it comes and it goes. In 1999, it comes, there are lots of people like I said at the beginning, like when I went into college lots of students were like trying to buy a few stocks on the side. Obviously, markets crashed in 2001, right, then the retail interest really pulled back then you had again kind of a, you know, somewhat of a stable and up market for a few years and then in 2008 or 2009, it crashed again, right. People pulled back and then what have we seen in the last three or four years, continued interest, continued interest saw the whole Robinhood boom and when the market crashed, again, we had a big pull back. 

And so, that kind of retail investor, they’re really subject to kind of the whims of the market and like what’s happening in the markets whereas the long term retirement savings investor, they keep saving, right. You know, I think because our product is positioned more for that market segment than people who want to like day trade stocks, we’ve actually seen very steady growth over the years. You know, we haven’t got the benefit of the ups, but we definitely haven’t seen the downside of the downs, we definitely see steady behavior and we are helping people invest better, you know, we’re helping them get diversified, we’re helping them get into portfolios that are appropriate for them, helping them save on fees and taxes and those are probably good things in up markets and down markets.

Peter: Yeah. I try and instill in my kids, I’ve got teenagers who are starting to have a little bit of money from their jobs they’re doing. I see you’ve got a dollar cost average your way.

Mike: Did you say a  crypto cost average?

Peter: Dollar, dollar cost average (laughs). If you’re going into crypto, you should be doing that as well really, buying a little bit at a time. Anyway, we digress. I want to talk about another really big piece of finance that’s starting to get talked about is this wealth transfer that you’ve baby boomers that are aging and dying and you’ve got millennials that are inheriting. That’s going to be tens of trillions of dollars, I’ve read, of inherited wealth that’s going to come down from the baby boomers. How do you view that at SigFig and I imagine that’s a massive opportunity, right?

Mike: Yeah. That trend is absolutely real, you know, you’ve seen study after study after study citing the scale of the order of magnitude of what’s happening there. I think that’s actually a big reason why all the big firms are taking digital transformation so seriously. I think they know they have these large incumbent legacy wealth management businesses, they’re healthy, they generate a lot of cash flow, they’re not disappearing overnight, but one of the big threats is like if retail behavior changes and if the last generation preferred to work with a human advisor and the next generation prefers to have great mobile experiences that maybe have advisors and maybe don’t, you do need to kind of prepare for the future in advance. 

You can’t wake up in 25 years saying, oh wow, $20 Trillion moved and like now we should get going, right, because all those clients have picked their ways and their providers at that point. And so, you look up and down Wall Street, I don’t know a single kind of large bank that hasn’t increased its focus and, you know, investments into the wealth management and investment industry. You know, every single bank I think sees wealth as a critical part of financial services, they see the steady long-term revenues that can be created. They see that clients have that need that, you know, in a lot of cases is actually underserved because, you know, traditional wealth managers are focused on only the top 5 or 10% of the population and they see an opportunity, like especially the retail banks who already have the customers. 

You know, they’re looking at that customer base saying hey, we’ve got an installed base, it’s been with us for 10, 20, 30 years, they have their bank account with us, they have their credit cards sometimes with us, they don’t always have their investment accounts with us. We can offer a better value prop with better client experience than what they’re seeing out there in the world and I think that’s why all the big banks are kind of leaning into wealth management and making it a bigger part of the business model.

Peter: Right, right, it makes sense. So, you’re working with a lot of these large organizations, maybe can you tell us some of the names that you can publicly share of the companies you’re working with and maybe describe a little bit of the detail about what you’re actually providing.

Mike: Yeah. We work with firms large and small, you know, they tend to fall into two buckets. One is what we think of as retail off banks, banks who are maybe the core offering is like a checking account or some sort of retail offering and the wealth management firms, where their core offering is wealth and investment management, those are two kind of big sectors. Some of the bigger clients we serve, Wells Fargo, UBS, Scotia Bank up in Canada, we also serve a lot of mid-sized firms, Santander Bank, Citizens Bank and then we also work with some small financial institutions as well. So, we’ve kind of run the gamut in those two verticals. 

To your question of like, you know, what do we do for them, it’s just been a fascinating evolution over the last few years. Our brand in the industry is better known for like the investment stuff that we do and we’ve actually expanded quite a bit from there. So, in the early days we really focused on that like what the industry likes to call the robo-advisor opportunity, but what we actually quickly figured out is that by using much modern software that’s actually designed with the client and the advisor experience in mind that technology can be used by traditional financial advisors. There’s a real misconception in the early days of “robo-advice” that, you know, the robo advisors were out to like put the advisors out of business, right, it was a competition, is it man or machine, like which way you gonna go and actually what we find is a lot of the human advisors’ clients want the benefit of human advice and a lot of the advisors want the benefit of better technology. 

