For now we want to learn as much as we can about how people get value from a tool like this and then try to align the revenue model with the value. While we'd like to make some money now, our costs are very low so we can continue to give away the planning for free.
Google's model might work for us: they give away a lot of resources for free and help a lot of people, and they charge certain segments of their audience that can afford to pay. So while people are accustomed to paying advisors for a plan, we think it's better for our audience and a competitive advantage to be free.
There's other ways that people are accustomed to paying advisors now that could work. For example commissions on insurance sales. The price of insurance is fixed by regulations in the U.S., so you pay the same price regardless of where you buy it; might as well buy from us and get a free financial plan too :-)
Another company tried charging for plans, but that didn't seem to work, they've since changed their model. We think it'll be better for our customers and for us if the financial services companies pay for this somehow.
Interesting. I thought that insurance regulations varied from state to state in the US and that each state requires their own license for sales...anyway, I wonder whether monetization via sales of insurance create a tension between neutral financial advice and the business strategy of the platform.
Hi Brudgers,
I'm a co-founder of Nickel. Regarding disclosure: we will fully disclose to Users how the company works, how we are compensated, and provide full fee transparency and any potential conflicts of interest (like advice vs. the sale of products). Most planners and advisors also manage investments and/or sell insurance products: it's a matter of full disclosure. Customers will be receive a comprehensive financial plan (that can be saved and updated) for free. We believe that's valuable, but what's infinitely more valuable is implementing that plan, and that's where we'll deliver, because we plan to make it easy for Customers to do so. For example: telling a couple with two kids, a mortgage, and only one working spouse that they need life insurance is valuable, but making that insurance one click away is even better.
Hi Brudgers - Thank you for the feedback. We are evaluating a number of alternative revenue options. (Most come with plenty of regulations and oversight requirements - the nature of the beast in financial advice/insurance.) I have favored the insurance revenue model (at least in the beginning) because we can be up and running (i.e., open for business) in one or two months, and fund growth strictly off of revenue. But you raise a valuable point. As Vic mentioned, we're hoping to mine the feedback of the financial plan users to determine appetites for buying, etc. The price compression and commoditization in the crowded investment management ("robo") space (i.e., <20 basis points annually on assets) tends to make that approach less attractive in the beginning.
That's true, states do regulate insurance including licenses for sales. And there's some Federal regulation too.
The tension between commissions and neutral financial advice is an important issue. Sometimes advisors disclose their compensation but not always. In our case we could not only disclose that but also reveal the logic and math behind the recommendation. The rules aren't a secret; anyone can look them up in a book. The value we add is not having to look them up, and then reconciling all the different rules into an algorithm that takes all the variables into account.
Comments
Curious regarding Nickel's roadmap to monetization.
For now we want to learn as much as we can about how people get value from a tool like this and then try to align the revenue model with the value. While we'd like to make some money now, our costs are very low so we can continue to give away the planning for free.
Google's model might work for us: they give away a lot of resources for free and help a lot of people, and they charge certain segments of their audience that can afford to pay. So while people are accustomed to paying advisors for a plan, we think it's better for our audience and a competitive advantage to be free.
There's other ways that people are accustomed to paying advisors now that could work. For example commissions on insurance sales. The price of insurance is fixed by regulations in the U.S., so you pay the same price regardless of where you buy it; might as well buy from us and get a free financial plan too :-)
Another company tried charging for plans, but that didn't seem to work, they've since changed their model. We think it'll be better for our customers and for us if the financial services companies pay for this somehow.
Interesting. I thought that insurance regulations varied from state to state in the US and that each state requires their own license for sales...anyway, I wonder whether monetization via sales of insurance create a tension between neutral financial advice and the business strategy of the platform.
Hi Brudgers, I'm a co-founder of Nickel. Regarding disclosure: we will fully disclose to Users how the company works, how we are compensated, and provide full fee transparency and any potential conflicts of interest (like advice vs. the sale of products). Most planners and advisors also manage investments and/or sell insurance products: it's a matter of full disclosure. Customers will be receive a comprehensive financial plan (that can be saved and updated) for free. We believe that's valuable, but what's infinitely more valuable is implementing that plan, and that's where we'll deliver, because we plan to make it easy for Customers to do so. For example: telling a couple with two kids, a mortgage, and only one working spouse that they need life insurance is valuable, but making that insurance one click away is even better.
Hi Brudgers - Thank you for the feedback. We are evaluating a number of alternative revenue options. (Most come with plenty of regulations and oversight requirements - the nature of the beast in financial advice/insurance.) I have favored the insurance revenue model (at least in the beginning) because we can be up and running (i.e., open for business) in one or two months, and fund growth strictly off of revenue. But you raise a valuable point. As Vic mentioned, we're hoping to mine the feedback of the financial plan users to determine appetites for buying, etc. The price compression and commoditization in the crowded investment management ("robo") space (i.e., <20 basis points annually on assets) tends to make that approach less attractive in the beginning.
Beside insurance sales is their another monetization strategy with fewer regulatory hurdles and a less commoditized market?
That's true, states do regulate insurance including licenses for sales. And there's some Federal regulation too.
The tension between commissions and neutral financial advice is an important issue. Sometimes advisors disclose their compensation but not always. In our case we could not only disclose that but also reveal the logic and math behind the recommendation. The rules aren't a secret; anyone can look them up in a book. The value we add is not having to look them up, and then reconciling all the different rules into an algorithm that takes all the variables into account.