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Written by Tim Ullrich
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Monday, 27 July 2009 10:32 |
 Providing a fresh take on a still relatively fresh idea (direct savings accounts), newcomer SmartyPig has earned significant attention thanks to its high interest rates and unique savings plans. Add to that a recent investment from Red McCombs that, according to American Banker, significantly enhances the firm’s marketing reach, and SmartyPig is suddenly a firm to watch in the online savings arena.
Below, we take a quick look at SmartyPig’s offerings and list some of its relative strengths and weaknesses. It bears mentioning that we have not opened an account with SmartyPig, and as such we have not yet viewed SmartyPig’s private site.
What is SmartyPig?
SmartyPig itself is a Web startup, not a bank. (The firm outlines its ambitions here.) SmartyPig partners with an existing bank in each country in which it operates, and it is these partner banks that actually administer the accounts and hold the deposits. SmartyPig provides the front-end software for managing the accounts. Here in the U.S., SmartyPig has partnered with Iowa-based West Bank.
SmartyPig offers just one savings account. The account currently offers 2.75% APY - a very good rate, especially these days. There is no monthly fee.
How does SmartyPig work?
Here’s SmartyPig’s basic pitch: we help people save for the stuff they want. The idea is that people shouldn’t just be saving, but rather saving for something. When a user opens an account, they create a savings goal (or maybe several goals), and a recurring transfer plan is set up to help the user meet this goal.
Recurring transfer plans are nothing new, of course, but SmartyPig adds an interesting wrinkle. Users can publicize their savings goals through email and social networking sites, allowing friends and family to make contributions towards the goal. Some might call it social saving, others might say it’s just a different way of asking for a gift. Either way, it’s a new take on peer-to-peer payments.
Customers can withdraw their money in three ways:
- ACH transfer (back to the funding account)
- SmartyPig Debit Card – The firm deposits the saved money onto a MasterCard debit card, which is then shipped to the customer.
- “Best-in-Class” Gift Card - This is another unique offering from SmartyPig. SmartyPig has forged partnerships with several retailers, and users can have their saved money deposited on a gift card from one of these partner companies. The appeal here is that each partner company adds a little extra when the gift card option is chosen (one to six percent of the total amount saved, depending on the company).
What’s the catch?
There are a few, actually, and they’re not too well publicized:
- West Bank controls the interest rates, not SmartyPig. This is never explicitly mentioned anywhere. Nor is it ever fully explained that SmartyPig is not actually a bank.
- Interest payments only post quarterly; most direct savings banks post interest monthly. This information is mentioned briefly in the FAQs (#10).
- Friends and family making contributions via credit card (which is the only way for non-SmartyPig customers to make a contribution) must pay a service fee of 2.9%. This fact is buried within the Terms and Conditions page. The Terms and Conditions also contain key information about minimum initial deposit and monthly transfer requirements; this information receives little or no mention elsewhere.
- Partial withdrawals are not permitted. In order to remove funds from SmartyPig, users must cancel their goal and remove the full amount. We learned this only by calling customer service.
- West Bank actually offers an account with a higher yield – a 42-month Relationship CD, which earns 3.00%. This, of course, is not mentioned anywhere on SmartyPig’s site.
The final take…
Overall we’re impressed with the SmartyPig idea. It’s a clever product with some unique features, and it’s gaining momentum at a time when people are keenly interested in finding safe ways to grow their money. So long as the firm’s partner banks keep interest rates high, they will continue to draw new deposits. No matter how many bells and whistles a firm offers, interest rates are still the key selling point of a direct savings account.
We have legitimate concerns about transparency, though. Too many important facts are placed in out-of-the-way places. A simple product overview page listing key facts in a chart or bulleted list would likely solve this problem. Nobody wants to feel they've been duped, especially by a pig. |
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Written by Tim Ullrich
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Monday, 20 July 2009 14:31 |
 While we don't monitor third-party account aggregators like Mint, Wesabe and Cake Financial nearly as closely as we do our financial institution coverage groups, we do like to keep an eye on developments among those popular personal finance services. We receive a number of periodic emails from aggregation services where we've established accounts - financial summaries, account alerts, new discussions, etc. We had one in our inbox recently from Mint saying how much they've missed our visits and encouraging us to check in. While this was definitely not a unique or surprising communication, we found this interesting in light of a few trends among aggregators and financial services in general.
To entice us back, the email mentioned how Mint continues to roll out new features, notably for investment and retirement accounts. Improving the retirement planning insights available through Mint definitely doesn't hurt in building and maintaining a user base. But in particular, these new developments speak to the issue of actually turning a profit from a free aggregation service.
Where Mint actually makes money is from sponsors, who pay when they gain new clients through Mint's unbiased recommendations. And we'd say there's a decent chance users will take advantage of new retirement account offers. For instance, the IRA Rollover Advisor functions much like Mint's signature Ways To Save comparison tools. It compares features and special offers from different IRA providers and estimates the financial benefit of a rollover. The key difference is that the IRA Rollover Advisor can return a much more eye-catching number than Ways to Save - over $60,000 of additional cash at retirement, rather than just $50 of savings for a new credit card (based on the defaults we see with our accounts). Those kinds of numbers should definitely get users thinking about retirement, and specifically about those sponsors.
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Written by Tim Ullrich
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Thursday, 09 July 2009 10:47 |
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When we first reviewed financial services' involvement in social media in our report, Social Media: Trends and Tactics in the Financial Services Industry, released in late 2008, we found that mutual fund firms were the slowest segment to accept social media into their marketing plans. In fact, none of the 24 total firms that we track for Mutual Fund Monitor and Advisor had even launched Twitter accounts at that time.
