How Does Acorns Make Money?

Acorns is a fintech platform providing services related to Robo-investing and micro-investing. The company makes money primarily through three subscription tiers: Lite – ($1/month), which gives users access to Acorns Invest, Personal ($3/month) that includes Invest plus the Later (retirement) and Spend (personal checking account) suite of products, Family ($5/month) with features from both the Lite and Personal plans with the addition of Early.

Business Model Element	Analysis	Implications	Examples
Value Proposition	Acorns’ value proposition includes: – Automated Investing: Helping users invest their spare change through round-up transactions and automated portfolio management. – Accessibility: Making investing accessible to individuals with small amounts of money. – Financial Education: Providing educational content to improve financial literacy. – Customization: Allowing users to choose their investment portfolios based on their risk tolerance. Acorns appeals to users looking for a simple and automated way to start investing and save for the future.	Lowers the barrier to entry for investing by using spare change. Encourages financial literacy through educational resources. Provides customization options based on users’ risk preferences. Addresses the needs of individuals seeking a hands-off investment solution. Offers a unique value proposition in the fintech and investment space.	– Automated investing through round-up transactions. – Financial education resources. – Investment portfolio customization based on risk tolerance. – Accessibility for users with limited funds.
Customer Segments	Acorns serves the following customer segments: 1. Millennials and Young Adults: Targeting a younger demographic seeking to start investing and save money. 2. Novice Investors: Attracting individuals with limited investment experience. 3. Long-Term Savers: Serving users who want to build long-term wealth and financial security. Acorns focuses on individuals and demographics that may have been traditionally underserved by traditional financial institutions.	Targets a younger audience looking to establish investment habits. Addresses the needs of novice investors seeking guidance. Appeals to users with a long-term savings and wealth-building mindset. Serves customer segments often overlooked by traditional banks.	– Millennials and young adults. – Novice investors with limited experience. – Long-term savers interested in wealth-building.
Distribution Strategy	Acorns’ distribution strategy includes: – Mobile Apps: Offering user-friendly mobile applications for iOS and Android devices, making investing and saving accessible on the go. – Online Marketing: Utilizing online advertising, social media, and content marketing to reach and acquire users. – Strategic Partnerships: Collaborating with financial institutions and brands to expand its user base. – Referral Program: Incentivizing users to refer friends and family to Acorns through rewards. Acorns leverages mobile apps, online marketing, partnerships, and referrals to distribute its services.	Ensures accessibility and convenience through mobile apps. Reaches a broad user base through online advertising and marketing efforts. Expands its reach by partnering with established financial institutions. Encourages user growth through a referral program with incentives. Utilizes a multi-faceted distribution strategy in the fintech sector.	– Mobile apps for iOS and Android devices. – Online marketing campaigns and social media. – Partnerships with financial institutions. – Referral program with rewards for users.
Revenue Streams	Acorns generates revenue through the following channels: 1. Subscription Plans: Offering tiered subscription plans with varying features and benefits. 2. Investment Fees: Charging users a small percentage of assets under management (AUM) as fees. 3. Acorns Earn: Earning referral fees by promoting financial products and services from partner companies. 4. Brand Partnerships: Collaborating with brands and receiving marketing fees for promotions and offers. Acorns diversifies its revenue streams through subscription plans, investment fees, referrals, and brand partnerships.	Generates income from subscription plans with premium features. Earns fees based on assets under management (AUM). Gains referral fees through the Acorns Earn program. Collaborates with brands for marketing fees and promotions. Diversifies revenue sources within the fintech and investment industry.	– Revenue from tiered subscription plans. – Fees based on assets under management (AUM). – Referral fees through Acorns Earn. – Marketing fees from brand partnerships.
Marketing Strategy	Acorns’ marketing strategy involves: – Content Marketing: Creating educational content to promote financial literacy and the benefits of investing. – User Referral Program: Encouraging users to refer friends and family to Acorns with incentives. – Social Media Engagement: Utilizing social media platforms to engage with users and share investment insights. – Online Advertising: Running targeted online ad campaigns to reach potential users. Acorns focuses on education, referrals, social media, and online advertising to market its platform.	Attracts users through financial education and literacy resources. Utilizes referrals to grow its user base organically. Engages with users and shares investment insights via social media. Reaches a wider audience through targeted online advertising campaigns. Implements a comprehensive marketing strategy in the fintech sector.	– Educational content promoting financial literacy. – Referral program incentivizing users to refer others. – Social media engagement and investment insights. – Targeted online advertising campaigns.
Organization Structure	Acorns’ organizational structure includes: – Executive Leadership: Comprising executives responsible for strategic direction and decision-making. – Technology and Development Teams: Managing the development and maintenance of Acorns’ technology platform. – Marketing and User Engagement Teams: Handling marketing campaigns, user engagement, and support. – Partnerships and Integration Teams: Collaborating with financial institutions and brands. Acorns maintains a structured organization to support its platform development, marketing, partnerships, and user engagement.	Led by executive leadership for strategic guidance. Manages technology development and platform maintenance. Handles marketing, user engagement, and support functions. Collaborates with financial institutions and brand partners. Maintains an organized structure aligned with its mission in the fintech industry.	– Executive leadership for strategic direction. – Technology and development teams. – Marketing and user engagement teams. – Partnerships and integration teams.

