45 days to LAUNCH Festival — Spotlights on Adam Nash, Wealthfront

7 min readJan 17, 2016

45 days to the LAUNCH Festival (2–4 March 2016, SF), I’ve gone back in time and watched ThisWeekInStartups Ep.441 (from June 2014, Youtube link, Itunes).

Jason’s guest is Adam Nash, CEO of Wealthfront and speaker at the coming LAUNCH Festival. In this interview Adam shows all his passion for leading the design of Wealthfront, going through all the nuisances that top-class Apple-grade (he was at Apple for two years) designers take into account as they shape products that will turn people into loyal fans.

Favorite quote from Adam: “Humans are predictably irrationals: you can design systems that help people think”.

Definately one of my favourite episodes noted so far.

Don’t forget to subscribe to the ThisWeekInStartups podcast: the best content comes out of these guests’ mouths and you won’t read it anywhere else (maybe in my notes).

Wealthfront vs traditional financial advisers

Adam Nash is the CEO of Wealthfront
Before going to Wealthfront he worked also at Apple, Ebay, Linkedin
Wealthfront is a service that allows people to just put their money in and you get a nice balanced portfolio
It has been the largest and fastest growing automated investment service
It was born with the premise that everyone deserves sophisticate financial advice and software makes it possible
They use humans for what they think they are best at: they get the best PHDs, CFAs who come up with robust investing strategies based on low cost, passive investments, index funds and being smart about taxes
But they execute those strategies on software: it’s always on 24/7, always watching your money, reliable, unemotional, allowing to execute every day in a way a financial adviser can’t
Results: they can offer features others can’t and costs and the minimum is low
With many advisers you can’t get an account if you have less than a million dollars
Most advisers charge between 1–1.5% — if this year you made 6%, 6–1.5= 4.5%
Wealthfront minimum to sign up is $5000 and they charge nothing under 10k
over 10k they charge 0.25% most advisors charge between 1–1.5% — if this year you made 6%, 6–1.5= 4.5%
20 trillions in asset managed in the US, it’s a big market
If you are paying 1% fee it sounds like it’s a small number — but over a 25–30 years compounded, it can mean a 25–30% difference
Individual investors in the last 20 years dramatically under-performed the market for 2 reasons:
they pay too much in fees
by paying professional advisers you’d expect that their advise will make you a lot more, yet research has shown that professional wealth managers under-perform the market indexes in any give time period

Millennials and investing

There is shift happening towards investments
Most Wealthfront clients are under 35 — their rapid growth has been fueled by millennials clients
Millennials don’t want to focus on their money, they think they’ll make money in their carriers, not investing
They are looking for a balance working with type of people they like on issues and products they are passionate about
They like the set-and-forget automated solution — don’t want to look at it every day, they like the idea of a system watching it everyday
People are starting to trust software

Wealthfront exponential growth

In the beginning of 2013 when he joined as CEO they had $120 millions under management
From 0 to 1 billion dollars under management (June 2014) in 2.5 years
March 2015, 2 billions
They make 0.25% of what they manage (1–2 billions managed = about 25–50 millions in revenue)
It’s a business about scale
Growth will be exponential: as the younger generations will grow older, they’ll have more and more money to invest
It took them more than a year to get 100 million dollars under management, now they add more 100 millions every month

The real value of Wealthfront

The real value is that customers seem to really love the service
Their customers in their 20–30 are at the beginning of their carriers and if they love it, they’ll keep using it for a long time
“I feel you are the Uber of the financial services in that it’s elegant, simple based on something that was uncomfortable and people didn’t enjoy like talking to a money manager” (Jason)
Mobile apps like Uber are great because they keep it simple: they just do one thing and they do it very well
Wealthfront has the same approach to focus on doing one thing incredibly well
When you sign up for the service you go through a little questionnaire and it sets on a scale of 1 to 10 on a dial how aggressive you want your portfolio to be and then it shows a range of result you can expect based upon what happened in the past, including financial crisis
It’s as transparent as possible

