Thrive: Your Online Personal Financial Planner
Thrive: Free Online Personal Financial Planning
So you figure it’s time to proverbially grow up and get financially wise. But you don’t know where to start: you didn’t learn much in school or from your parents, the folks at the bank won’t give you the time of day, and you can’t afford a financial planner. What do you do?
Thrive is an online financial planning platform that may be the solution to your immediate needs. As a free service, you’ll receive personalized advice and sound recommendations free from biases. Thrive has been around for the last few years and after receiving accolades from the likes of the Wall Street Journal, and Fast Company, Thrive is paving the way to financially empowering anybody who wants it.
After catching up with a few team members at Thrive, I gained a new insight into the services they provide, as well as the fun approach that the entire Thrive team embraces when doing the dirty work of helping people with their finances.
“I started working on Thrive after a few years of my friends asking me for advice on what they should do with their credit card debt, 401ks, students loans, or how to budget better. After a couple of years of this, I realized that our generation is overlooked by banks and traditional companies and what we need is a Charles Schwab for people in their twenties and thirties,” says Avi Karnani, Co-Founder. “Now, three years later, we've been acquired by LendingTree while building on our promise to provide financial advice to anyone who needs it, over the web, for free.”
What exactly does Thrive do, you ask? Thrive helps you manage your money. By entering in your bank accounts, investments, and credit card details, Thrive will help you budget, keep your spending on track, and make sound investment decisions.
But banks around the world are not on-board the Thrive-train quite yet: “It is harder to get in contact with banks outside the US to get them into the system. But we've done our best, we have some of the top Canadian banks in there, and we work every day to get more banks,” says Matt Wallaert, Lead Scientist and social psychologist (a great skill to have when working with behavioral patterns around money).
So although Thrive can be used by anybody around the world, they are currently best set up to help US and Canadian residents.
Among these people, Thrive aims to be a viable solution to people in their twenties and thirties. However, Avi says “we're seeing an increase in users in their forties and fifties. When we ask them why they signed up for Thrive, they tell us that since the economy has battered their retirement savings, they need something to help them with budgeting and rebuilding better financial lives.”
This of course, begs the question: Who is Thrive’s ideal client, aside from age?
Avi: “If you're worrying about your third vacation home or how you'll afford that second luxury SUV, you're probably not the ideal Thrive client. We've built the our company to help average Americans make the right financial decisions, as opposed to wealthy folks that all the other companies compete for.”
Where I become confused (and skeptical) in the process is when it comes to making money. As a free service, how is Thrive financially sustainable?
Matt had something to say to me about it: “Basically, we get money from banks so that it is free for users. Among our myriad of free services, one of the things Thrive does for users is help them find the best bank accounts for them. And when people take that recommendation, and go and open that account, the bank will sometimes pay us a small "account generation" fee. It isn't much, but when you add it up, it is enough to keep our doors open and our service free.
“It is important to note, however, that we recommend the best bank account regardless of whether we make any money for doing it. The algorithm that determines the best account for you literally can't talk to the money making part of Thrive; they are completely separate programs. And we actually maintain this distinction at our company as well.”
I tend to cringe at automated advice-generating programs, especially as a former Certified Financial Planner myself. But between the accessible personal support team and the advanced calculations, Thrive is bridging the gap.
When I asked why I have to enter my personal financial information, Matt said “By giving us access to what you do financially, you enable our algorithms to use some logic to determine appropriate advice, which is actually very similar to what a friend who knows a lot about both you and money in general would do. We can see you're overspending, so we can tell you to slow down. We can see that your accounts aren't set up right, so we can tell you to fix them. You can tell us "I dream of owning a home" and we can say "OK, here's how you go about doing that.” So we're basically your smart, has-the-finance-mojo friend, except online, free, and you don't have to buy us a birthday present (not that I'd reject it: I'm a fan of good cream soda, hint hint.)”
In regards to how Thrive’s recommendations are generated, Avi shared their secrets: “Some recommendations are made on the basis of pure math, for example, a credit card with lower interest rate is better than one with a higher interest rate, and we can compute the fees you'll pay versus your total debt to factor those in as well. Other recommendations are informed by the opinions and best practices of experts, users, and our polling of financial advisers. For example, that you should have at least 30 days worth of emergency spending socked away in a savings account, but not before you pay off your credit card debt. In terms of investments, our financial advisory engine will focus on the lowest cost index funds rather than picking stocks…Too many first time investors make expensive mistakes picking stocks instead of index investing and even more potential first time investors are afraid to get started because of how hard all of this sounds.”
When I pressed the security issue, the reply I received was: “Thrive doesn't ask for your social security number, we don't know your bank account numbers, and we can't move your money around…in a worst-case scenario, you may leak some shopping information you aren't ready for people to know.”
If you aren’t prepared to enter some financial information into the program though, you won’t get much of a chance to sample the fare, shy of viewing the features you could enjoy if you used the program to its full capacity. “At some root level, if you don't trust us enough to tell us what you do with your money, why on earth would you trust our advice?” says Matt.
Being a platform specifically for people in their 20s and 30s but with older people now flocking to the service, I wonder what Thrive’s limitations are. When should a Thrive client get a personal financial planner?
Avi said: “A good analogy to answer your question would be to compare financial planners to travel agents. Sometimes you need to go to South Africa and maybe you want someone who can guide you that. But, most times you need a plane ticket to LA and rental car waiting for you and for that you use the web.”
Surprisingly enough, Thrive actually works hand-in-hand with financial planners, who enjoy the user-friendly interface that clients can continue to use when the planner has gone home.
And although insurance recommendations are not part of Thrive, Avi says “we know from listening to users that insurance decisions are among the hardest decisions to make. We're working on it!”
With a dedication towards growth and a constantly evolving financial planning engine, Thrive just may be a financial planning solution for a self-starter who is motivated to improve their finances but not yet ready to work with a full-on personal financial planner. In this world where it seems that the Internet can do everything except walk the dog (give it time), it seems logical that financial planning programs would wend their way to the Web. Thank goodness that the likes of the folks at Thrive are at the cyber-financial-planning helm.
Note: The author has no vested or affiliate interest in Thrive.