Welcome to Financial Advisor IQ

Why PayPal Could be the FA's Next Big Rival

November 27, 2017

Financial advisors have a new challenger to contend with: PayPal. The online payment company is partnering with the auto-saving and -investing platform Acorns Grow Inc., the Wall Street Journal writes.

PayPal users will now be able to invest directly from the PayPal app or their online account into Acorns, the two firms said, according to the paper. PayPal clients will also be able to manage their Acorns investments straight from the PayPal app, Joanna Lambert, the company’s vice president of consumer financial services, tells the Journal. Last week the service was introduced to the first group of PayPal users, and all U.S. users will have access to Acorns by early next year, the paper writes. There were 218 million active PayPal accounts worldwide at the end of the third quarter, the company said, according to the Journal.

Acorns’ specialty is micro-investing: the firm lets users connect debit and credit card accounts, rounding up purchases to the nearest dollar and investing the change, the paper writes. The firm charges just $1 per month to manage portfolios of ETFs for most users, Acorns CEO Noah Kerner tells the Journal.

PayPal is entering a quickly-growing arena: robo-advisors are expected to triple their assets to $220 billion by the end of the year compared to 2016, according to Cerulli Associates data cited by the paper.

PayPal’s competition in digital advice includes not just robo-advice pioneers such as Betterment but traditional institutions such as Charles Schwab and Vanguard, both of which have recently rolled out robo offerings, the Journal writes. Wells Fargo Advisors unveiled a robo-advice service for fledgling investors earlier this month, as reported.

By Alex Padalka
  • To read the Wall Street Journal article cited in this story, click here.