Earlier this month, we learned that Snapchat is reportedly working on a new feature for its app. This has nothing to do with special filters, but everything to do with money. That’s right, Snapchat is rumored to be working on a robo-advisor service to help advise users on how to invest their money. The app also plans to provide users with access to exchange-traded funds (ETFs), an easy and cheap way to find and access investment opportunities whether they are stocks (like Apple’s stock) or commodities (think, gold).
If you have recently come into some money by nabbing your first job, winning the lottery, or doing something in between, here’s what you should know:
Robo-Advisors Explained …
When it comes to robo-advisors, think more algorithms and less human interaction. In other words, robo-advisors are simply computer programs that use algorithms to propose automated investment recommendations suitable for you.
Who Are the Major Players?
According to Deloitte, automated investment advisers like Betterment and Wealthfront along with about nine other firms make up the growing robo-advisor industry. Though a nascent industry, Deloitte anticipates that the robo-advisor industry could grow to US $5 – US $7 trillion in the next decade. The industry’s growth will likely be attributable to new players wanting to get in on the robo-advisor action. The entities reportedly looking to enter the market could range from established wealth management firms like Vanguard and Charles Schwab to peer-to-peer and web-based services like Venmo, Snapchat, Inuit’s Mint, Twitter, etc.
What’s Your Angle, Snapchat?
With a 100 million monthly users, Snapchat is actively searching for creative ways to generate revenue. Increasing advertising efforts and its less than successful attempt to offer sponsored lenses via its Lens Stores are just a couple of ways the messaging app has tried to cash in on its growing audience. But, that was the past. Moving forward, it is possible that Snapchat is banking on its robust Millennial user base (about 70% of its users are between the ages of 18 and 34) to profit off of a potential robo-advisor service.
While Michael Kitces (partner and research director at Pinnacle Advisory Group) gives kudos to the Snapchat for its audience, Kitces is skeptical about social platforms entering into the “robo” space. Kitces explains that even the big guys in this space only bring in a few million dollars a year in revenue. He even questions what social media platforms see in a market where current players are folding and exiting the business.
Well, social media company Facebook may just have uncovered the answer. The company’s latest study of its Millennial users found that young people are increasingly trusting robo-advisors and turning to them for guidance on investments.
Bringing It All Together …
Snapchat’s angle seems pretty simple: Take a majority of your users who are financially prudent Millennials and want to know how to invest their money. Add their increased interest in using robo-advisors. That comes out to Snapchat potentially seeing a lot of green.