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SoFi CEO Mike Cagney Wants To Replace Your Bank–And Your Financial Advisor

Today the fintech unicorn introduces wealth management. Next up: credit cards, checking accounts, and more.

SoFi CEO Mike Cagney Wants To Replace Your Bank–And Your Financial Advisor
[Source photo: via Pixabay]

At first, SoFi founder and CEO Mike Cagney just wanted to refinance your student loans. Then, he wanted to offer you a mortgage. Now he wants to help you save for retirement, too.

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“This is an opportunity for us to cement the relationship,” he says.

For months the financial services company, worth over $4 billion, has been quietly testing its wealth management service, which combines roboadvisor-style technology with live advice, delivered via phone or chat service. For existing customers with an active loan, SoFi Wealth is free. As of today, it is also available to new customers, who will pay a management fee of 0.25% on assets over $10,000. (To sign up, they will need to invest $500 or initiate recurring monthly deposits of at least $100.)

Like Betterment or Wealthfront, two of the leading independent roboadvisors, SoFi Wealth features smart portfolios that optimize allocations based on a customer’s risk profile and long-term goals. But SoFi hopes to differentiate itself through its ability to offer broader advice–tied, of course, to the company’s own products.

“We can see a pathway over the next 25 years where transferring from a transaction-based business on the lending side to a true relationship-based business is going to unlock huge potential,” says John Gardner, general manager of SoFi Wealth.

There will be near-term benefits as well. “There’s no loss-leader in here,” Cagney says. “We’re disciplined about running positive contribution margins on everything we do.” The company is on track for another profitable year, after finishing the first quarter with $40 million in adjusted revenue.

Later this year, that set of activities will expand to include credit cards and checking accounts, building on SoFi’s $100 million Zenbanx acquisition. (The company is in the process of applying for an industrial banking charter.) A life insurance pilot is also underway, in partnership with Protective.

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Meanwhile, other online lenders are struggling to branch out from personal loans into adjacent categories. Companies like Lending Club and Prosper, which started as monoline businesses, falsely assumed that they would ultimately be able to lower their cost of acquisition over time, Cagney says. He started with a different premise: “The way you lower your cost of acquisition is cross-sell.” It’s an old-fashioned Wall Street playbook, with a newfangled Silicon Valley interface.

Whether the public markets reward that model remains to be seen. An IPO is at least a year off, according to CNBC. Cagney’s choice to replace president and CFO Nino Fanlo, who announced his departure earlier this month, may hint at those future plans.

About the author

Staff writer Ainsley (O'Connell) Harris covers the business of technology with a focus on financial services and education. Follow her on Twitter at @ainsleyoc.

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