ASPIRATION AT A GLANCE
Location: Los Angeles, CA
Team Members: 24
Structure: For-profit; B Corp
• One of 50 “World’s Most Innovative Companies of 2016” according to Fast Company
• One of the “100 Brilliant Companies” of 2015, according to Entrepreneur Magazine
• “Best Checking Account” from the “Best Banks in America 2015–2016” awards by Money Magazine Often, middle-class individuals and young people have trouble finding ways to invest according to their values. Either they do not have enough money to grab the attention of a traditional investment firm that could advise them in sustainability, or their mistrust of financial firms runs so deep that they do not even try. Recognizing these challenges, Aspiration CEO Andrei Cherny set out to create a new, purpose-driven financial firm with the mission of expanding economic opportunity for all.
His model is simple, yet revolutionary for his field. Aspiration provides a sustainable investment fund, mutual fund, and high-yield checking account with low minimums — $500 for the investment and mutual funds and $10 for the checking account — and here’s the fun part: customers only pay Aspiration what they believe is fair. The model not only opens up opportunities for youth and the middle class to invest sustainably, but it is rebuilding trust in the financial industry. We spoke with Cherny about his innovative new business.
Can you tell us about the conceptualization of this company? Where did the inspiration for it come from?
Andrei Cherny: I’ve spent 20 years working on issues of fairness and opportunity in our financial system, whether in the Clinton White House or as a financial fraud prosecutor. In 2012, I was working as an advisor to companies including some of the big banks. What I saw was that you had these gigantic financial institutions whose customers just did not like them. They didn’t like doing business with them. They didn’t think they shared the same values or that these companies were going to have their backs. In talking about this with my friend Joe [Joseph] Sanberg, who became my co-founder at Aspiration, we felt that if you were serious about closing the growing gap of wealth inequality, you had to create a financial firm that people actually liked — liked doing business [with], believed in, and trusted. That’s what we set out to do with Aspiration.
Can you provide us with a high-level overview of your business model?
AC: Aspiration’s business model is what we call “Pay What Is Fair.” We trust our customers to decide what to pay us — even if it is zero. They set their fee when they first sign up and then can change it whenever they want and as often as they want. We feel that if we can’t prove to them that we are doing a good job, then we don’t deserve to be paid.
When we began, people thought we were crazy. But we believed that if we wanted to ask our customers to trust us with their future, we needed to be able to trust them as well. And it has worked out better than we imagined. Over 90 percent of our investment clients choose to pay us, on a voluntary basis. That is extraordinary in this day and age when there is so much anger over financial fees. It shows that we are forging a very different kind of relationship with our Aspiration customers. They see we are on the same side of the table as they are. They know we’re not going to pull a fast one on them or act in a way that is contrary to our values because if we ever did, they could just choose to pay zero.
Even beyond Aspiration or the financial industry, what we’ve shown is that the vast majority of people are honest and honorable. Instead of taking advantage of us, people have shown they are worthy of being trusted and feel they are part of a real movement where they won’t let each other down. It’s a pretty special feeling to know we’re part of that.
Who is your typical customer?
AC: Our customers range from 18 to 93 years old, and from people who don’t have two nickels to rub together to multimillionaires. But the average customers are in their thirties and have started to steadily build up some assets. What unites our customers is two things: first, a sense that the financial industry hasn’t been looking out for ordinary people or treating them fairly; and second, that they are conscious consumers. They see the link between their money and their morals, and they don’t see any reason why they have to choose between them. They drive carpool in a hybrid and recycle bottles and bags. They’re buying fair trade coffee and cage-free eggs, and from companies that have a larger charitable purpose. But they don’t understand why the financial sector does not live up to those same values.
“Today, 89 percent of sustainable investments are in the hands of institutional investors, money managers, and other investment institutions. Everyday investors have been on the outside looking in.”
Why do you think Aspiration is appealing to Millennials?
AC: Millennials are the generation most shaped by the 2008 financial collapse. They saw their parents hurting, or losing a home — or perhaps they had to move back in after college. They’re reared with technology and looking for something different in all aspects of their lives. And they have an expectation of a social conscience from the companies they do business with and the products they buy. And so it is natural that they have little trust for the incumbents in a financial industry that is often antiquated and too often runs on a “greed is good” mentality. In fact, according to a recent poll, 71 percent of Millennials would rather go to the dentist than listen to what a financial firm is saying.
One of our most popular products with Millennials has been the Aspiration Redwood Fund, which brings best-in-class sustainable investing to people at a $500 opening investment. It is not only fossil fuel- and firearm-free, but actually looks for companies whose practices when it comes to the environment and their employees makes them more likely to be profitable over time. This gives Millennials a chance to make a good investment at a low level in a product they can believe in and with a company that shares their values.
What trends have you identified in the investment field? Do you anticipate big changes in the industry moving forward?
AC: It’s clear that sustainable investing is booming. Between 2010 and 2014 alone, total funds in socially conscious investing strategies more than doubled from $3.7 trillion to $6.5 trillion, and they have continued to grow ever since. My former boss Al Gore’s Generation Investment Management, and UBS, a strategic partner of Aspiration, have [both] been doing great work in this area. But so much of this has only been accessible to the very wealthiest of investors. Today, 89 percent of sustainable investments are in the hands of institutional investors, money managers, and other investment institutions. Everyday investors have been on the outside looking in. The challenge now is to democratize access to these sustainable investing strategies. That’s part of what we’re doing at Aspiration.
What gives you hope that your model will be successful?
AC: What gives me hope is seeing that we’re restoring other people’s hope. Almost every day, we get calls or emails from people saying that they had not trusted anyone in a financial firm for a long time, but that we’ve changed that. It lifts us up, but also gives us a huge sense of responsibility. What we’re already seeing is people signing up for Aspiration accounts in huge numbers and choosing to pay us fairly. And most of the people who come to Aspiration have no other investment products. We’re successfully getting people off the financial sidelines and helping them build assets. If we can continue to grow and bring these services to more people, that gives me hope not only for Aspiration but for the challenges we’re facing in America.
CHERNY’S TOP 3 PIECES OF ADVICE FOR MISSION-DRIVEN ENTREPRENEURS
1 Build purpose and impact into the DNA and business model of what you’re doing, instead of making it just something you bolt on top.
2 If people don’t tell you that your approach is crazy, then you’re probably not thinking big enough.
3 Keep moving forward every day, even the days that you feel like the ground is crumbling underneath you. Especially those days.