Will HelloWallet Transform Online Financial Advice?

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Los Angeles Mayor Antonio Villaraigosa is one of HelloWallet's early fans. The city's public workforce will soon have access. Villaraigosa calls it "a new model that not only provides a critical service to help those suffering during this economic crisis, but does so in a scalable, financially sustainable way." Patrick E. Clancy, CEO of Community Builders, which develops housing for moderate income and the working poor, calls HelloWallet—because it provides people with the opportunity to better themselves financially—"just the kind of product partnership we value."

Make no mistake: For all the do-gooder rhetoric, HelloWallet has every intention of making money, says its creator, a studious economist-turned-entrepreneur named Matt Fellowes. For years, Fellowes specialized in cataloguing the vast demographic divide between wealthier Americans with access to financial services and the nation's majority of unadvised and unbanked who are less able to convert their wages into mobility. While at the Brookings Institution, for instance, he estimated U.S. households unnecessarily lose $100 billion each year simply because of avoidable missteps using financial products.

He also found that nearly four in five Americans—and nearly all employers—lacked a meaningful solution. "It was like looking at a giant highway where few know how to drive, but everyone has their gas pedal against the floor," says Fellowes. "I saw banks trapped in an unsustainable business model, most Americans stuck with bad deals and false hope, and a government that could not responsibly respond to either problem. I saw that financial advice was one of the last frontiers of the financial services industry that had not democratized."

To be sure, Fellowes faces some challenges. He'll have to compete with established providers of 401(k) and other benefits to corporate HR departments, and those providers may demand a link from any advice site to theirs. Fellowes also will have to convince users of the inviolate privacy of their personal information, a challenge for any online provider in the hacker-threatened digital age; he says the company is establishing safeguards, for instance, against identity theft. HelloWallet's low-price subscriptions, meanwhile, means that the startup will have to scale up mightily to make any money for its investors.

And then there's the herd mentality of big corporations' HR departments, many of whom tend to let others experiment with innovation first. "It's great in concept, and I applaud Matt Fellowes heartily," says Mercer's Delivorias. "But will corporations get past some of the hurdles they have in terms of vetting products and services of any third-party vendor without a track record? I think many will sit back and wait to see who else signs up."

Early Adopters

But Fellowes has assembled more than a team of mere dreamers. Those who now aim to shake up the nation's financial advice establishment, putting more literacy in the hands of lesser-paid workers, include one-time Wall Street whizzes with pedigrees from Ernst & Young, Fannie Mae (FNM), Charles Schwab (SCHW) and Bank of America (BAC). A former player on JP Morgan's (JPM) derivatives desk helped develop algorithms that instantly match data and wise investing practices with the personal goals established by users.

Another member of Fellowes' team adapted software initially developed for U.S. intelligence agencies that is being deployed now to scour the Internet and databases for virtually all available savings, checking, and loan products across the country. Fellowes predicts that system will pay off for users; by surveying more financial products, it can identify better deals.

In a recent analysis of basic, starter checking accounts requiring a minimum balance of less than $5,000, for instance, the software turned up an average yield 50% higher than the average yield advertised by online competitors, and maximum yields up to 400% higher, Fellowes says. As for the banks and other established institutions that may now feel threatened, he says that overall his innovation should drive more business, not less. In theory at least, workers armed with more financial intelligence may begin to step up saving and investing efforts—adding to business for financial institutions. That's what Fellowes is banking on.

Epstein is a correspondent in BusinessWeek's Washington bureau.

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