Table of Contents

Origin story

Acorns is an American financial technology and services company founded in 2012 by Walter and James Cruttenden.

The father and son duo created Acorns to educate others on passive and incremental investing. Once a user has signed up for an account, they can select from a range of pre-built investment portfolios.

The portfolio can then be grown through micro-investing once the user connects a valid debit or credit card.

In recent years, the platform has expanded to offer checking account services and individual retirement account (IRA) products.

The company also strengthened its product offering by appointing behavioral economist Shlomo Benartzi to an Acorns committee tasked with investigating consumer spending.

As of 2020, Acorns had $3 billion in assets under management spread across 8.2 million customers.

How Acorns makes money

First and foremost, Acorns makes money via three subscription tiers:

Lite ($1/month) – which gives users access to Acorns Invest, allowing them to round up their spare change and invest it into an exchange-traded fund.
Personal ($3/month) – including Acorns Invest plus the Later (retirement) and Spend (personal checking account) suite of products.
Family ($5/month) – encompassing features from both the Lite and Personal plans with the addition of Early. This allows parents to create an investment account for their kids and save money on capital gains tax.

Referral fees

When an Acorns member purchases at one of its 350 partners, the company earns a referral fee.

The fee is usually a small percentage of the total purchase amount. Acorns then distribute a portion of that fee to members – either as a direct deposit or re-invested on their behalf.

Management fees

For investment portfolios exceeding $5,000, Acorns charge a flat annual management fee of 0.25%.

Portfolio owners whose balance does not exceed $5,000 will not pay a management fee. However, they will be required to pay for one of the above-listed subscription plans.

Interest on cash

Acorns also make money by lending the money sitting in member accounts to other financial institutions and collecting interest.

Future growth strategies

Many Acorns accounts are only netting the company $12 annually, which is not a lot of revenue.

Recently the company has made a concerted attempt to increase revenue through growth.

The first such action is the establishment of Acorns Later, where the company hopes to secure customers early in their careers and help them build a sizeable nest egg.

Acorns also formed a strategic partnership with PayPal to expand their customer base and get access to bank account services.

Based on recent acquisition activity, some speculate that a B2B offering may also be under development. B2B services are a significant avenue for revenue generation, as evidenced by Acorns competitor Stash.

Value Proposition:

Automated Investing: Acorns automates the investment process, allowing users to invest spare change from debit and credit card transactions into diversified portfolios tailored to their risk preferences.
Financial Education: Acorns provides educational resources and personalized insights to help users make informed financial decisions, empowering them to achieve their long-term financial goals.
Accessibility: With low minimum investment requirements and no account fees for college students, Acorns makes investing accessible to individuals of all income levels, encouraging financial inclusion and literacy.
Portfolio Diversification: Acorns offers diversified investment portfolios constructed by financial experts, reducing risk and maximizing potential returns for users with varying investment objectives.
Savings Tools: In addition to investing, Acorns offers automated savings tools such as round-ups, recurring deposits, and cashback rewards, helping users build emergency funds and achieve short-term savings goals.