And so, you know, what we kind of quickly figured out is like we should be able to adapt our platform for use by advisors who work with clients and so we built kind of a variant of our product called Digital Advisor Pro that really is designed to help make advisors more bionic, you know, like put better technology in their hands so that they can spend more time with clients and less time re-balancing portfolios and managing paper work and, you know, doing all the stuff that you kind of do manually in the world today.

Peter: It’s almost like a robo-advisor type of functionality, but for the actual human advisor?

Mike: Yeah. And you know what, the industry used to instill even to this day, calls these platforms are essentially TAMPS, Turnkey Asset Management Programs and the early TAMPS focused around asset management. You know, literally it’s like the software that balances the portfolio, they didn’t really have tax-loss harvesting in the early days of TAMPS, but since then, you know, there’s tax optimization logic and stuff like that, but what’s really fascinating is, you know, sometimes people ask us, are we a TAMP. And, you know, what people think of as TAMPS are basically this investment management software and what we think is actually quite different about SigFig is when you really ask a consumer, why do you hire a financial advisor to help you, they’re hiring them for more than portfolio management. Your portfolio managers a commodity, if you want just portfolio management, I mean, there’s a lot of places in the world you can go to get portfolio management help. 

People hire advisors for help with financial planning, trust and estates, they hire them for peace of mind, they hire them to have someone to call to ask questions, you know, they hire them for all these different reasons and the TAMP software category doesn’t do any of those other things, you know, all they do is make portfolios. And so, what we found with the early platform that we built was by combining financial planning with investment management, with account opening, with the digital experience on mobile and web, with the advisor collaboration tools that you would, you know, use to facilitate an interaction between a client and an advisor, they’re all these different components of having like a modern wealth management offering. We ended up building this kind of integrated suite that really kind of ties all those pieces together and that leads to a client experience that makes a lot more sense and operations that are a lot more efficient. 

The operations being efficient are actually really important in the long term. Why? One, every cost that bank has to manage a client basically has to get translated to a higher fee structure, right, so the more inefficient the business is, the higher the fee you have to charge your clients. Two, it’s about democratization, right, like if you have a very inefficient business model and you make money on AUM then you’re going to tend to really only be able to serve wealthy clients.

Peter: Right.

Mike: Whereas, if you can get to a lot more efficient operations, you actually can serve a lot more clients in a profitable way and so all of that kind of comes together in this kind of platform we built so that we can lead to better client experience, better advisor experience, much more efficiency for the business. We hope that that leads to better returns for the client, lower fees for the client and maybe even increased profitability from the bank and the advisor. For a few years we kind of expanded what we do in investments and then over the last couple of years, we expanded beyond investments. So, we ended up building a couple of new product lines that are basically aligned around two basic themes. One is how do we broaden the kind of advice that we give to clients so instead of thinking about it as just investment advice, a lot of the banks that we work with, they often want investment services, right. 

They offer lending products, they offer the deposit products, they offer sometimes insurance products and clients don’t think about their finances in the silos of the industry has put these products in, right, they think of that from a perspective of buying a home or saving for retirement or protecting the interest of my family. And, you know, when you do those things you might be using a savings account, you might be using an investment account, you might be using a mortgage, but, you know, what we ended up saying was, how do we give kind of holistic, integrated advice, how do we understand the broader needs that a consumer has and how we build digital experiences that can kind of learn what those needs are and then recommend the right products, the right actions, the right service providers to kind of satisfy those needs.

Peter: Right.

Mike: And then most recently during the pandemic, we built a brand new product called Engage that actually facilitates the virtual collaboration of clients. So, this is a topic we’ve been studying for a long time, you know, the pandemic was kind of a perfect accelerant of this basic concept. When the pandemic hit us and, you know, we’re all disrupted, that is just an interesting moment for creating new things and we basically said well, all these other industries that have seemed to go virtual, whether it’s working with co-workers over Zoom or meeting with your doctor over a Telehealth appointment or maybe even some of the distance learning that students had to interact with during the pandemic. 

There are verticals where like in-person collaboration is clearly superior, like most people would say in-person teaching is better than virtual education, but finance is actually a very, very well suited vertical for virtual collaboration and most banks have not made it easy to collaborate virtually so we kind of ended up building this product, that designed to help enable and facilitate like an immersive interactive experience even if you’re not face-to-face sitting in a branch with a banker.

