Bankrate says that American families are missing an estimated benefit of $237 billion for future educational savings because they’re not using 529 college savings plans effectively, citing a report from Morningstar.
Ksenia Yudina, founder and CEO of U-Nest, has set out to do something about that. Formerly a vice president at Capital Group/American Funds, the largest 529 provider in the U.S., she has launched a way for families to use the 529 plan to save for their children’s education with a mobile phone. She discussed her company at Money2020 which she attended with Peter Mansfield, U-Nest’s director of marketing.
Q What does your company do?
A We have developed the first mobile app that helps parents set up and manage 529 college savings plans. What used to take eight hours of time to research we put into five minutes.
A I came up with this idea basically based on both my personal and professional experience. I graduated from an MBA program (UCLA’s Anderson School of Management) $180,000 in debt, and that’s not the most expensive MBA program.
Q But you were already working at a leading 529 provider, so why leave to start your own company?
A I worked with high net worth families, over $5 million, and they were using 529. It’s a top priority for them and everyone likes saving on taxes, but they aren’t the ones who need it most. A lot of my friends started forming families and approached me with the same question — how can we be set up a college fund?
Q So why not sign them up at Capital Group?
A We dealt with a lot of people who work with or as a financial advisors. The advisors would create a 16-page doc and send it to clients by FedEx for a signature. When I suggested something like that to my friends, they pushed back and said they used Robin Hood and mobile banking, what’s wrong with 529 plans that they are still on paper? They wanted to take advantage of it, but it’s so confusing and complex and they didn’t have time to do all the research.
Q How did you get it off the ground?
A I funded the beginning myself with over $160,000, and an angel investor who knew me put in $300,000. We just closed a seed round with several funds.
Q What’s the response?
A Our goal was a pilot program with 1,000 families, and we reached that number pretty quickly…our rating in the iOS App Store is 4.8 or 4.9, and we are about to launch Android.
Q Who is signing up?
A The first clients were my personal friends and also some of my investors, because they were eager to test it, and they had small kids. The feedback was that it is super simple and super fast.
Q How are they finding out about you?
A Good question. About 70% of people don’t know about the 529 program, which is what happens when you leave marketing to the states. Financial advisors haven't been too enthusiastic because it take a lot of work and client education for not much in the way of commissions.
Q So, are you changing any of this?
A By becoming this sort of digital advisor, we have been able to remove all those hurdles and eliminate a lot of paperwork.
Q Does that make your approach attractive for financial advisor firms?
A Yes, a few large advisor networks are looking at it, because it provides a way to get into younger households. Advisor networks have had a tough time reaching young families, and some see this as a gateway product to allow advisors to sell other life-stage products.
Q Do your clients invest the maximum of $15,000 per year?
A. The average is $200 a month, but mostly we want people to be consistent, even if it’s as little as $25. They can set it up to be an automatic payment and then adjust the asset allocation based on the age of the student, becoming more conservative as the time for college gets closer.
Q Are you using it?
A Yes. I have three kids, so I tried out several plans as part of our R&D. My oldest is nine and I have twins, one boy and one girl, who are 4 years old. I believe in education; I have a CFA and an MBA. Education helps you be successful in life and I don’t want them to be burdened by student loans.
Q. What else?
A We have a gift option so friends and relatives, like grandparents, can donate to a child’s account.
Q What’s it like being a woman and raising funds in Silicon Valley?
A We could write a book. It’s not so much overt sexism but insidious reactions where people are overly nice. But they have also asked Peter about my “coachability”, which he says no one ever asked him about a male CEO. In one funding meeting, when Peter stepped out the VC turned and asked how the company had discovered me. I’m the CEO, I said. He was shocked.
Q Was this a surprise?
A I didn't know how hard it was going to be, but I have found out that only 2% of women get money from venture funds. I spend a lot of time in meetings, and frequently the business relationship questions go to Peter and the personal questions go to me.
Q Has attending Money2020 helped?
A We are at a fintech conference and instead of having women in events, they have separate events for women. I favor inclusion. One reason women have less access to capital is because we are not as networked as the guys. We need to be qualified based on our credentials and what have we have achieved in life, and not on gender.