Storytelling about SmartPath with Alok Deshpande
Welcome to the Use Case Podcast, episode 90. This week we have storytelling about SmartPath with Alok Deshpande. During this episode, Alok and I talk about how practitioners make the business case or the use case for purchasing SmartPath.
Alok is an expert in all things involving money and financial wellness. His passion for teaching people about money to understand their financial wellness really comes through during the podcast.
Give the show a listen and please let me know what you think.
Show length: 26 minutes
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Ladies and gentlemen, this is William Tincup, and you are listening to the Use Case Podcast. Today we have Alok on from SmartPath. And please correct the pronunciation of your name. We’re gonna be talking about the use case for SmartPath. So why don’t you introduce both yourself and the pronunciation of your first name because I think I butchered it and also introduce SmartPath to us.
Sounds good. William, yeah, like, I don’t know if you butchered it. I’ve had it butchered significantly worse than that. So I think I’d give you a kind of a b minus. My name is Alok Deshpande, I’m the CEO of SmartPath. And, and at its core, SmartPath is a financial literacy and coaching business, we operate in the space of financial wellness, which has gotten to be fairly broad for vendors. I mean, sorry for employers.
And what we specifically do is provide educational content, we do sessions throughout the year, we do one on one coaching with, with employees. And then lastly, we have a range of tools that can really help employees kind of understand what is the strategy? What’s the direction I’m supposed to take? That’s kind of the fundamental question that people struggle with is, what do I do next? And I think that that’s really where we shine.
Oh, that’s fantastic. Well, so so wellness, you know, most people, when they think of wellness, they think of obviously the health side, and then financial wellness thank God, you know, a couple of years ago, people started to really kind of dig into this all the way from tuition reimbursement all the way down into helping people with their credit, etc. Where did y’all start? Where What was your origin story in terms of kind of how you wanted to help corporations, but also help their employees. Help the folks that work for em?
Yeah, it’s interesting. I the origin story actually does not start with corporations. I am. My past was I spent a decade in consulting, I was at a firm called Bain and Company, which is a management consulting firms. Sure, through the Great Recession. And in the 2009, 2010 timeframe. I effectively saw what was happening. Obviously, we saw a massive crash in the housing market. And if you recall, at that time, there was this kind of the whole thing around Wall Street versus Main Street.
It was Wall Street versus Main Street, Wall Street has caused these problems. And look, I think the reality is, is that yes, Wall Street definitely had some creations of products that made it easier to own a home for folks that maybe not necessarily should have owned a home at this stage in their financial journey, right. But what I noticed too, was that Main Street, which is the community I grew up in outside of Atlanta, there were a lot of friends of mine, anecdotally, they were just making bad choices.
They were doing 100% stated loans, cashing out, buying a car with, on a refinance. And so they were kind of completely over leveraged. And as I started getting frustrated about the scenario, my wife said, Well, why don’t you do something about it, I don’t know if she thought that I was gonna do what I did, which is I quit my job and started teaching people about money. And I literally started with six people in a room. And then on the weekends, I would host these classes in downtown Atlanta that were free for anybody to come. And we’d have standing room only and the teaching was basically the following, which was, let me teach and guide on how to make financial choices without selling any financial products. So today, SmartPath lives by that. We do education and coaching and we don’t have a dog in the fight. And I felt like that’s what was missing for the middle class.
Yeah, because the CFPs or any, any broker, Even Even the best brokers, they’ve they care, either they care because they’re making some type of fees or they’re or it’s in success. Somewhere along the line, they’re making some type of money. But I, you know, I wonder. Because I’ve said this to people publicly before is like, we weren’t. In high school. we weren’t taught personal finance. Like I correct we were taught, you know, trigonometry, which was, um, yeah, fantastic, I guess.
But like, it would have been really nice to know like, credit, you know, how to establish credit, what you know, the importance of credit, things like that. So, when you when you walk into, you know, you’re talking to you HR, you’re talking to you know kinda getting set up and helping their employees. What, what are they for two things. One is they think their employees need and second point That is where do you tend to start? Like, in helping the employee population?