Recently, however, we've seen a definite shift towards a slow acceptance of social media, mainly in Twitter. As mentioned in a Corporate Insight blog post in May, Vanguard Blazes a Social Media Trail for Mutual Fund Firms, it was noted that Vanguard had just taken major strides in the mutual fund social media world by starting a blog, registering a Facebook page, and launching a Twitter account. We projected that we would see more of the same from other mutual fund firms.
We were right: two firms followed close behind. American Century launched a Twitter page in late June, while Putnam introduced their Twitter page on July 1st. Users may have a tough time finding the Putnam Twitter page, though, unless they know exactly where to look; the page is registered under the name of its president and chief executive, Robert Reynolds.
This brings our count of tweeting mutual fund firms to three (well -- four, if you count the German-based Allianz, who began tweeting entirely in its native launguage in April). These firms will likely encourage their competition to navigate around compliance issues to reach out to their clients -- and prospective clients -- where they are the most likely to find them. |
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Written by Tim Ullrich
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Thursday, 09 July 2009 10:44 |
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June was a busy month as firms, now well past the seasonal crunch of tax season and the radical market swings from earlier this year, made changes across the board, introducing new products and marketing campaigns, and some unique new tools as well.
Capital One Introduces (Another) Card Customization Tool
The month began with the introduction of Card Lab Connect, a unique new feature from Capital One that allows non-profit organizations – both big and small – to set up a co-branded affinity card benefiting their organization. Using the Card Lab Connect interface, users can create a custom card design and build a card information page that is hosted on Capital One’s site. The firm also sends users a marketing toolkit that contains tips and tools for marketing their organization’s new benefits card, both online and off.
Card Lab Connect is the first card customization interface we have seen dedicated exclusively to non-profits, and stands as one of the most comprehensive card customization options we have seen overall. In many ways, Card Lab Connect is a product of its time – influenced by the personalization options afforded by social networking sites and inherently customizable devices like the iPhone, consumers today increasingly demand products designed for or by them. Card Lab Connect speaks to that demand, allowing Capital One to reach out to new customers in a more focused, and perhaps more meaningful way. To be sure, many of the personalization options afforded by Card Lab Connect are ultimately superficial – each card, regardless of its design, comes with the same basic rewards program. The uniqueness of Card Lab Connect, then, is not inherent in the card product itself, but rather the scale at which the firm allows users to set up affinity-based rewards programs.
Student Banking Suddenly Hot
Remember college? Digging for loose change in the couch cushions, just to buy a burger? If anyone needs help with finances, it’s students, and in June a number of firms introduced new resources to help keep kids out of trouble, at least financially speaking.
Fifth Third Bank released a new series of videos on its website called “Don’t Be That Guy,” which highlight common financial mistakes that college students make, such as wasteful spending. Citizens Bank also added a new Tip Sheets for Students and Parents page to its public site that identifies twelve tips for managing money, financial aid and student loans. T. Rowe Price targeted a younger audience with its new Family Center sitelet, which features an interactive video game for children. Co-designed by Walt Disney Resorts, the firm’s video game teaches the basic principles for saving and managing money.
Big Mergers Continue to Move Forward
Wells Fargo announced on its joint blog with Wachovia that Wachovia Securities had officially been transitioned to Wells Fargo Advisors name. Accordingly, the Wachovia Securities public and private sites now feature Wells Fargo Advisors’ colors and logo.
Smith Barney and Morgan Stanley updated their respective sites with a new Morgan Stanley/Smith Barney logo. While both firms maintain separate private sites for their respective customers, a new Morgan Stanley/Smith Barney sitelet introduced this month offers general information and press releases regarding the new joint venture. |
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Written by Tim Ullrich
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Wednesday, 08 July 2009 15:14 |
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According to the Alzheimer’s Association, as many as 5.3 million people in the United States are currently living with Alzheimer’s disease, a figure that is increasing every year due to the growing population of elderly people. While the medical field continues to develop new drugs that increase the lifespan of humans, the financial and economic ramifications of a growing elderly population should be considered.
People stricken with this devastating disease often require some form of care giving; a responsibility most often shared among relatives. Those relatives are sometimes required to scale back the hours they devote to a job, or quit working completely, effecting their personal financial situation and the U.S. labor market. As a result, Long Term Care Insurance (LTC) was developed nearly forty years ago as a way to supplement Medicare coverage and help cover the exorbitantly high costs of nursing home and other private care.
While the LTC product has certainly helped many effected families cope financially with the cost of medical care, the premiums paid to purchase a LTC policy are certainly not inexpensive. Some people may never require the benefit of owning LTC coverage, and for them, any premiums paid into a traditional LTC policy are essentially lost. Enter the new LTC/annuity hybrid.
According to an article in the Retirement Income Journal, four companies – Genworth Life, United of Omaha, Bankers Life and OneAmerica – have thus far developed a product that is structured as an annuity, but offers a LTC rider that potentially covers the cost of medical care. If care is not need, the annuity will gain interest as a normal fixed annuity, paying out a specified monthly benefit. However, in the unfortunate case that nursing home care is needed, the LTC benefit rider will kick in to pay the costs tax-free.
Given the uncertain future of health care coverage in America, decreasing social security benefits and the overwhelming number of baby boomers entering retirement, the market for a LTC annuity hybrid is rife with potential. While the product is still in its developmental stages, those companies that can fine-tune and best market the LTC annuity will compete for a huge percentage of market share. |
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