By Amy Young

 Upside Consulting Group


Robo advice has made a lot of things easier: it digitized onboarding, simplified risk profiling and automated portfolio construction and rebalancing.

However, it has failed to address one critical thing; most of the consumers who are likely to embrace a simple digital solution have little or no savings to invest.

As a result, they simply don’t think of investing as something that’s for people like them, which makes them very expensive to acquire.

In contrast, a microinvesting tool that draws people to investing by helping them save is a very different proposition.

The wealth management industry has an opportunity to cost effectively serve millions of new consumers by using tools that facilitate saving as a springboard into investing.

‘most of the consumers who are likely to embrace a simple digital solution have little or no savings to invest’

Think about how your parents taught you to ride a two-wheeled bike. They started out holding the seat, and when you got to the end of the block you realized they’d let go and you were doing it all on your own. The knowledge that you could do it instilled the motivation and confidence to keep trying.

This is exactly what microinvesting does. It shows consumers that they can indeed save, and then simplifies the investing journey by automatically investing those savings in a diversified portfolio.

The impact of these tools was modest when all they could do was round up coffee purchases.

However, recent enhancements show the potential these tools have to help users save much larger amounts of money:


  • doubling or tripling round-ups (30% of Acorns customers are doing this)
  • prompting people to save additional amounts at daily, weekly or monthly intervals (17% of Acorns users who viewed this feature signed up)
  • analyzing the user’s income and spending patterns and proactively transferring money to savings (the average Digit saves up to $170/month with this approach).


Critics of using behavioral nudges to drive retirement saving all point to the fact that while they help people save a bit of money, they don’t go far enough to prepare people for the full cost of retirement. What these critics overlook is the power of momentum. Once consumers see that they can save a little with no effort, they’re willing to make a bit of effort to save more.

‘small behaviour changes today have big payoffs in the long run’

Microinvesting tools are now offering personalized guidance to keep users progressing on their investing journey, with continual reinforcement that small behaviour changes today have big payoffs in the long run.

The ability of microinvesting to help consumers save progressively larger sums, will transform the wealth management industry. Once a firm has the infrastructure to analyze user transactions and deliver the relevant saving nudges, it effectively reduces the marginal cost of acquiring a dollar of assets to near zero – for firms that already have customer relationships.

Banks could dramatically improve the financial well-being of their customers – and grow investable assets – by embedding these features as the default configuration of every chequing and credit card account. Hopefully the recent partnership between PayPal and Acorns will encourage them to embrace this important opportunity.


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