Blog 7: Stackwell
Empowering a new community of Black investors
Company: Stackwell is an early stage fintech startup on a mission to attack the racial wealth gap by empowering a new community of Black investors. Its mobile application, to be launched publicly in Spring 2022, delivers automated tools and education to help Black Americans stack and build wealth.
Location & Year Founded: Boston, 2021
Founder: Trevor Rozier-Byrd, Founder and CEO
Funds Raised and VC Investors: Have raised funds from CMFG Ventures and others.
Founder’s Background: Originally from New Jersey, Trevor moved to Boston to attend Boston College and later Boston University law school. He became a corporate transaction lawyer in New York with Sidley Austin, working on securities, fund management, private equity, hedge funds, and related financial services. Returning to Boston, Trevor moved into M&A and venture capital law with WilmerHale. He ultimately transitioned to in-house counsel and then management roles at State Street Bank, where he pivoted to strategy and business development. Trevor rose to Managing Director at State Street before deciding to pursue his passion that led to Stackwell Capital.
1. Where did the idea for Stackwell originate?
There were two main catalysts for me to starting Stackwell. I was at a point in my career where I was ready to take the next step in my leadership journey. I wanted to have a broader impact on community as I was always the only Black person or only Black male in the room. With that came a strong sense of desire and obligation to give back and create access to opportunities to people who look like me. In considering what to do next, issues of the racial wealth gap and how to address it were always top of mind. From my professional experience I knew how powerful the stock market could be as a tool for creating long-term sustainable wealth. There is also no gatekeeper to accessing the financial markets as there are in other areas of financial services such as qualifying for a loan. No one can tell someone else that they can’t come in and participate in the financial markets. No one can limit someone’s ability to gain the same return as anyone else. The stock market is within everyone’s reach. I want to give more people in the Black community access to investment products and information, which will have positive ripple effects creating long-term social and economic benefits.
2. How does Stackwell’s offering work?
In phase one, we are delivering a robo-investing product. We create model investment portfolios that take the mystery and fear out of the investing process. By leveraging principles of behavioral sciences, we empower a user’s development. We create and sustain a path for our users to ultimately achieve their long-term financial goals and objectives. We leverage the personal lived and professional experiences of everyone on our team to do this.
In terms of how it works, when a user signs up for our app, we ask a series of questions around the user’s investment objectives, risk profile and investment time horizon. We run algorithms that then suggest which portfolio is best suited for that user. Our portfolios are based on broad-based index ETFs, covering both equities and fixed income. We help align our users to the appropriate asset class and help them easily get into the market in an automated fashion to take the stress and strain out of individual stock picking.
3. What differentiates the product?
We have created a product that is simple and easy to use and deliver it with an accessible price point just $1 month and only a $10 investment minimum. Our goal is to help promote greater inclusion across the income spectrum. We want to break down the barriers that contribute to why people don’t invest in the market. Many people feel that it requires a lot of money to participate or don’t know where or how to start investing for themselves or their family. By reducing the barriers, we try to take the angst and anxiety out of the investment process.
4. How does this product specifically fit the Black community?
We have intentionally architected our solution to specifically address the social, emotional, and cultural barriers to entry that have contributed to underinvestment in the Black community. We communicate directly with our user base in culturally competent ways by using language, examples and imagery that will resonate and increase comfort and confidence in the process. We wrap everything with an intense focus on community. There is generally speaking a lack of proximity to the investing and wealth building process in the Black community. This begs the question, how do we pull the curtain back, share stories, and provide information so that more people can start leveraging the markets to grow their wealth providing them with greater agency and control to direct outcomes that matter in their lives? As one example, we have started to execute an ambassador program with college and graduate students across the country. We are activating our ambassadors in localized ways to facilitate conversations as a conduit for exposure, access, and inclusion in the financial markets.
5. What lies ahead for Stackwell in 2022?
We are in private beta right now and expect to go through a couple of test cycles. Full release is planned for early Spring. The biggest goal is a successful release.
Secondly, we hope to bring on additional investors to the company to help us execute.
We aim to bring on mission-aligned investors, that also bring significant depth and breadth of expertise in areas of impact for us, in addition to their capital.
6. What are the long-term strategic objectives?
In phase one as I mentioned, we are delivering a robo-investing product that will immediately meet the needs of Black investors. This will help us earn their trust and allow us to pursue a platform business model. Our goal is to become the preferred partner for end-to-end banking, wealth-building and financial services needs in the community by providing a curated set of products that are delivered in transparent, honest, and fair ways.
Ron’s Take
It may be difficult to fathom, but the racial wealth gap in the US is worse today than it was prior to the Civil Right Movement of the 1960s. In fact, white Americans have on average 7.8 times the wealth of Black Americans (see chart below).
The ripple effect of this wealth gap is manifold, including access to capital, affordable housing, quality education, adequate healthcare, and more. The tools and platforms that have been developed are in common use today are overlooking the needs of the Black community by not addressing the root causes of uncertainty around investing and personal wealth management. In creating a platform that simplifies the “how to” and speaks directly to the Black community, Stackwell aims to address a critical need.
Historical stock market returns over the past 30 years have averaged close to 11% annually (closer to 8% annually when adjusted for inflation). For the long-term buy and hold investor, the cost of “sitting out” of the market exacerbates this wealth creation disparity. By enabling more Black investors to put capital to work, Stackwell will help to solve this gap. Having more capital at work in the equity markets generally helps to increase capital liquidity and benefits the economy broadly.
We look forward to watching Stackwell go live soon and will follow the progress as their platform attracts a new base of investors from the Black community as they begin to participate in the capital markets.