Yeah, that’s a great question. I think, typically what employers see on is they see people taking money out of their 401k, or their 403B. so that they see that that as the kind of core pain point, or they might have like a hardship fund or a pass the hat type of fun, right. And so they, they see that, and then they see anecdotal stories of folks wanting their, there is a need for money. And there’s typically an acute need for money. And so that’s pretty much what employers see. I think in terms of our perspective, in terms of how do we go in and help in our mind, you have to start with an underlying philosophy of what should a person be doing? and in what order? And that’s got to be very, very simple and consistent.
The answer of it depends on things that folks are not necessarily skilled or confident about is kind of the worst answer you can give. So what we do is we go in, I wrote a book on this in 2015, where we go in with a very structured philosophy, this is what you should do, in order starting with contributing up to the match in your retirement through emergency funds, paying off debt, so on and so forth. And that, that foundation, allows an employee who may be making $17 an hour, or $12 an hour or $40 an hour, it may allow a pipe fitter, a teacher, it allows them to have a plan and a path in front of them. That doesn’t require them to have to learn everything about money. Instead, they’ve got to execute.
The analogy I draw is when I go on YouTube, I actually watch YouTube videos of fitness, and then I’ll do the workout like basically workout videos. But when I’m doing that workout video, I’m not thinking about the physiology of the body. And how is this, I’m just trying to get through it so I can be done. I’m trusting that that person knows what they’re doing. And I think the same in money, folks don’t necessarily, I love I’m passionate about the topic. But I’ve come to learn that, it’s not everybody wants to be a personal finance guru. They just want to know what to do. And then they can go and help execute.
And I think that’s the philosophy that we carry in organizations. And when organizations see what our our system is, we teach a very structured system, and everything spawns from that. The lightbulb goes off that yes, now our employees can speak the same language, it’s not going to be an it depends sort of thing.
I love that. So let me ask you about your the way you talk to your the way that you coach, you know, obviously SmartPath coaches around debt, debt consolidation, where your philosophy on just kind of how to deal with debt, credit and savings?
Sure, sure. I think so starting with debt, well, kind of they all mixed together, we start with something called financial fuel. Which is the amount of money you spend less than you make each month. If that number is negative, there isn’t really a lot to do on all the others until you can make that number positive. And I don’t know, I think what tends to happen in our space, and specifically in financial health and wellness is there are some unbelievable products out there. But they mask the root problem. And the root problem is, is somebody can have a new form of credit that’s cheaper than a payday loan. And those are great, that’s, that’s actually a step in the right direction. But if we’re not going to stop the bleeding, this is typically going to be a band-aid.
So we look at those band-aids as very positive some of those products, however, we can help stop the actual bleeding. So from our standpoint, it starts with fuel. Then from fuel, once you have fuel, there is a pathway to pay off debt and save money. And there are different tiers of the way you take that path. So for example, if I’m, if I have student loans, again, if I have fuel, so I know that I can pay off these loans at over some period of time, then it’s going to be in my best interest to try to find a way to reduce the interest rate or reduce the the the time it’s going to take to get have this completed. That’s the same with any type of debt.
So I’m now once I’m in a space where I know I can pay it off because I have extra cash each month to throw at it. Now I want to think about the efficiency in which I do that same with savings. Once I know that I have cash at the end of each month now it’s about how much do I save? Where do I save and you know, doesn’t make a difference whether I get a 1% APR or a half a percent APR, what we try to do is to get people focused on the most important decisions and not worry too much about the ones that get most of the marketing. I’ll give you an example.
There’s a lot of shift for people with their savings account. We get this question all the time. Should I move my $3,000 in savings to this other bank That’s offering me 1.1% APR, that my current bank is only offering me point 1%? Well, when you do the math on that, that’s like a $30 decision. And so how while it seems like kind of the general rule of thumb is I should be going for a more interest than less. That is true. However, that decision is probably number 18 on the list that you should be thinking about? How do we prioritize those decisions accordingly? Because that decision is not going to matter whether you get point one or 1%.