How it was designed

Millennials don’t like hard-selling pitches (“Sign up now and I’ll show you later”)
For that reason, when you go on Wealthfront for free without giving no email you go through the risk questionnaire, assess your financial situation, they give you the ideal portfolio, efts, all the research and you can go to a broker and do it yourself if you like
When designing the app they asked themselves how they could provide their brand promise to the mobile experience
Others would have had shown a list of the transactions, like they have been doing for years, they don’t
They come across as different than other operators in financial services because they are transparent, they keep their promises, people don’t feel like they are out to get them
Every time they roll out a new service or a new feature, the customers feel that not only they have made a great decision signing up but it gets better and better
#1 customers tell them: you guys do exactly what you said you gonna do

Always adding new features

They added a feature for Twitter employees, investors and ex-employees that wanted to sell their stocks at IPO but didn’t know how much they should sell it for, when was the right time
They addressed a stressful problem cause for stock options holders it’s a lot of money and what you get out of it can vary depning on volatility
They solved it with a 3 steps process: 1. tell them how much stock they have (unvested/vested, everything);2. tell how much of it they want to sell upfront; 3. they are asked to set how long they want it to take to go from there to a diversified portfolio
They don’t try to pick the right day, they just sell some of it every day (they charge no commissions so it’s all good)
Another good feature: they know the state you live in so they set aside the right amount for taxes

What boosts growth

every Wealthfront client can refer a friend and see who of your friends signed up (the more friends sign up with their affiliate link, the less money they’ll spend on management fees)
5k fee-free per friend who uses the service
similar to the Dropbox model but instead of free storage it’s a higher threshold for paying fee (unlike Dropbox, you and your referred friend both get the 5k fee-free management lift)
They have no marketing budget: all growth comes from word-of-mouth, offline and online (through referral system)
Americans don’t like to talk about money, that’s why they use intermediers but they talk about money with some people: if they love the product, they’ll talk about it
They’ve seen millennials joining and after some time their parents join as well

The difference between a service that provides value and a service that people really love

Tim Cook said: “Apple believes that consumers like to be surprised” (on not giving away too many info about future products)
We underestimate the emotional response to design: people use Wealthfront because it’s so different from what they expect
He was 2 years at Apple: hired at NEXT right before it was acquired by Apple (and interned at Apple a few months earlier)
NEXT had such brilliant software engeeners that a team of few people could do what other companies team required hundreds of people
They had the toughest interview questions that lasted hours
Fresh out of college, he’d been doing Java for a year and since Java was new, they were all starting from zero and he could learn a lot (97)

Steve Jobs and what he learnt about design at Apple

When he was there, Steve Job said that Apple is not in the business of making products that people want, but in the business of making products that people lust after
The market share of BMW is 1% but no one knows and cares cause when one drives by you either have one or you wish you had one
If they can’t create products that people lust after, they have no reason to exist
Winning the most market share ins’t always the best path to build the most valuable business
He then started to think it wasn’t just about utility as his engineering background primed him
The bias to break down everything to a feature set is strong for engineers (this is faster than that, this does more than that), they feel the urge to quantify
Humans are not that rationals: if all people wanted was utility, food, clothing would be different
There a lot of emotions involved with products, especially with products like Wealtfront where money is involved (hope, empowerment, fear, greediness)
If you really want to win in the market today with consumer products you really have to touch them, delight them, surprise them
At Wealthfront they want to make sure that design shows their transparency so young people can trust it enough to invest their savings there
Humans are predictably irrationals: you can design systems that help people think

Trends and market crashes

In 5–10 years everybody will have an automated service managing their money because it makes so much sense
Their product was born and grown in a bull market: how will they tell their millennial clients that markets go down?
Unlike financial advisors that you may see a few times a year, their customers go to the site or the mobile app very often
Millennials have experienced a couple of crashes followed by bear markets, they expect them and they also expect that markets will go back up again
These investors will be different: young, they have a long time frame, put this on automatic

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