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.
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.
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.
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.
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Braintree
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