What’s gonna matter is, can I drive more fuel to increase that 3000 to 4000? Because I’m saving more. And I think this puts the power back into the individuals hands to say, Okay, what can I do? What do I control to improve my situation? And then the rest of the stuff will kind of work itself out? And that’s typically how we think through it. I mean, we can get I’m happy to get into details on like, we call them care plans. How do you think through paying off debt? How do you think through savings and what accounts you should use, we get get very specific, right, of course, but ultimately, it’s got to have fuel first, you got to have fuel. And then ultimately, you look at this employee, and you kind of think within the context of their life.
Take, for example, an employee that has three young children. Been married five, six years, and is kind of just like in the middle in the thick of things. I’m not gonna ask that employee to go and start moving their savings accounts around and all this kind of stuff. I’m trying to get them zoomed in on fuel, understand, what where does that next dollar go. And just execute on that month after month after month. And when they look up five years from now, or shoot five months from now, they are going to see that progress. And the reason that I’m trying to simplify it for them as because three young kids is hard enough.
Me adding additional complexity, because it sounds smart, isn’t going to be helpful, they will nod their head and not actually do it. The easier I can make it, the more the better chance I have for them to execute against the guidance.
Which is ultimately the goal.
Is there a way for employees? Because some of this is they don’t know what they don’t know. You know, we weren’t taught necessarily in high school, not everyone has an MBA or took finance, etc. And so so there’s a lot of anecdotal information flowing around. My grandfather’s, you know, brother-in-law, who met some guy, you know, at AutoZone told me that, how, how did he know that? How do they know where they are in terms of like, their health, the financial health of where they are, as a relates to where they want to be?
No, most don’t actually know that. Um, what they do know, is when they are facing a pain point, right? That pain point could be this credit card debt feels like it’s drowning me, right? These student loans, I never think I’m going to pay them off. A pain point could even be positive. How do I get enough money for a down payment on a home?
Am I in the right investments? Or am I in the right place when I’m contributing to this retirement account? What is a retirement account? And so I think that what we find is that this macro view of their health relative to where they should be and measuring that with some score is more a function of what organizations want to do to prove their worth. And I would say vendors in this case, then it is how the actual employee behaves.
If you help them with their next issue, you will earn the right to help them with the one after that, and the one after that. And that’s kind of where we keep our focus on is get them help on what they have going on right now. Make sure that it’s the right thing to help them on.
Like if you want to buy a home, but you’ve got $22,000 of credit card debt, and you make 45 grand? Well, maybe we need to think differently about homeownership. Because this does not seem like the right next move. So we’ll be very transparent about that. But I don’t need to teach this individual or coach this individual on a broad on view of their financial health, I need to coach them on what they feel is their pain point today. And we have very structured ways to do that along every single personal finance topic you can imagine.
Right. So let’s let’s talk a little bit about, because I see this as an engagement, you know tool, you’re an employee engagement and also an employee retention tool. You know, because you’re, you’re just like in some of the great you know, health wellness programs, you’re trying to help them get to a really, really good place. I also see it as a recruiting tool. I so on one level, I see it You know, I mean, I know we’re dealing with employees.
But, you know, if you when you’re applying for a job, if a recruiter can tell you, Hey, this is some of the things you can look forward to post, you know, agreement and post onboarding. You know, I can see that I can, I can see that as a, you know, a benefit to be sold or to be marketed to candidates, that without stepping there, what do you when you talk to HR? You know, how do you talk to them? What do they like about SmartPath? You know, what, what do you know, and what barriers do you face, etc.
Yeah, it’s like attempt to piece those apart. I think that week, we tell employers directly financial wellness alone, will not make your culture. If you already have a culture and a set of benefits that speak to total rewards. So if you have a, even that function in your organization, you’ve already taken a massive step towards this being a very employee-centric organization. If you’re not an employee-centric organization, dropping in a mental health program, or a financial health program with none of the other stuff is going to feel a bit disingenuous.
