When it comes to building wealth, a lot of people say the first $100,000 is the hardest. It’s hard to hit the $100,000 net worth milestone because there are so many pitfalls along the way. Are you taking on too much debt? Does your insurance coverage leave you vulnerable? Is your spending out of control relative to your current income.
One reason it’s so hard to hit a $100,000 net worth is because good advice costs a lot of money. Few financial advisors will meet with you until you have at least a quarter million in the bank, and a financial planner may cost as much as a few thousand bucks (and perhaps not provide the value that you need).
However, Cinch is a low-cost technical solution that aims to fill the financial planning gap from a $0 net worth (or even less) until you start considering complex estate planning questions. Unlike every other fintech solution, Cinch promises to take on a fiduciary relationship with customers. That means that every recommendation they make will align with your best interests.
This is easily the most ambitious piece of Fintech we’ve seen to date. Here’s what we know so far.
Easy To Understand Financial Reporting
We all know the old axiom that “what gets measured, gets improved.” But with finances, there are so many things that need to be measured. There’s your net worth, your cash flow, your debt, your interest levels, your credit score, your investments, your insurance coverage, your emergency fund and more. It’s actually kind of hard to stay on top of it all. That’s why so many of us assume that we don’t have any money problems… until we realize that we do.
Cinch promises a straightforward financial reporting for all the most important areas of your financial life. They call this a “Playback.” The Playback uses real information from your credit report, your bank accounts and even your insurance companies.
The Playback will include the status of your student loans, credit card debt, term life insurance, bank fees, your emergency fund status, cash flow information, and spending challenges. I was really impressed by the fact the Playback did such an accurate job capturing my income and my expenses. Since I have an irregular income, most apps don’t accurately assess my income. Additionally, since I use bill pay and transfers for childcare and taxes, most apps don’t understand what I’m doing with my money. However, Cinch assessed the situation well.
Cinch will also start adding more playback features when they roll out in 2018. Outside of the life insurance information, you could cobble together a set of reports about your finances using apps like Credit Sesame and Personal Capital or Mint. At least to start, the information in Cinch won’t be groundbreaking, but it will be altogether.
Prioritized Fiduciary Advice
The Playback feature helps you understand where you stand financially, but Cinch’s real value comes from their prioritized fiduciary advice. The app analyzes your financial situation and makes specific, actionable recommendations. Their recommendations can range from switching banks, transferring money to a savings account or paying more on your loan. It could also include adding more car insurance or life insurance, or changing companies so you can save extra each month.
Cinch recommended that I add an additional $300,000 term life insurance product. This is something that I’ve contemplated doing since my daughter was born, but I’ve been too lazy to pull the trigger. Cinch will pull recommendations for term insurance products, so I can just accept and move on with my life.
On top of their recommendations, they’ll give specific spending and cash flow challenges based on your spending profile. They recommended that I should cut down restaurant expenditures by about $30 per month by using cash. Normally, I would think that this is a great recommendation, but almost all the restaurant expenditures were incurred because of a conference my husband attended, and his school reimbursed him.
What I love about this approach is that Cinch prioritizes for you. Our financial lives have tons of moving parts, so it can be hard to know what to do first. Cinch uses artificial intelligence to determine when you should think more long term, and when a short term win is worth it.
Cinch’s prioritized recommendations will be perfect, but they stop analysis paralysis. Too many people leave their finances a mess because they don’t take the first step. I’m excited to finally see a product that offers “good enough” recommendations.
Smart Product Recommendations
One thing that sets Cinch apart from the competition is their massive database of checking, savings, credit card, and insurance products that are available for comparison. Using your personal information, Cinch can recommend the absolute best in class products for you, and they can continue to make new recommendations as these optimize.
Cinch will not accept referral payments from any of their product recommendations, so they will offer either the best or one of the best product recommendation services anywhere.
Future Enhancements: Easy Automation
Cinch has a lot of future enhancements planned, and most surround the Playback and Prioritized Recommendations features. However, one feature that Cinch plans to add has me excited. They plan to add a “Do it for me” automation feature. If they recommend saving an extra $200 a month to your emergency fund, you can accept the recommendation and Cinch will set up the transfer for you.
Financial automation is one of the keys to wealth-building, but it can be a pain in the butt, especially if you have multiple accounts. Having a technology deal with the button pushing is a perfect way to free up headspace while making progress on your finances.
Final Thoughts On Cinch
Cinch promises a lot, especially as they add more features after their initial roll out. We’re not sure what the roll out price will be, and what features will be available right away. I can say that I’m excited about the app’s future. I think it’s a missing piece of FinTech. Right now, the app is best for people in the early stages of debt payoff and emergency savings, but I think it has room to grow. I would love to see it offer enhanced options regarding insurance, investing, and income growth.
I don’t think Cinch will replace the value of a financial planner or a financial advisor for people with more complex financial needs, but I think it will fill in the gap for people aspiring to that first $100,000 in wealth.
Cinch is a new app that analyzes your financial situation and provides helpful fiduciary advice and recommendations.