Ep. 178: Will Peng - Achieve Greater Financial Stability

Contact Will: https://www.linkedin.com/in/williampeng/

Full Episode Transcript:
Neha: (00:05)
Welcome back for another episode of Count Me In. I'm your host Neha Lagoo Ratnakar. And this is IMA's podcast talking about all things that affect the accounting and finance world. Our featured guest for today is the CEO and co-founder at Northstar, Will Peng. Will co-founded Northstar, a financial wellness and benefits platform because of his inspiration by the positive change FinTech can have on people's lives. He set out to solve the inequality of our financial guidance and shares his insights with us as he discusses the inclusive and equitable support employees can receive from FinTech related apps and products. To hear more about how FinTech can improve financial stability, keep listening as we head over to the conversation now.

Mitch: (01:02)
So Will, I know your history, right? That kind of led you into this FinTech space and a lot of what you do is about financial guidance. So what I would like to first start off our conversation with is asking you how will emerging FinTech really help solve some of these financial problems that a lot of individuals are facing today?

Will: (01:23)
Yeah, this, this is a really interesting question because of my background. I started my career as a product designer. So thinking about the ways that behavioral psychology influences or limits people from making change with their finances, but also my time as a venture capitalist, investing in startups, a lot of FinTech startups seeing the new technology that enables us to solve a lot of these classic problems I've been around for, for a long time. And first and foremost, I think what's most exciting that technology can actually influence personal finances is the idea of financial accessibility. So who has access to financial advisors, financial best practices and for the longest time, financial advice has been mostly limited to people who already have money, people who are wealthy already. And if you look at this from first principles, the underlying reason is that the ways in which we deliver financial advice, and this is pretty broad definition, right?

Will: (02:29)
Financial advice can be financial planning. It can be tax advice. It could be investment advice. The ways that we have delivered this advice have primarily been a hundred percent human driven. And when advice is human driven, you're limited kind of by the number of hours in the day, you can do the math pretty simply you have maybe a 40 hour work week. And if you're a financial planner, you have 60 to 90 minute sessions, and pretty quickly you realize that you need to charge a certain floor for your hourly rate. If you're a fee only financial advisor, and then you also see new business models around non fee only advisors who take commissions who referral fees and asset management fees. And that's a set for topic that we can talk about.

Will: (03:24)
But I'm generally a proponent of fee only models because it most closely aligns the advisor with the client. But so, so if you think about financial accessibility from that perspective it's really exciting to think about the ways that technology can more scalably deliver advice both in the creation of the plans, as well as the delivery of the plans. And once you do that, you actually lower the floor of what you need to charge in order to stay in business. And so you kind of see this in, for example, the robo advisor world low cost index funds have been around for a while. But the emergence of robo advisors has been a really interesting development because now anybody can connect, get access to low cost index funds with a great user experience and, and invest with, with low minimums and this all came about because of technology. And so that market is relatively mature now I dunno if you saw recently that UBS acquired wealth front so really interesting thing about not only that specific vertical, but across all different verticals, what are the ways in which technology is making personal finances more accessible?

Mitch: (04:43)
Yeah, it's really interesting because, you know, as we talk about making things more accessible and, you know, you mentioned a lot of the opportunities presented by technology for private finance and, you know, obviously many of our listeners, more the corporate finance, but still technology enabling a little bit more foresight and, and, you know, more data available, another theme in line with technology and kind of the profession. And also what you're doing here is making some of these resources essentially more inclusive and equitable, right? So you talked a little bit about kind of lowering that floor, but far as employees, you know, specifically in the workforce, how is this you know, equitable and inclusive relate to technology?

Will: (05:31)
Yeah. So well, this is I'm glad you asked this question because this is a big part of what we do here at NorthStar. And we have this saying that financial wellness starts at work, and it's this fundamental idea that especially in the US, so much of our not only financial lives, but also our whole lives center around work. And what I mean by that is that work is the primary source of wealth creation for the majority of people. You get your salary, your retirement accounts, but you also get your health insurance plans through work. This whole idea of employer sponsored plans and a whole set of perks. If you work at a tech company, for example, you get equity compensation, and that's oftentimes really difficult to understand. So there's an education gap not only for equity, but just for personal finances in general.

Will: (06:18)
And if you look at it from a macro perspective, we've really shifted away from defined benefit pension plans where my father still has a pension plan and so hopefully he can retire soon and he'll get a kind of predefined payout, but we you've moved into a world of defined contribution plans like 401k plans and HSAs and FSAs and the variety of things that you'd get from your employer have increased. Whereas your total compensation package was relatively simple in the past. Now it's really complicated. And our education system around finances and the support systems through to help people make the best decisions, best financial decisions have not caught up. And it's an unreasonable expectation that employees individuals know how to choose the right retirement plan or figure out how much you should put into your retirement plan each month, or how to use an HSA or how what's the best health insurance plan for me.

Will: (07:27)
I think the what's been really interesting to see the rhetoric around policy has been around the idea of choice where if you remember from the healthcare reform debates there is this idea of choice and it's true that the HSAs are incredibly powerful. They have what's called triple tax savings that most people don't know about. But it requires back to the point I made earlier about behavioral psychology, because it is so complex. Most people don't utilize them. And so even though it's a powerful option, most people don't use it, which means that the choice is a double-edged sword. So you need to, you need to pair choice with education and advice on how to best utilize these new tools. So I think there's a really interesting responsibility that employers have today to not only give people the tools, but also the advice to make those best decisions for themselves.

Mitch: (08:34)
And let's, you know, continue on this topic and the conversation...