And so typically, when this is used in recruiting SmartPath will be one of many things that they’re talking about, right? In terms of the total package that you get when you come here. So I make it very clear to employers, and really, it’s not about me making it clear, them making it clear, we tend to engage with employers who’ve already thought about total rewards before we ever got there. So those are the ones that there’s a good fit.
So let me make sure I understand. So like Fortune’s list of the Best Companies to Work for great places to work, the best place to work, local awards, etc. Those people kinda already get it.
Yeah, those people kind of already get it. And then in industries where high competition, so we’re seeing a lot more activity from industries where there’s high competition for developer talent, right? Those companies may not get it yet. But they’re recognizing that they better get it quickly.
Or they’re either going to lose the talent or not even have the talent apply, either.
You got it.
And in those situations, they’re not just looking at us, they’re looking at mental health wellness, they’re looking at what do we do for food? In terms of can we do some sort of what are we doing for PTO? They’re thinking through their entire benefit strategy, what are we going to do? One that’s most interesting to me now, is the advent of lower and moderate compensated employees getting equity. Right? And what does that look like? So so they’re thinking holistically about this all the way at the, starting at the CEO level. So either they have it, or they have a strong enough pain point in the industry to where they need to get it.
So with that, I just want to make sure you’re obviously talking, or at least the easiest path for SmartPath would be to talk with people that get it when you find yourself talking with folks that maybe they haven’t felt this pain yet. Or maybe they haven’t invested in wellness in general, as as, as other companies or other industries. Where do you start with those folks? Or Even do you? I mean, do you? Do you waste time pushing the boulder uphill?
No, not that much. We don’t waste that much time doing that, because we don’t think it’s a great use of their time, so much about our time. But you know, I’ll give you an example. If a company doesn’t have a 401k match. Right? Then I tell them like, I’m happy to, yeah, have a conversation with you. But it’s all gonna come back to even if you could do it at the Safe Harbor 3%, you know. Do that first. Find the money for that.
That’s the best help you can get and put it on put them on auto-enrolment and auto-escalation. I can’t do anything to eclipse the value of you doing that. Right. And so those are the conscious conversations we have for the employers are at the earlier stage. And I leave and have conversations with employers at an earlier stage to say, do you really even need to do this? Because in some industries, they are in a situation where margins are razor-thin, right? And this isn’t something that’s going to help your margins immediately and definitely not from a CFO standpoint.
Right. They have a high turnover. I mean, in that same scenario, but they’re burning through employees for one reason or another then this could be seen as a retention tool.
It could be although if they’re burning through employees, typically I would not start with this. I’d start with who, how are the managers being trained.
You know, I’m going to try to guide the employer on what’s best for the employer. Right? Right. We come in there at some point depending on where they are, but there are plenty of conversations I’ve had, and our team has had, where the answer is not us.
Yeah. Well, well, I mean, I think that’s actually the best way to talk with customers. I think probably your experience at Bain also kind of gave you some of this is, you know, if you’ve got the fundamentals down, we can lay some things on top of the fundamentals that are that will be helpful. But if you don’t have the fundamentals, 401k matching being a great example of that. If you don’t have the fundamentals, we probably need to get the fundamentals down first. And when by we, I mean, French Victorian, you probably need to get the fundamentals done. So so let’s, let’s just pin it and talk a little bit about, you know, and I don’t need to know the dollars and cents part, but your financial model, like how you when you position things to HR, you were How do you make money as a subscription? SaaS software?
Yeah, typically. So our model kind of consists of two components, we have a subscription software company, first of all, our model is employer-sponsored. Right, the employer pays us, right, and we don’t generate income any other way. They pay us a fixed fee for the platform, which includes classes every single week, which includes some custom classes for their employees, which includes our tools. So all of that is available on a I think it’s a SaaS fee, right? And then we charge for coaching. And we charge for coaching on an hourly rate. And we know what our margins are on that.
