If one of your New Year’s resolutions is getting your financial house in order, selecting a personal finance app is a great place to start. As Marc Andreessen famously quipped, “Software is eating the world,” so there is no shortage of apps available. But who has time to try them all?
For answers, I turned to someone who has tried them all, local financial planner J.R. Robinson, founder of Financial Planning Hawaii and Fee-Only Planning Hawaii. J.R. is also a co-founder of retirement software maker Nest Egg Guru and an alum of the respected local tech accelerator Blue Startups.
Question: So, J.R., where do you begin to choose the right personal finance app?
Answer: First, people should know that most of the popular personal finance apps are, first and foremost, account aggregation software. As soon as you log in, you are invited to link all your accounts so that you (and the software provider) can see all the details of your financial life in one place. Banks, investment accounts, 401(k)s, IRAs/Roth IRAs, credit cards, mortgages, auto loans and student loans can usually all be connected.
Because adding all this data can be a time-consuming process, consumers should be deliberate in selecting an app.
Q: What criteria should they consider when deciding which app to pick?
A: There are three broad categories of personal finance apps. There are those that focus on debt management and credit monitoring, those that excel at spend- tracking/budgeting and those that focus saving and investing. Deciding which of these is most important would be a good starting point.
Q: Can you give examples of specific apps in each group?
A: Wallet Hub and Credit Karma are the largest players in the credit monitoring space. Simplifi, Monarch and YNAB are examples of popular budgeting apps. Acorns and Betterment are examples of investment-centric apps. There is also Rocket Money, which blurs the line between debt management and budgeting, and SoFi, which is remarkably similar to Simplifi but also has portfolio management and financial planning services.
Q: What about cost?
A: The apps I just mentioned fall into two categories: subscription-based and “free.” Simplifi, Monarch, YNAB, Acorns and Rocket Money charge modest subscription fees of $3-$15 a month. Betterment charges an asset-based fee for portfolio management.
Consumers should also understand that the free apps are not really free. The price consumers pay for signing up with Wallethub, Credit Karma and SoFi is that they are barraged by offers for loans, credit cards, insurance policies, etc.
I once had a representative from one of these companies take umbrage at the suggestion that his firm sells the data it gathers from account aggregation to advertisers. He assured me that they would not ever let the foxes into the henhouse by sharing private user data with third-party vendors. Instead, he explained that vendors pay his company a fee to place ads for their products with their users based on user data. To which, I replied, “So, your company IS the fox!”
Q: Do you have a favorite among these choices?
A: Although its functionality beyond budgeting is rather limited, I think Simplifi offers a good user experience at a low cost.
However, in my opinion, SoFi stands alone in the personal finance app space. Its platform offerings include well-designed budgeting tools, access to high-interest savings accounts, portfolio management, Right Capital’s Monte Carlo simulation software, access to free estate planning document drafting services and even the ability to speak with a financial planner for free. The downside of this robustness is that SoFi would really, really, really like to help you get a loan or a mortgage or a credit card, or insurance or an investment account. … Let’s just say they are proactive in their outreach and leave it at that.
Q: To wrap things up, do you have any recommendations for DIY consumers who just want great, low-cost investment apps?
A: In my opinion, the best/lowest-cost portfolio management platforms still reside at Vanguard, Fidelity and Schwab. For all the fuss that apps like Betterment and Robinhood made about “democratizing” investing, I believe the reason why these companies have struggled to gain meaningful market share is that the investment industry has always been in a state of disruption. The companies that have survived are the lowest-cost providers with the broadest range of offerings because they have successfully scaled.
Rob Kay, a Honolulu-based writer, covers technology, health and sustainability. He is the creator of fijiguide.com and can be reached at Robertfredkay@gmail.com.
