Andrei Cherny, the co-founder and chief executive of Aspiration, grew up on food stamps in North Hollywood. A child of Czechoslovakian immigrants, Cherny says he watched his mom and dad--who worked as a school counselor and a teamster, respectively--struggle with a banking system that largely catered to the wealthy.

"They never had much in terms of investments, but I saw financial advisers put them in high-risk, nonliquid products that were completely unsuitable to people with only a few thousand dollars to their name," Cherny says. The experience sparked an early interest in finance--and particularly in finding ways to make the U.S. system more egalitarian.

Cherny went on to a public policy career, serving first as a speech writer under then-President Bill Clinton, and later helping Senator Elizabeth Warren (D-Mass.) craft the Consumer Financial Protection Bureau, a government agency that oversees banks and other financial-services companies. Still, in the wake of the 2008 U.S. financial crisis, he started thinking that the way of the future for financial institutions might be a different kind of business model--one that emphasized social good as much as turning a profit.

"I saw that if you actually care about inequality of wealth, and you care about the future of the planet, we needed a financial institution in this country that empowers people to make better economic choices and think about sustainability," Cherny says.

In 2014, the now-41-year-old started Aspiration, an online-only investment manager with a radical new model: Customers pay only what they think is fair. Although this amount could be as little as zero, Cherny insists that about 90 percent of the company's roughly 85,000 customers choose to pay some percentage of their assets under management. He says Aspiration is on track to exceed $1 million in revenue in 2017, generated mostly from investment management fees.

The broader goal with the fee structure, Cherny explains, is to serve more middle-income Americans. To his point, about 94 percent of Aspiration customers are spread across the heartland, as opposed to major urban areas like New York City and San Francisco. The company has raised more than $30 million to date, from investors including Renren, the Chinese social media company, and eBay founder Jeffrey Skoll.

Where you can put your money.


The company offers two types of funds--a standard basket of mutual funds, as well as a single mutual fund focused on sustainable investing, called the Aspiration Redwood Fund. (The latter invests only in socially responsible companies from an environmental and people management perspective.) Although customers choose what they pay quarterly to Aspiration, they are still on the hook for paying expenses to Aspiration's financial partners, which go toward things like fund administration, insurance, and state registration. The company insists that it caps these at half of a percent of a customer's assets. If that doesn't cover the cost, Aspiration will either negotiate the price down or make up the difference.

Aspiration also generates revenue on checking accounts, offered by Boston-based Radius Bank: While it won't charge to manage the account, the company does charge for wires and money orders.

The battle for your heart and wallet.

Aspiration, to be sure, is not the only young financial services firm that claims to have customers' best interests at heart--and it's certainly the underdog, with only $180 million in assets under management. Betterment, for example, is a New York City-based "robo-adviser" that manages portfolios of exchange-traded funds (ETFs) for a cut starting at 0.25 percent. The company was recently valued at $700 million, according to The Wall Street Journal, and manages more than $8 billion in assets. Meanwhile, San Francisco-based Wealthfront, which operates on a similar business model, manages about $5 billion in assets. Of course, Aspiration is also up against incumbent banks, such as Charles Schwab and others.

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Cherny acknowledges the competition, though he argues that his funds are more selective. Aspiration evaluates mutual fund companies across three categories--social, environmental, and governance programs--and will choose to work with them only if they have committed to more employee training to reduce safety violations on site, reducing their carbon emissions, or increasing gender diversity at the board level.

"We have a customer relationship built on conscience and sustainability, much more broadly than just financial," says Cherny.

The business model, however, is far from stable. "It is a very risky pricing approach, and it definitely doesn't work for everyone," says Ayelet Gneezy, an assistant professor of marketing with University of California, San Diego, whose research focuses on the "pay what you want" structure. The big question, she adds, is whether enough customers will pay--and how much.

Still, she says that Aspiration's "underdog" approach has appeal, especially as consumer confidence in the financial industry continues to fall. "They can always try something else if it doesn't work," she says, such as setting up a minimum quarterly fee of 1 percent, as opposed to zero.

Others suggest that the emphasis on environmentally friendly companies could inhibit returns. "That's wonderful for the environment, but is that good for your bottom line?" says Mike Moebs, founder and CEO of Lake Forest, Illinois-based financial research firm Moebs Services. He notes that the average Jane or Joe likely doesn't have enough money to diversify his or her investments, which is what people should be doing to maximize their returns in Aspiration funds.

An unexpected Trump bump?

Since Donald Trump's victory in 2016, Aspiration has seen a noticeable uptick. Cherny says that the company has roughly five times as many accounts as it had prior to the election; assets under management have gone from $30 million this time last year to $180 million. Cherny says the Redwood fund, which lets investors avoid fossil fuel and firearm companies, has seen a 468 percent increase in customers since the election. While it's mostly anecdotal evidence and may not completely explain the uptick, some customers have cited Trump's victory specifically as a reason they signed up for the platform, and they occasionally post about it on social media.

That could be a significant advantage moving forward. Among the many challenges facing the financial technology industry is that customers are more interested in hearing about online-only money managing firms than they are in actually making the shift. In 2017, only about one-third of U.S. adults who use the internet also use online money managers, according to recent Forrester research.

"We're not political necessarily--the election has been like mood music--but it highlights for people that they want a way to be able to show what they believe in on a day-by-day basis," Cherny says.

Correction: A previous version of this article incorrectly cited UBS as one of the financial partners to whom Aspiration's customers owe fees.

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