Whether you’re searching for a new mortgage or a credit card, financial advice is often a bit of a
maze and that’s with all the technological advancements we have at our disposal.
Now think back 13 years to 2008 when this advice was more of a minefield than a maze,
with one wrong move potentially crippling you financially. Tim Chen found himself in this
position at the time. A former Analyst at some leading Hedge Funds like Perry Capital and JAT
Capital Management, he found himself unemployed after being laid off on Christmas day. He received
an email from his sister to help her to find a credit card with lower transaction fees and with
nothing else to do, he got to work researching. But after a few quick google searches,
Chen was shocked that the only information he could find was marketing or promotions,
nothing concrete. So he spent the next week professionally researching the major banks and
credit companies to build a list of options for his sister. But this sparked an idea in his mind
and in his wallet. So today, we’ll explore the history of NerdWallet and how they’ve
become one of the most reputable Financial Advisors in America. Here’s How It Happened.
Firstly, what is NerdWallet. Well it’s a Fintech platform that provides financial advice for loans,
mortgages, insurance, tax and investments alongside calculators to work out how Much
you can borrow. Their mission is “to provide clarity for all of life’s financial decisions.”.
The website now sees 10s of millions of visitors every month and will likely
have a valuation when they IPO in 2021 of $5bn. But it wasn’t so easy back in 2008.
Chen realised in his research that the material was so dense,
nothing was easy to understand and it was almost impossible to compare products. He wanted more
transparency and the only way was to launch his own website. So, using $800 and working from his
Manhattan apartment, he launched NerdWallet to provide the pros and cons of financial
services with a Q&A offering and professionally written articles thanks to financial journalists.
The start was - well - tough. in the first year he, along with his co-founder Jacob Gibson,
only made $75 whilst working 20 hour days and was forced to move into his girlfriend’s apartment
to save money. A year later and NerdWallet had done $60,000 in revenue, a positive step
but not exactly a fortune and if it wasn’t for the poor economic outlook
caused by the global financial crisis, Chen admits he might have got another job with a hedge fund.
But from mid 2010, NerdWallet began seeing more visitors and revenues rocketed. By 2015,
NerdWallet raised $64mn in their first funding round and they were already turning a profit,
adding cash to the balance sheet. the Impressive growth was partly thanks to the low quality
already on offer in the industry which were so bad they had led to lawsuits for fraudulent practices
and mistrust with big banks. NerdWallet hired established writers from USA Today and
the Wall St Journal who pumped out well written financial articles which not only added gravitas,
but helped to flood Google with NerdWallet content and improved their search engine optimisation,
making it easier for them to be found and not having to pay for marketing or SEO.
"Most consumers want to know that they can trust somebody who is not beholden to one financial
institution," "They're worried that they don't know the right answers and they're going to make
a mistake. We want them to have the confidence that they're making a good solid decision."
But Chen himself didn’t always make good solid decisions. Along the way he had a
philosophy of hiring smart people and letting them figure it out. The business became silod
and some new employees didn’t match the culture they were building. The issue is
that when you then let those people make hires for themselves, the culture can become toxic quickly.
So in December 2013, Chen fired 11 employees, 20% of the workforce at the time to fix his mistake.
Chen was a poor public speaker and the speech was described as brutal and visibly uncomfortable,
but it had to be done. He had to do the same thing again in 2017, firing 50 employees or 13%
of the workforce to continue the trend of ensuring the strategic direction of the business.
But as the business has grown, you might be sat there asking yourself
how does NerdWallet make money? Well they run affiliate marketing through their website.
If someone clicks on a link and signs up to a credit card or mortgage,
NerdWallet gets paid by the lender. There are however question marks around whether
or not NerdWallet promote the offers that have the highest affiliate commission despite them
confirming they always have their clients’ best interests at heart. Something to think about.
Nerdwallet now generates around $150mn annually and their growth has
even expanded internationally, acquiring the Know Your Money platform in the UK.
Despite the competition from the Fidelitys and Vanguards of this world, alongside the Bankrates,
Credit Karmas and Motley Fools, NerdWallet stands by its mission to help people make
decisions confidently when it comes to finance by making information transparent. It’s broad
breadth of financial content means that whenever you input a financial question
into google you’re bound to be faced by the nerds as they try to anticipate your financial dilemmas.
Even Chen believes it’s a waste if people don’t find the right answer.
When Chen started, he admits he was more concerned about building a successful company,
but now he’s become more mission oriented and he believes that if they focus on doing what’s right,
maybe they can build a relationship with a person so they come back, time and time again.”
And that’s how it happened.
Thanks for watching