Peter: A couple of more things I want to get to here and one is you mentioned UBS, you’re working with them and was announced that UBS was going to acquire Wealthfront and then they broke up and that didn’t happen. You obviously know Wealthfront, you know UBS, I’d love to get your perspective on this particular episode that happened this year.

Mike: Yeah. You know that there’s kind of a big, fancy, juicy story behind it. You know, when I think about our sector, I’m a huge fan of other companies using the software to help digitize, you know this is a massive opportunity that’s going to take a lot of difference for more people kind of working on it to kind of unlock the real potential of it. When you think about what’s happened in the industry, you know, that thing I had said earlier about digital becoming more important that’s almost like an obvious statement that, you know, if you walked into any boardroom at any bank, you know, that would be true. 

Every bank in the world that I know of is placing more and more emphasis on the importance of digital and software and all that stuff. So, for a ton of reasons, Wealthfront’s a great company, UBS is a great company, there’s a lot of things that they can do together, why did it fall apart? You know, I don’t really want to speculate, but when you think about the reasons that, you know, a firm would consider an acquisition like that, I think it’s obvious, you know, like digital is becoming such an important part of the future of most businesses. For a lot of banks, the internal focus, talent and culture is not really around software, right, like many banks are really strong at sales and distribution, some banks are strong in marketing and product and, you know, banks spend a lot of money on software, they have a lot of people who work on software, but a lot of the technology that banks operate internally is like infrastructure software. 

So, it’s core systems, trading systems, core banking data, you know, massive data repositories and part of where SigFig has chosen to focus is really around customer experience software, that software that you use to actually offer the offering you do to your clients, the software you use to facilitate collaboration between, you know, an advisor and a client. And that client experience software actually really requires not just trade software acumen, but really amazing design work, product work, all of the like consumer Internet DNA of like building things beautifully and, you know, things that are easy to use. That DNA has not really made its way into enterprise software and so, you know, we just see a huge opportunity to make the experience that a client and a provider have using software just feel much more modern, much more cloud-based and much more dynamic. That’s kind of turned out to be, you know, kind of where our sweet spot has been.

Peter: Right, and you’re really focused on the business-to-business side of this. I’d love to get your perspective on direct-to-consumer, the robo-advice, most of robo-advisors now have a broad suite of products, not just focusing on one piece, but are you bullish about this direct-to-retail companies that focus on wealth management as a core. I mean, I would have expected by now some of these companies would have tremendous scale, but, you know, some of them have decent scale but they’re not even coming close to the Vanguards, Charles Schwabs and Black Rocks of the world, right?

Mike: Yeah. I’d say I’m modestly bullish, I think the winds are blowing in the right direction around democratization, lower fees, better products, more digitization, like all of that, you know, all the reasons that we’ve seen such growth in our business I think absolutely help the kind of B to C players. I think I’m modestly bullish because, you know, part of why we chose B2B is the wealth management industry is an industry that’s very diverse with a lot of players and no one firm has like massive market share. I mean, it’s just too big of a pie to have, you know, one or two or three players kind of eat it all. And so, part of why we chose the B2B path is because we looked at that market, we said, look at how large it is, how big are we likely to get going direct-to-consumer versus how likely are we going to get if we actually build the technology, but then put it in the hands of incumbent players. 

Our assessment was like we would be able to make a lot more progress on our mission of helping people get to a better place by being the provider of technology to other firms. If you couple that observation with the fact that, you know, most banks are not software companies, you know, that’s not their DNA, it’s not their history, it’s not their legacy, they have some talent pool there, but it’s not usually the majority of the talent inside of a bank and so for all those reasons we just felt like there’s like proof of synergy. You know, they bring a customer base, a brand, they bring trust in that brand, they bring assets, we bring, you know, the product, the technology, the design expertise and that ends up being a marriage made in heaven, right, like we each bring assets to that partnership that the other party doesn’t have and that makes both sides better off as a result. 

So, we’re more bullish on the B2B approach because, you know, we think we can kind of reach a lot more people and get to a lot more scale, but I’m not bearish on the D to C approach either, you know, 

I think you’re seeing some nice franchises getting built and one of the beauties of the investment industry is slow and steady wins the race, you know, Vanguard didn’t get to how ever many trillion dollars they have overnight. You know, it was 50 years of annual compounded growth over and over and over and over again that had got them to where they are today. So, I don’t think it’s reasonable to expect that in, you know, a new B to C player in five years is going to become a trillion-dollar platform. I don’t know a single financial institution that got to a trillion dollars that quickly so I think it just takes time, I hope that they’re successful because their success will accelerate our success.

