The Wall Street Journal
SCOTT SAUNDERS, CEO of the online lending company Payoff, did not set out to build a personalized financial coaching app for women. In 2014, he began assembling a team that eventually included a cognitive neuroscientist, a marketer, an advertising executive and the data scientist behind eHarmony's match algorithm. The goal: to build an app that used psychological testing to match users of both genders with artificially intelligent financial coaches. By focusing on the intersection of money and psychology, Saunders hoped to minimize financial stress and maximize the pleasure users get from spending and saving.
The app, named Joy, launched earlier this month. Joy is free, although users are occasionally prompted to consider loans from parent company Payoff. The app's AI-enhanced coaches ultimately took the form of animated, advice-dispensing robots. According to Joy's creators, focus-group participants preferred robots to human-looking coaches because the robots seemed less judgmental. Early testing yielded another important discovery: Women liked Joy more than men, so much so that Joy's all-male team pivoted and redesigned their product. They brought in Alison Brod, a PR firm that specializes in beauty and fashion, to help create Joy's look and feel, including its bright color scheme and balloon logo. Men are more than welcome to use Joy, Saunders says, but the app is unmistakably marketed to women, who remain an underserved market in financial services.
Although they have more earning power than ever before and are more likely to control their own finances, women are still less likely than men to use financial services. According to a 2016 survey from Accenture, 44% of women say they have talked to a financial adviser more than once in the past year, versus 58% of men, and just 61% of female investors say they have "a good understanding of their investments," compared with 75% of men. The problem, according to Alexandra Taussig, a senior vice president at Fidelity, is that the language of financial services is male-oriented. Saunders goes a step further: "The psychology of the existing financial system is that it's incredibly male-oriented," he says. "It's transactional, power-focused, ruthlessly competitive and based on literal conversation." According to Taussig, women tend to think about their financial lives in terms of life milestones, such as marriage, divorce and taking care of children and parents. "Men look at it more as a competition. 'How am I doing? What's my performance? Am I beating the index?' "
Kendra Thompson, a managing director of global wealth management at Accenture, says women are focused on long-term outcomes. "They're much more interested in the big picture and how they can advance themselves in the big picture," Thompson says. "Most of what we provide as an industry hasn't really focused on that." Which is not to say that no one in the industry has tried.
LearnVest was one of the first financial advisers to target women. Founded in 2009 by Alexa von Tobel after she dropped out of Harvard Business School, the company began as a newsletter and financial-education website for women and later added budgeting tools and financial planners. Northwestern Mutual acquired LearnVest for a reported $250 million in 2015, when the site had two million free users and 10,000 paying clients. By then, the company had adopted a gender-neutral approach and the tagline: "We believe financial planning (actually) is for everyone." Today, von Tobel says, most LearnVest users are married couples in their 30s.
In 2016, former Citigroup CFO Sallie Krawcheck launched Ellevest, a digital investment platform that determines women's investment portfolios by asking them about their goals rather than their tolerance for risk. The Ellevest model also accounts for financial challenges unique to women: longer lifespans, the pay gap and the higher likelihood of career breaks. And the platform avoids cliché investing jargon and metaphors such as "beating the market" or "picking a winner."
"It isn't that women want different financial services," says Amanda Steinberg, founder of the female-focused savings and investment platform WorthFM. "It's that they want the advice delivered differently."
Joy is betting that its personalized delivery—determined by a user's psychological profile and financial data—will set it apart from the competition. The app asks first-time users to take a five-question quiz designed to identify the personality traits known in modern psychology as "the big five": openness, conscientiousness, extroversion, agreeableness and neuroticism. Do you consider yourself tidy and prepared, the quiz asks, or disorganized and carefree? Creative or conventional? Dramatic or calm? Based on their answers, users are assigned one of 10 "financial personalities" identified by Saunders and his team. Joy's robot coaches combine those results with bank and credit account information to tailor their tone and feedback. The coaching becomes more individualized as Joy's robots gather data on income, spending and consumer satisfaction. Users are asked to rate every purchase they make according to how happy or sad it made them, allowing the robots to track patterns and make recommendations.
"Behavioral economics are really a blunt instrument," Saunders says. "The nudges and little hacks, they do work, but they work better if you treat people differently based on who they are and what really is important to them."
Some experts aren't convinced that psychological testing is the key to effective financial coaching. According to Meir Statman, the Glenn Klimek professor of finance at Santa Clara University, studies have shown some correlation between "the big five" and financial behavior; people who rate high in conscientiousness are also likely to have high lifetime earnings. But he's unconvinced that the traits on which Joy is based are strong predictors.
"I'm not suggesting it's the equivalent of a horoscope," Statman says. "I'm just not sure if it classifies people correctly." And an effective robot adviser, Statman points out, would need to be intelligent enough to account for variables such as major life events and shifts in behavior that occur over time. Joy's coaches periodically ask users about their mood and stress level, which, Statman says, may fill in some of those gaps. But whether Joy's animated robots are up to the task remains to be seen. "I think artificial intelligence still has to make strides," Statman says. "Guiding people is really a complicated process."
This article was licensed through Dow Jones Direct.
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