How many financial apps do you have on your phone?
If you have more than one financial app that isn’t from a traditional bank, you are officially a Fintech (financial technology) user! These Fintechs are companies that were founded post-2008 crisis by people who were disillusioned with the way the banking industry and decided it was time to revolutionize the way we manage money with technology.
A lot of good has come out of these startups: commission-free trading, transparent fees, and low-cost remittances, to name a few. But do these new financial services companies work for high earning professionals? Do they benefit high earners in the same way as lower-income professionals? We don’t think so, and we wanted to explain why.
The mission of most new Financial companies
Financial technology companies that cater to consumers have mostly been focused on financial inclusion and democratizing finances. They’re providing apps, jargon-free content, and cheaper services to those consumers that are traditionally underbanked or unbanked.
With 16% of the US population deemed to be underbanked and 6% to be completely unbanked, there is a large demand for financial services that include those that are mostly ignored. These companies are advocating for fairer services, transparent products, and tech-savvy solutions. We can see this through the most well-known Fintechs such as Chime, Robinhood, and Wealthfront.
But these new Fintech companies have mostly ignored another segment of the market: high-earning professionals. Why? It could be that they’ve tried and failed or that low-earners are simply more profitable. However, it could also be because products for high earners are simply too complex (e.g. credit cards). Unifimoney is one of the few Fintech companies catering to the high-earning professionals — because the Big Banks have failed them and there are no Fintechs that truly meet their needs. Here are a few reasons why Fintechs don’t work for high-earning professionals.
Why they don’t work for high-earning professionals
They specialize in one service
Fintech products are doing great things. However, the issue is that there are now several hundred Fintech companies, all offering specialized services and apps. Consumers now have an entire financial stack, with some using more than 10 different financial apps (you likely have quite a few). Taken by itself, each app is a big improvement from the traditional bank. But constantly switching between apps means that managing money, in some ways, is now more complex than ever.
High-earning professionals are usually incredibly time-poor and do not have the available hours (or the interest) to sign up to financial apps, test them all and pick the one they like. What they need is a financial app that does it all, combining all the unique improvements Fintechs offer. Not a single Fintech offers all these services in one app — except Unifimoney. 🙋♀️
They don’t address more complex needs
Most of the products and services these Fintechs offer are great for low earners or professionals on a regular income. But hardly any cater to the more complex (and more lucrative) needs of the high earners. From our own analysis, we’ve found about 188 Fintech companies in the US, with 180 of them (95%) focusing exclusively on customers who earn less than $50k per year.
What are the complex needs of high earners? Here are some examples. Most high earners also have a large amount of debt and need strategies and advice on how to pay it off. The more you earn, the more complex your taxes are, so they most definitely need advice on managing taxes. Many high earners will also be maximizing their retirement accounts such as their 401k, IRA, and 529; most current Fintechs such as Robinhood only offer regular brokerage accounts.
Many high earners may also have rental properties, have a spouse in a different tax bracket, and use a lot of credit cards. Yet, the current Fintechs do not offer services that cater to these needs — there are less than a handful of Fintechs that offer credit cards at all.
High earners need Fintech products that are highly focused on automation (to save them time), fiduciary advice (to keep snake-oil salesmen at bay), and prioritize maximizing retirement accounts. This leads us to our next point…
They focus on the stock market
High-earning professionals such as doctors, lawyers, and accountants don’t need to take on as much risk when it comes to investing. Saving 20% of $250k is a lot more money than saving 20% of $50k — which indicates that high earners have a lot more money to add to their investments. This means there isn’t such a great need for rapid growth, and an 8% return isn’t as crucial. It may seem a little counterintuitive at first (you don’t want to make more money?), but it makes sense if our high earner is more risk-averse or prefers using that money for other pursuits. They might wish to give to charity, help fund their children’s education, or to invest in a separate business.
Most Fintechs are focused on democratizing the stock market and making it more accessible to regular investors. But as Jim Dahle, the White Coat Investor says, most doctors would rather leave tens of thousands of dollars in a high-yield savings account than invest in the stock market. But no one offers this type of product with a reasonable interest (especially not banks).
In addition to preferring savings accounts over stock market investing, most high earners need specialist advice for tax and legal advice, whether it’s to set up a trust fund or to pass on their wealth to the next generation. It’s another reason why they may be more focused on maximizing their tax-efficient accounts rather than taking more risk in the stock market.
Restrictions on larger dollar amounts
Many high earners need to make bank transactions that involve large dollar amounts, such as paying off student loans or contributing to tax-efficient accounts. As a high earner, you may be investing $10,000 per month or paying off $20,000 in loans in one payment.
Most Fintechs have limits on how much you can transfer. For example, Chime ACH transfers offer a maximum of $200 per day and up to $1,000 per month. Varo Money also limits the number per transfer to $5,000. These maximum limits simply mean that many Fintech accounts don’t work well for high earners.
Untrustworthy business model
We’ve covered this many times at Unifimoney: many of the current US Fintechs don’t have a sustainable business model. Robinhood says they are “democratizing finance for all”, but in fact are selling their users’ data to high-frequency traders and are not at all transparent about how they make money (and are currently being fined by the SEC). Wealthfront is all about passive investing, but behind the curtains, they are involved in active trading. They currently invest 20% of their users’ money into complex derivatives and charging them higher fees.
Robo-advisors and commission-free trading are products that don’t provide enough revenue, which is why many Fintechs are having to change their business model in order to remain sustainable (and aren’t very transparent about it). This doesn’t work for someone who cares about protecting their data, or who is committing a large sum of money to a financial institution. If you’re investing $10,000 per month and maximizing all your retirement accounts, you want to do it through a financial services company that you can trust.
That’s why at Unifimoney we are building a sustainable bank: we only accept users that deposit $6k per month with a balance of $35k — to make sure active users aren’t subsidizing other accounts, we charge inactive users a fee. This ensures we have enough revenue and we can actually give back a reasonable amount of interest to our customers while treating them like people, and not a product.
Fintech is a force for good: people are waking up to the fact that banks have been taking advantage of us for decades, and it’s time they changed their ways. However, this wave of innovation has left out some key customers, and in many ways has further complicated the financial landscape. As a high-earning professional, your best bet is to use a Fintech that provides an all-in-one account, doesn’t sell your data, and is actually sustainable. If that’s what you’re looking for you, you may be interested in what we have to offer…