Peter: Okay then, so last question. I mean, as we look to 2023, what’s on tap for SigFig, what’s next?

Mike: Well, I think there’s a couple of basic things. I touched a little bit on this concept of virtual collaboration and one of the interesting things that we have seen is that virtual collaboration is a big use case for that product, but part of what was kind of well received by the industry from what we built is actually this idea that once you’re using software, to facilitate client interaction, the people who run the firm actually can start to influence what the software does. And so, what’s powerful about that is it allows a bank to have a much more systematic way of interacting with their customers and I think of this as like, if you think about the world of in-person collaboration, let’s say you’re a client, you walk into a bank, you sit down and talk to a banker, 99% of that interaction is verbal. You literally sit at the desk and you talk to each other and so there’s not actually a lot of opportunity in the prior era to use software in that interaction. 

When the in-person interaction goes virtual, suddenly a screen is between the client and the provider and that screen is a very powerful communication tool, it’s a very powerful collaboration tool, it’s a very powerful workplace and productivity tool and yet most banks have not been built around interactive collaborative workflow, they have not been built around screen-based collaboration. And so, what happened with Engage, because we built this platform that was focused initially on verbal collaboration, we ended up finding all kinds of interesting ways to unlock the power of the screen. That screen is a good communication tool, you can do financial planning, you can sign documents, you can aggregate your data, you can do all kinds of stuff when the interaction is more than just a verbal conversation. 

And, you know, what we’re finding now is that concept of screen-based collaboration and having like a platform that actually facilitates more effective client interactions that actually can also be used in the analog world and it’s almost coming full circle. So, you know, if you walk into a bank branch in a few years, maybe you’re not just sitting at a desk talking with a banker, maybe you’re actually looking at an iPad together, maybe you have a screen that you’re using to kind of work with the banker. You know, I think that that actually will unlock a much more effective experience for the client and the banker and so that’s kind of one big theme we’re passionate about and putting a lot of R&D dollars into. 

We’re also seeing the spillover of banks wanting to actually expand their advice offerings. So, if you look at a typical bank most of the banks’ sales & marketing is what I would call product selling, you know think about all the direct mail that you get from banks, right, like what are they doing in that direct mail, they are selling product, right. They’re selling you a checking account, they’re selling you a credit card, selling you a mortgage and how do you compete on products, rates and fees essentially, super commoditized. Most of the smart banks that we know and talk to, they’re really trying to adapt their offering to be about more than just selling products. They want to be offering advice, they want to be offering solutions, they want to be more client-led, client-centric and, again, that’s a huge opportunity for software to help, you know, accelerate that transition. 

It’s actually kind of hard for the typical retail banker to serve a client really well. If you’re a retail banker, you’re probably, you know, somewhat early in your career, you probably weren’t like a CFA or a PhD in finance, it’s a professional job, but it’s not the most high-skilled workforce, but they are earnest in wanting to help clients. There are a lot of bankers that I know, you know, they are there to help serve clients, they are frontline service & sales professionals, where does software come into play? If you can use software to help assist a banker give better advice, more personal advice, more compliant advice, help the banker say the right things, not say the wrong things, you’re going to have a banker workforce that’s more effective, right. 

That’s going to be a real opportunity for the world because let me tell you, there’s a huge shortage of financial advice. You know, most people never learn financial advice in school, they never learn financial advice, you know, in some sort of formal setting. Actually, most people learn financial behavior sfrom their parents, some parents have good financial behaviors, some parents don’t have good financial behaviors and so there’s a real gap of where does the world turn to for financial advice. I hope that, you know, software is going to be a big part of that answer we’re going to get to a better place for everybody involved if we can take advantage of how powerful software is to give good advice.

Peter: Indeed. Well, I’ve got a good place to end it, Mike, and thank you so much for coming on the show. It’s exciting what you guys are doing and I think I’d just say there’s a lot more to be done here. Anyway, appreciate you coming on the show.

Mike: Awesome, my pleasure and it was nice chatting with you.

Peter: You know, it’s really interesting I think what Mike just shared there around how bringing a screen between the customer and the banker really provides a huge amount of opportunity that we haven’t even began to explore. We’re two and a half years into this new world where we do a lot of things, you know, through video calls and you don’t need to just do a Zoom call and have the video of the person there. There’s so much more we can use with that screen real estate and I think it’s going to be interesting to see what develops there because there is so much potential.

Anyway on that note, I will sign off. I very much appreciate your listening and I’ll catch you next time. Bye.

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  • Peter Renton

    Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.