Acorns Investment App Coming to Australia

Acorns, the popular US based investment app, is coming to Australia.

The app currently has 750,000 Android and iPhone users across the US. According to the creators, that number is growing by 100,000 every month. Since the app launched, it’s helped users US$25 million.

Now Acorns wants to grow their user base to Australia. The creators say the Australian market is only 7-8% of the size of the US market. But Australia has a high rate of smart phone use. According to Google’s ‘Consumer Barometer’ survey, 66% of Aussies have a smart phone, compared to 57% of Americans.

What is Acorns?

Acorns is a smart phone app that, according to its Google Play and App store pages, ‘invests your spare change from everyday transactions into your very own diversified portfolio.’

The app links up with your bank account. Every time you make a purchase, it rounds the figure up to the next dollar. It then takes those extra cents and puts them in your Acorn portfolio. For example, say you buy a takeaway lunch on the go. When you swipe your card to pay the $9.20, the app sees that figure and rounds it up to $10. It then takes that extra $0.80 from your transactional account and puts it in your Acorn account. This money is then invested by Acorn in a selection of portfolios. It’s all done automatically, in the background.

 Why is it different from stockbroking apps?

The unique ‘spare change’ investing model has been described many ways.

George Lucas, managing director of Acorns’ Aussie partner firm, says ‘It’s like putting all your gold coins in a jar’.

The New York Times pointed out that you can use Acorns ‘to create a reasonably well-designed portfolio that allows you to add as little as $5 at a time’.

WIRED called it ‘the Tinder [casual relationship dating app] of investing’. Though that could be a snipe at the simple nature of the app, or just at its young target audience.

Money Under 30 said ‘A few dollars here and there can add up to more than just a small pile of money. With little impact, you have the seeds to grow something that could have a big impact.’ And there you have the reason for the name Acorns. Though if it launches in Australia, maybe it could do with a local re-brand…but Gumnuts doesn’t have quite the same ring to it.

There are no minimum buy-ins, very low fees, and the app is free. So it’s accessible to people who don’t have a couple of grand lying around to get started. The idea is that you put aside a tiny bit at a time, to plant the seed for wealth growth. The old-school investment equivalent would be buying an expensive pre-grown mature tree.

 What do the funds invest in?

The US portfolios were developed with the help of the ‘father of modern portfolio theory’, Dr. Harry Markowitz. Simply put, they’re about diversification of assets. The mix of assets changes between the five different risk level portfolios you can choose from. Every portfolio has large company stocks, small company stocks, emerging market stocks, government bonds, corporate bonds, and real estate stocks. These are represented through carefully chosen ETFs (exchange traded funds).


Acorns asset allocation

Source: acorns.com
[Click to enlarge]

The figure on the left is their (very pretty) asset allocation map. The figure on the right is how each portfolio type is displayed in the app. Users can click on each asset category to find out more about the specific ETF.

The Aussie portfolios will be constructed much the same way. They’ve also been designed with the help of Dr. Markowitz. They’ll use Aussie ETFs, with exposure to local and international markets.

Who is their Australian partner?

Acorns Grow Inc., the US company behind the Acorns investment app, is teaming up with local firm Instreet Investments Ltd. Instreet has been around since 2007. They’re focused on structured products, i.e. pre-packaged investment strategies.

Their managing director is George Lucas (insert your own joke about Star Wars here). He’s a veteran of investment banking with nearly 30 years experience. He’s held management roles with First Chicago, Citibank and a couple of local listed investment trusts.

The two companies will form a new company together, called Acorns Grow Australia. Its chief operating officer will be Brendan Malone. He was previously the CEO of international banking at RBS Asia Pacific.

What are the alternatives?

Australia’s got plenty of investment information apps. Plenty of major finance publications have news apps. Some paid apps repackage ASX data into user-friendly forms.

You’ve also got plenty of stockbroking apps to choose from. CMC Markets, ETRADE, CommSec and others all have their own apps, through which you can view your portfolio info and make trades.

But those all have the same conditions – online trading fees, minimum trades, etc. — as a regular online trading account. We don’t have anything like Acorns in Australia yet.

In the US, there are a number of different free investing apps available. For example, there’s Robinhood. Created by Stanford grads Baiju Bhatt and Vlad Tenev, it’s a stockbroking app that charges nothing for trades. Their mission statement is simple:

We believe the stock market is one of the best available tools for individual wealth creation. But too few have reaped the benefits of this powerful, economic force. And it’s no wonder why.

The markets are a complex system of regulation that may seem daunting to new investors, and with the financial crisis, distrust in Wall Street has never been higher. Traditional brokerages — many of them established in the 1970’s — have been slow to adapt to new technologies. Many still rely on paper-based accounting and the few that have mobile applications, are built off of archaic interfaces.

Disappointed with the current offerings, we set out build a financial company from the ground up. One that puts people first — not profits. One that you can trust, shares your values, and understands the mobile climate.’

The company makes its money through interest from uninvested cash balances and customers who trade on credit. Robinhood is very social, in that it suggests stocks that are popular amongst users. Its clean user interface is already drawing praise from design experts.


Robinhood_nightAndDay

Source: robinhood.com
[Click to enlarge]

One common criticism is that it doesn’t come with market info or tips. But as mentioned above, there are plenty of apps for that kind of content. Like iBillionaire, an app which uses SEC data to show users what billionaires are choosing to invest in.

Robinhood has set up an Aussie website to gauge interest. But unlike Acorns, they haven’t announced any firm plans to launch here.

Where can you get the app?

If you’re keen, or if you want to show the smart phone obsessed millennial in your life, head to the Acorns AU website.

Eva Mellors,
Contributor, Money Morning

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One response to “Acorns Investment App Coming to Australia

  1. This looks like an oz version of FirstStep (getfirststep.com) except Acorns pricing rips off users: How can someone pay a $1 a month if they’re putting in loose-change. It seems so predatory.

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