Not everyone is in the habit of investing, and even fewer people are thinking about saving. Very often, people lack confidence and shy away from the smartest habit that you can do for yourself. While not every finance company will take this into consideration, Finhabits is taking an approach to financial assistance that has everyone in mind. The digital investment advisor assists with retirement services in multiple languages because financial decision-making shouldn’t be a burden for anyone. With easy access to portfolio recommendations, the platform teaches you how to make the best decisions for yourself and your family.
AlleyWatch spoke with CEO and founder Carlos Garcia about how Finhabits can benefit more people than ever.
Tell us about the product or service.
Finhabits is a mobile-first digital investment advisor that makes quality investment and retirement services more inclusive for diverse communities. We offer both individual investment accounts, as well as Roth and Traditional IRAs. It’s the first bilingual service — available in English and Spanish — designed to make investing simple and second nature.
Our automated platform combines fiduciary advice with behavioral nudges, making it easy for anyone to establish the habit of investing in their future. Each user receives a diverse and customized portfolio recommendation with high-quality index funds from Vanguard and BlackRock.
How is it different?
Traditional financial services are complex, costly and unapproachable. These financial firms don’t understand consumers the way we do. Finhabits makes investing simple and friendly for minorities because it was designed from the ground up with them in mind, taking into account any cultural barriers.
The platform is designed to teach and reinforce good financial habits through simple, repeatable actions and friendly reminders. By helping users start small and achieve short-term goals, we help them gradually acclimate to investing toward longer-term goals.
What market are you attacking and how big is it?
Across the U.S., Latino households have $2 trillion in financial assets and minorities as a whole make up $4 trillion in financial assets. These are the fastest growing communities in the country so they present a tremendous opportunity.
But this is only the start. We’re already starting to see that the framework we built around habits and simplicity resonates with anyone who has little to no prior investing experience. It’s an ideal platform for first-time savers, so we see a much bigger opportunity to help this generation of Americans get on track toward financial security for their future.
What is the business model?
We charge users a fee of $1 per month for accounts under $2,500 and 0.50% a year for balances over $2,500. The first three months are free and there are never any commissions for buying or selling investments.
What inspired the business?
I’ve worked in financial services for 14 years. After getting my start at Merrill Lynch, I founded Fundspire, an investment analytics platform for fund managers. After it was acquired by eVestment in 2012, I founded Madison Quant Labs, a quantitative hedge fund.
Along the way, I learned a lot about financial products and how the industry operates. It was clear that minorities were being overlooked, and not much has changed since I started.
Finhabits is very personal to me. Communities like the one I grew up in have never had much access to quality financial services, and the result is that many hardworking people arrive at retirement with little to no money saved for their retirement years. This also means that the importance of investing in one’s future isn’t taught at home, so the problem becomes generational.
I spent my career helping the rich get richer, so I wanted to use my knowledge and experience to help those who need it most.
What made you leave a well paying job on Wall Street to startup this company that’s focused on a small but underserved market?
Minority communities are at a disadvantage when it comes to the habit of investing and access to financial services, and that’s one of the reasons why there’s a persistent wealth gap. As I mentioned, it’s an issue that’s close to home for me, and we haven’t made much progress.
It’s a great time to solve the issue because technology is changing everything. It’s bringing the cost down significantly, which means we can operate with higher efficiency and sustain low fee-based accounts. The amount someone has to invest is no longer a limitation.
What are the milestones that you plan to achieve within six months?
We’ve been successful in the select cities where we’ve already launched. Now that we’re rolling out nationally, we want to keep all of that momentum going. For now, the goal is to help as many people get started as possible.
By its nature, investing is a very long-term effort, and building this company is no different. We’re aiming for measurable success in six months but we’re just as excited for the years ahead. That’s when all of our efforts and focus will really pay off.
What is the one piece of startup advice that you never got?
No one ever told me that luck plays a big role in a company’s success. Some companies hit their lucky break in their first year. Others don’t get there until the third or fourth year. Most startups don’t manage to survive those first three or four years, so they end up missing that lucky contract or opportunity before they ever get there.
The lucky break is great, but you can’t bank on hitting it early. Every startup has to be prepared to weather at least three tough years at the beginning.
If you could be put in touch with anyone in the New York community who would it be and why?
I’d love to meet Michael Bloomberg. He’s a successful entrepreneur with a very long-term approach. I admire that he doesn’t give up on his vision, no matter how long it may take.
Why did you launch in New York?
New York is the financial capital of the world, and the finance industry is what brought me here over a decade ago. If you want to be around the big players and the innovative thinkers in the financial services sector, New York is the place to be.
New York also offers a good mix of people. There’s so much diversity of education, income, ethnicity and culture. This city embodies the kind of inclusiveness and diversity that Finhabits is all about.
What’s your favorite restaurant in the city?
My wife and I really like Gohan on 14 Orchard Street. It’s a great little Japanese restaurant with home-style cooking. Definitely worth a visit.
