A first-of-its-kind venture capital arm for socially responsible FinTech is being launched today by pioneering financial wellness firm Financial Finesse.
El Segundo, Calif.-based Financial Finesse, a leading independent provider of financial wellness coaching as an employer-paid benefit, introduced Financial Finesse Ventures—a natural extension of the company’s “people-first” mission—that will support a new era of FinTech it says is 100% aligned with the best interests of consumers.
The new venture arm, company-backed and led by Liz Davidson, Financial Finesse Founder and CEO, will seek investments in purpose-driven companies dedicated to driving positive social impact.
Davidson, who is also the CEO of Financial Finesse Ventures, told 401k Specialist she saw a clear need in the market.
“After dozens of discussions with employers who were alarmed by the implications of FinTech solutions with highly conflicted or problematic service offerings reaching employees as consumers, or worse, discovering that they were embedded into services their existing vendors were providing, I was inspired to form Financial Finesse Ventures,” Davidson said. “Our objective is to fund FinTechs with pro-consumer models who have the ability to truly drive generational wealth and impact positive social change.”
While there is increased discussion about social responsibility and some encouraging macro trends in the ESG space, Davidson said FinTech is significantly lagging in these areas.
“We are at a critical crossroads—what we do now as investors, employers, and consumers has the potential to change the trajectory of the industry. With Americans facing significant financial challenges, there is a lot hanging in the balance. FinTech has the potential to be a powerful solution; we want to do our part to make sure it is.”
While the ESG movement has received some pushback this year in light of significant economic turmoil, Davidson said she has no concerns about Financial Finesse Ventures in this regard for two reasons:
“This is a company-funded venture arm with Financial Finesse as the only investor. This insulates Financial Finesse Ventures from pressure from outside investors to have to compromise social responsibility for profit,” she said.
Second, “Financial Finesse is very conservative in how we manage our finances, so the size of investments we are making is a very small percentage of overall cash on our balance sheet. This enables us to take a long view without worrying about needing to exit for liquidity.”
The venture arm is very intentionally set up to be social impact driven first and foremost, without the pressure to choose between quick returns and doing what’s right by employers, employees or consumers, Davidson added.
Addressing a problem
The explosion in FinTech in recent years has led to an escalation in services that place profit above purpose—with a recent surge in companies selling high interest rate loans, encouraging irresponsible investing, or connecting investors with overly expensive financial products and services in exchange for high commissions. This trend is not only concerning for consumers who could fall prey to these predatory practices, but also business leaders who worry about problematic service offerings being embedded into employee-facing platforms.
“We have seen a surge in FinTech firms with predatory practices selling their services to employers as an employee benefit”
Greg Ward
Financial Finesse Ventures was launched to change the trajectory of the industry, support companies that both consumers and employers can trust, and inspire other firms to begin investing in innovation for good.
“We have seen a surge in FinTech firms with predatory practices selling their services to employers as an employee benefit,” said Greg Ward, CFP and Director of the Financial Finesse Financial Wellness Think Tank. “Financial Finesse Ventures will make early-stage investments in companies that have the ability to transform consumer’s financial lives as they reach scale. We believe that doing the ‘right thing’ is actually the best long-term business strategy and we’ll be looking for founders that feel the same.”
Through an intensive and selective process, Financial Finesse Ventures has identified a number of early-stage companies with pro-consumer models and will announce its first investment in Q4 2022. Beyond funding, Financial Finesse Ventures will help incubate its portfolio companies, leveraging Financial Finesse’s relationships and expertise to fast-track their path to success.
“Financial Finesse Ventures is a long overdue addition to the venture capital and FinTech industries,” said Elaine Hagan, Associate Dean of Entrepreneurial Initiatives at the UCLA Anderson School of Management, who works with entrepreneurs to accelerate growth of their businesses and shares Davidson’s views on social impact. “It is refreshing to see a company committed to financial wellness at its core, making mission-aligned investments at a time when the market for funding is tightening. With this launch, Financial Finesse is taking a key leadership role as an arbiter of socially responsible FinTech.”
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