Marketing Strategy:

Digital Advertising: Acorns invests in digital advertising campaigns across various online platforms, including social media, search engines, and display networks, to raise brand awareness and attract new users.
Content Marketing: Acorns produces educational content, blog posts, videos, and podcasts on personal finance topics, sharing insights, tips, and success stories to engage and educate its audience.
Influencer Partnerships: Acorns collaborates with influencers, bloggers, and celebrities in the personal finance space to endorse its platform, leveraging their credibility and audience reach to attract new users.
Referral Program: Acorns incentivizes users to refer friends and family through its referral program, offering rewards such as cash bonuses or account credits for successful referrals, driving user acquisition through word-of-mouth marketing.
Partnership Marketing: Acorns forms strategic partnerships with banks, employers, educational institutions, and other organizations to promote its services to their customers, employees, or members, expanding its user base through co-marketing initiatives.

Distribution Channels:

Mobile App: Acorns primarily distributes its financial products and services through its mobile app, available on iOS and Android devices, providing a convenient and accessible platform for users to manage their investments and savings on-the-go.
Website: Acorns also offers its services through its website, allowing users to sign up, learn about its offerings, access account information, and contact customer support online.
Referral Program: Acorns leverages its referral program to encourage existing users to refer friends and family, expanding its customer base through word-of-mouth marketing and incentivized referrals.
Partnership Networks: Acorns partners with banks, employers, educational institutions, and other organizations to distribute its services to their customers, employees, or members, leveraging existing networks and customer bases to drive user acquisition.
Digital Platforms: Acorns utilizes digital platforms such as social media, search engines, and display networks to promote its services, target potential customers, and drive traffic to its mobile app and website.

Key takeaways:

Acorns is an American fintech company with a focus on micro-investing and other services such as retirement planning and investment accounts to fund future tuition expenses.
Acorns charge a management fee for each of its three investment subscription plans. Portfolios with a value exceeding $5000 are also charged a flat fee of 0.25%.
Many Acorns customers with low-value investment portfolios are returning very little revenue to the company. It has sought to remedy this situation with a focus on retirement products and strategic partnerships. There is also the potential that Acorns will enter the lucrative B2B market.

Key Highlights of Acorns Business Model:

Value Proposition:
- Acorns provides automated investing, financial education, accessibility, portfolio diversification, and savings tools, catering to individuals seeking simplified investment solutions and improved financial literacy.
Customer Segments:
- Acorns targets millennials, novice investors, and long-term savers, offering investment opportunities and financial education to demographics traditionally underserved by traditional financial institutions.
Distribution Strategy:
- Acorns leverages mobile apps, online marketing, partnerships, and referrals to distribute its services, ensuring accessibility, broad reach, and organic user growth.
Revenue Streams:
- Acorns generates revenue through subscription plans, investment fees, referral fees, and brand partnerships, diversifying its income sources within the fintech and investment industry.
Marketing Strategy:
- Acorns employs content marketing, user referral programs, social media engagement, and online advertising to attract and engage users, focusing on financial education, user incentives, and strategic partnerships.
Organization Structure:
- Acorns maintains an organized structure with executive leadership, technology and development teams, marketing and user engagement teams, and partnerships and integration teams, aligned with its mission in the fintech industry.
Origin Story:
- Founded by Walter and James Cruttenden in 2012, Acorns aimed to educate users on passive investing and provide accessible investment solutions. Over the years, it expanded its product offerings and user base.
Revenue Generation:
- Acorns earns revenue through subscription plans, referral fees, management fees on investment portfolios exceeding $5,000, and interest on cash. It aims to increase revenue through strategic partnerships and product expansion.
Future Growth Strategies:
- Acorns focuses on retirement products, strategic partnerships, and potential entry into the B2B market to increase revenue and address the needs of its user base, emphasizing long-term financial planning and investment.
Key Takeaways:
- Acorns offers a value proposition centered on simplicity, accessibility, and financial education, targeting underserved demographics with automated investment solutions.
- Through a combination of distribution channels, revenue streams, and marketing strategies, Acorns aims to maintain growth, expand its user base, and increase revenue in the competitive fintech landscape.