If a former Clinton White House speechwriter teamed up with a private sector entrepreneur, what would they build?
In the case of Andrei Cherny, who accounts for both parts of that equation, it turned out to be Aspiration, a bank based on consumer conscience.
Benzinga spoke with Cherny about the company he and fellow co-founder Joe Sandberg created.
Benzinga: How would you define Aspiration?
Andrei Cherny: Aspiration is a 21st century financial firm built on bringing great financial products to everyday people by building trust with consumers who don’t trust the incumbents in the financial industry.
Aspiration is a response to an industry that is moving more and more upmarket and going after higher net worth clients. This leaves millions of people in the country who are not getting the best financial products. We have a series of products that focus on the broad middle class.
Can you highlight some of those products?
Sure. The Aspiration Redwood fund is a sustainable actively managed investment fund that is 100% fossil fuel free, 100% firearms free and invests in companies that are proactive regarding the environment and their employees.
It’s a fund, that year-to-date according to Morningstar is in the top 1% of all large cap mutual funds in America. People can get in with a $500 minimum investment.
Our banking product (checking account) pays 1% interest which is 100 times better than people would get at any of the biggest banks.
There are no ATM fees at any ATM in the world. It was named Money Magazine’s best checking account in America. And the opening deposit can be as little as $10.
In addition to products Aspiration has a unique philosophy. Can you talk about that?
We are committed to giving. We take 10% of our company’s revenue and apply it toward charitable giving. Not profit, by the way, revenue. This is a huge part of the DNA of Aspiration – what we stand for as a company. That makes us, by percentage, probably the most charitable financial firm in America.
Finally, trust is our core business model. We call it “Pay What Is Fair.” We trust the customer to decide how much to pay us. If they want to pay us zero, they can pay us zero for as long as they want for any of our products and be treated the same as any other customer.
That’s something of a show stopper. Do you really let the customer decide what to pay?
We see it as our responsibility to show that if we’re doing a good job, we deserve to be paid. If we can’t show that, then the customer should not be paying us. We don’t want to be paid by those clients because we are not delivering for them. We trust our customers enough that if we’re doing a good job they’re going to treat us fairly.
What we’ve actually seen over the past year and a half plus since we’ve been in operation is that well over 90% of our customers choose to pay a very fair amount. That shows not just the strength of this model but also the depth of the customer relationship.
Andrei ChernyWhat was the inspiration for Aspiration?
I’ve worked on financial issues for more than 20 years, in the Clinton White House, as a financial fraud prosecutor for a number of years and then spent a number of years as a consultant to big companies including several large financial firms.
What I saw were very large financial firms with tens of millions of customers who fundamentally had an antagonistic relationship with the company.
In many cases the financial institutions were losing money on the customers because they weren’t big enough dollar-wise. To make customers profitable, the companies were loading up fees which just upset customers even more. It was just a model that was not working.
I saw this as an opportunity to build something different from scratch that would function in a very different way. With my co-founder, Joe Sandberg, who has spent a number of years on Wall Street, we came together to launch this in 2014.
You make a case that socially responsible companies are good investments. Why is that?
I think it works for a number of reasons. First, sustainable practices are a proxy for long-term thinking. If Wal-Mart changes all of their lightbulbs to more energy efficient bulbs, there will be an immediate cost but a long-term energy benefit.
A company that offers more family benefits for its employees will incur some additional cost in the short term but is also going to have a more productive and more innovative workforce according to numbers of different studies.
What we are really doing is valuing companies that take a long-term view.
Second, what we’ve seen over the last generation or two is that the value of companies has shifted from physical assets to more intangibles.
Companies that are focused on protecting their reputation and addressing risk are companies that are also going to have strong long-term valuation and profits.
How did your personal history and background help define your path?
My parents were recent immigrants when I was born – from then Communist Czechoslovakia. I grew up in a family like a lot of immigrants from all sorts of parts of the world.
We struggled economically. That gave me a sense of purpose and mission around expanding economic opportunities for people.
After working in the White House on economic issues in the 1990s, I left politics and government and became a financial fraud prosecutor and assistant Attorney General in Arizona focusing on ground level financial fraud and what happens to people with corporate scams and other challenges they were facing.
It eventually evolved into what we’re doing at Aspiration – which is creating a financial firm that is open to everybody.
What’s the chance you could end up back in the White House in a second Clinton administration if that happens?
(laughs) I would say it’s pretty close to zero. My hands are more than full with building Aspiration and I feel like we’re making a real impact. Bringing people in from the sidelines and giving them much better financial products.
For example, you look at something like our checking account. There are studies that show most of the country can’t come up with a $400 emergency payment when a car breaks down or there is an unexpected home repair.
For an average person with an average number of assets in their checking account, if they move from one of the big financial institutions to Aspiration, they’ll have more than $400 a year in money earned and money saved right there. That’s a really big impact. I think there are a lot of different ways to make a difference and I think we’re doing that at Aspiration.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
