Ep. 178: Will Peng - Achieve Greater Financial Stability

Learn how Fintech is helping people achieve greater financial stability. Will Peng, CEO and co-founder of financial wellness and benefits platform Northstar, joins Mitch Roshong to discuss how technology is democratizing access to expert financial guidance and empowering people to make important financial and life decisions with more confidence than ever before.
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 you have going here as far as, you know, the education and working towards change, how does this technology ultimately work towards changing financial stability across the country? I know you mentioned, you know, really the United States being, you know, one main focus area, but whether it's domestically or globally, you know, how does this work towards more stability across you know, all individuals? 
 
 Will: (09:05)
 Yeah. So if you look at the statistics around kind of where Americans personal finances are you find that doing nothing is doing something and whether it be around savings rates or retirement contribution rates or the amount of debt that people are in. The reality is that if you don't provide employees with education, they just most of the time do nothing. So this is because is if you face, if somebody's faced with a ton of different choices, complex choices, and this is my personal story, actually, when I graduated from college was I had a ton of student debt. I had a retirement plan. I had equity through work. I had to choose health insurance. I needed to save for the first time all while living in New York City. And it was just so overwhelming. And as an immigrant, I just didn't have anybody to turn to either my parents didn't know what to do. 
 
 Will: (10:05)
 So I just did nothing. And I was automatically enrolled in a 30 year payment plan on my student loans, which was designed to squeeze as much interest out of me as possible. Didn't really save that much, didn't enroll in my 401k plan. And so the reality is that that there's this default state where if you don't do anything, you're actually making a decision that's not in your own best interests. So it's, it's really important to provide not only the education around what these different tools are, but also giving them access to financial advisors, as well as new kind of FinTech apps to kind of break through that behavioral psychology of not doing anything with your personal finances. 
 
 Mitch: (10:53)
 It's interesting because I was in a very similar situation coming outta school, not out a whole lot of guidance. It's just, here's the real world and figure it out. So it took a while until I actually did receive some education from, you know, individuals at work and, you know, some guidance as far as what I should be doing. And especially year over year as things change financially. So I imagine, you know, technology you mentioned some apps certainly probably accelerate the learning curve, I would assume, right. Enabling individuals to kind of learn and, and see some, you know, different benefits and such, you know, it is so mainstream at this point, but I would like to get your opinion on that learning curve and whether it's from the employers or the individuals educating themselves, how does FinTech and the technology relating to personal finance and different guidance like this? How does that look into the future? What do you expect as far as the gaps in financial stability across the country and, and whatever else, what can we expect in the future coming up from this space? 
 
 Will: (12:01)
 Yeah, there are a few really interesting trends here. I think underlying all of it is the emergence of new FinTech infrastructure. So infrastructure around consolidation of personal financial data across different institutions. So previously you're kind of locked in to one bank that you decide to bank with. And it's hard to get information from another bank, if you use one bank for your checking and saving then another one for investments. So consolidation of personal financial information, and ultimately with the goal that you can actually own your own financial information is really interesting to think about. And almost being able to use different point solutions across institutions as almost like a commodity. So I think that's super interesting and enables much more interesting FinTech apps. And the next step from that is the ability to actually take actions on your advice and kind of the two primary ways to do it. 
 
 Will: (13:06)
 The types of actions are moving money and opening and closing accounts. And we've talked about the importance and difficulty around behavioral psychology, of personal finances. It's like oftentimes eating, eating your vegetables, or it's really, it's really difficult for people to understand long term impact with their short work term decision making. So by making it as easy as possible to turn that advice into action, you can actually move money between bank accounts, if you have your checking at Bank of America, but your savings account is at Ally Bank you should be able to move money based on a certain schedule or intelligently based on how much you have in your checking account. you should be able to sweep that into different accounts automatically. So this idea of automating your finances is really interesting to think about, to pay off your loans, pay your bills, put money into an investment account. 
 
 Will: (14:12)
 That's a really exciting vision to think about. And the other is being able to open and close bank accounts or different products. So if your financial advisor recommends that you refinance your student debt and they give you a recommendation or a few different recommendations, it'll be amazing to be able to refinance that debt in a very seamless way instead of having to go and Google it and look up, which one's the best one and then file fill out the application. And another example of this is really exciting is what does the intersection of financial planning tax and investments look like? It never made sense to me why these three types of advice are kind of separate. You go find a CFP and who's helping with you with your financial plan, but then they say, okay, like, there's some tax question that you have related to equity compensation, but I'm not your tax advisor, go talk to your tax advisor. 
 
 Will: (15:11)
 And maybe I don't have one. And even if I did have one, how do you have this CFP and the CPA communicate so that they're they have a context from what I'm working on with them. And maybe I have a question about my employee health plans. Well, like my, my CFP doesn't have that information. So how do you, how do you pull that data in? So it's, it's the intersection of advice, but also data that's really interesting. And I think that's a big part of kind of where we're going as well, in addition to where the, where the industry is going to almost have, like, if you're familiar with the term, like the idea of a family office, family office is like the, the pinnacle of financial advice for wealthy people. And back to how we started this conversation, the reason why people don't have access to that is because it's a lot of manual work. And so of course, if you're a family office, you'll go after the most wealthy individuals and manage your assets, but how do you take the fundamental idea of combining all these different types of advice and make it available to everyone? I think that's a really exciting vision to, and future world to think about. 
 
 Mitch: (16:23)
 It's very interesting and it makes you think, you know, how have we come this far without solutions like that in place, but it's you know, great topic. I do have one last question, if I can before we wrap up here, you know, you were talking earlier about the employer's role in some education and, you know, some of the individual's role in personal growth, and just curious, based on, you know, today's workforce really, and, you know, we've all heard the great resignation and the freedom of choice and different options that employees are seeking for one reason or another. So all these different topics, it got me thinking, you know, how does this really, this idea of FinTech solving financial inequity really ultimately equate to businesses, being able to keep some of their top talent? Is there any correlation between an individual's personal finances and some of the issues they're facing with, you know, employers keeping some of these individuals in their workforce? 
 
 Will: (17:26)
 Sure. Yeah. It's a really great question and something that we're at the center of, and I'll caveat with everything that I say with the fact that the reasons that people stay at a company encompass more than just personal finances, you need to create a healthy culture, rewarding workplace, respectful to each other. Those are all requirements as well, but from a financial perspective, it's really interesting to think about the ways that people oftentimes look for a new job because they're not paid well enough. Or maybe they don't understand all of the range of benefits that they receive that have, maybe they're not, they don't have a fungible cash value, but they do have a significant impact on my livelihood and my ability to achieve my financial goals. So what we found is that by offering something like NorthStar that it's not just about having a call center of coaches is being able to work one-on-one with an advisor who understand let's take like specific example. 
 
 Will: (18:30)
 If somebody's looking to start a family, they'll go to their financial advisor who understands all their, their different needs, but also all the different benefits that the employer offers. So it's not just about setting a new budget or figuring out how much I need to save, but it's also about understanding that maybe you get fertility benefits and infertility benefits through work, or maybe you're on a high deductible health insurance plan. And you need to change to one that's a better support for parents and, and childbirth. So it's this really holistic approach to financial wellness that employers are really at the center of. And so we want to help people shift away from a world where they see a higher salary as the only way to achieve their financial goals and kind of providing a more holistic set of support beyond just a higher salary. So I think there's a really interesting shift that we're seeing with many employers to, to think about their or total rewards or compensation and benefits packages in this way, rather than just saying like, Hey, here's the salary, here's your retirement plans and health plans. And calling it a day, 
 
 Speaker 4: (19:41)
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