And so that hourly rate ranges based on the size of the employer, and they can, the challenge with doing a usage-based, which is it is usage-based in that regard, is that employers want kind of, Hey, you know, I like this, because I’m only paying for the people using it. But what happens if lots of people use it? You know, how do I budget for this. And so typically, we’re really good at kind of being a good predictor of depending on their communication strategy, their marketing, how many people are even going to know about this, and how it’s going to play out, we can give them a good number to say, Hey, we think about 500 of your employees are going to use the coaching, and we in the in year one, we will take the hit on overage, right, I’m not gonna ever turn somebody away.
If somebody needs financial coaching, they’re not going to get turned away by us. That’s just kind of the core of our mission. It’s why I started the business. That being said, at the end of year one, we can have a stewardship meeting and say, Hey, you know, you guys had like, 3x, the usage. Now, from a pure business standpoint, I was like, wow, this was highly unprofitable. That being said, that is always a good thing. So companies turn around and say, Okay, I can go find more budget if we’re seeing high usage and high satisfaction. And so that first year helps us set a baseline, and then we go from there.
I love that. So, so one of the things that, you know, as you talk about usage and consumption. How do you turn to those two things, which are great indicators? How do you view success with an account?
Yeah, we do a few other things. So it really, it’s really important from our perspective, to segment what the value of this program is based on your employee base, and what type so I’ll give some examples. Let’s take a company x that has a large portion of the population of their employees that are nearing retirement age over the age of 50. For those types of companies, one of the challenges they’re going to face is they’re going to eventually have to do either voluntary riffs or riffs.
Because you, you may not be able to absorb this many individuals as they get to later stages in their career. And let’s assume if that’s the case, how can we help in our specifically in our retirement readiness coaching package, identify help people put the puzzle together that shows them if they’re truly able to retire? And what we found is unbelievable. Man, we found that 60% of the people that we ended up doing retirement readiness with are able to retire four and a half years earlier than they thought they were. Now think about how big of the gap that is if somebody thinks that they can’t retire, they are going to hang on as long as possible.
Because in a lot of times, the reason they think they can’t retire is because putting together Social Security, medical costs, the fact that their mortgage might be paid off or not, what are their expenses gonna be in retirement? How long are they going to live? That is highly complicated. In any kind of average person’s mind who doesn’t kind of live and breathe this stuff? So in those situations, the default response for somebody who doesn’t know is to keep working. I don’t want to turn off the nozzle of a paycheck, if I don’t think I can retire. And what we’re finding is is a majority of them 60%. It that’s not the case, they actually can retire. Way sooner than they thought once they see how the puzzle is put together. So there’s a very direct ROI there. Because there’s a carrying cost of employees at a certain stage, especially depending on the industry.
There’s a whole other set of employees where presenteeism or absenteeism is a problem in the workplace, folks are there, but they’re not there. And all of us, you and I on this call and everybody listening is remembers a time at work where your mind was somewhere else. Um, we actually do a lot of serving pre and post classes coaching kind of all these components to get a feel for the reduction in the number of hours people are distracted, so that we can quantify the benefit. Now that’s not going to show up directly on a CFOs P&L, if he pushed me for where’s that number on productivity rarely shows up as a direct number, it’s going to show up as efficiency. And so but we will be able to at least share from a quantitative standpoint, what does that look like in your organization? And that’s the same, it’s SmartPath that’s being used, but it’s segmenting the population to know what am I trying to do with these groups to drive true ROI to the organization.
I absolutely love this. I’m so glad we got to talk because I get asked about financial wellness pretty much weekly so it’s just really nice to know A, that you’re doing the work that you’re doing and you’re helping people I mean, this is I know it’s not a not for profit. I fully understand that. However, it is mission led and you’re helping people. So brother, I really appreciate you carving out time for us today and giving us the use case for SmartPath.
No problem at all, man. Thanks for having me on and congrats on all your success.
Absolutely and vice versa. And thanks for everyone for listening to the Use Case Podcast. Until next time.