Aspiration lets its customers decide how much it gets paid to manage their money
Los Angeles-based Aspiration, the financial firm with a conscience, wants to be the investment firm of choice for middle-class Americans. It aims to help customers make money while giving 10% of its revenues to charity, and letting customers decide what fee to pay on their investments. The startup, which has attracted 20,000 customers since launching in late 2014, offers several products; from a checking account, to a sustainable investment fund, and its flagship mutual fund. Founder and former speechwriter for Al Gore, Andrei Cherny, said about 90% of the firms elect to pay a fee, which he attributes to the strong relationship Aspirational builds with its customers.

Whether it’s the bank bailout, housing crisis or flash crash, financial institutions don’t have the best reputation these days, but this investment company is trying to move away from a “greed is good” approach and closer to a feel-good mentality.

Aspiration, which says it’s trying to help its customers make money while also making a difference, gives a portion of its revenue to charity and lets clients pay whatever fee they want on their investments — even if the fee is nothing.

The company’s message comes at a time when many Americans say they don’t trust banks, an industry known for trying to maximize revenue, much less give away 10% of it, as Aspiration is doing.

About 45% of Americans said they have “some” confidence in banks in a 2015 poll by the analytics company Gallup, and 26% said they have “very little” confidence or none at all. Gallup polled about 1,500 people in June 2015. The drop in confidence was pronounced between 2006 and 2009, coinciding with the U.S. financial crisis. About half of people said they trusted banks “a great deal” or “quite a lot” in 2004 to 2005, and that number fell to 22% in 2009 and hit a low of 21% in 2012.

Letting consumers pick their own fee is just part of the company’s mission: being “a financial firm with a conscience,” said its chief executive Andrei Cherny, a former speechwriter for Vice President Al Gore during the Clinton administration who also worked as the Assistant Attorney General in Arizona where he investigated financial fraud.

Aspiration’s website tries to appeal to investors with a conscience. Courtesy of Aspiration

Los Angeles-based Aspiration is a for-profit company, and Cherny said about 90% of customers choose to pay a fee rather than electing to pay 0%, which he attributes to the strong relationship he thinks Aspiration creates with the customers. Many find out about the company through word of mouth and social media, he said. The company has invested in its Facebook presence and website and emphasizes that it donates 10% of revenue to charities that promote economic growth in the U.S.

“People at the end of the day are, for the most part, honest,” he said. “They have a sense of obligation and reciprocity.”

Cherny declined to specify the amount of assets Aspiration is managing, but said it has more than 20,000 customers since launching in fall 2014. The company raised $15.5 million from venture-capital firms and individual investors during summer 2015.

The average customer’s age is 33, and they range from 18 to 95, Cherny said.

On Aspiration’s Facebook page, individuals have left comments such as “This is the way for a sense of humanity to progress in a positive manner” and pro-environment messages, praising the idea of sustainable investments.

There are also several messages supporting presidential candidate Bernie Sanders, who has spoken about economic inequality and “the greed of Wall Street.”

“There’s a real sense that (customers) are excited there’s a financial firm that is built for everyday people and for the middle class, and a feeling that the financial industry hasn’t worked for everyday people or shared their values,” Cherny said.

Online investing services have grown rapidly in the last several years -- even investment bank Goldman Sachs GS, +0.81% opened an online savings account for people with as little as $1 to invest earlier this month.

The online financial adviser Betterment LLC has more than 150,000 customers who have invested $3.9 billion and recently closed a $100 million funding round, valuing the company at $700 million. The company charges 0.35% as an annual fee for accounts less than $10,000, 0.25% for accounts $10,000 to $100,000 and 0.15% for accounts that are more. It was founded in 2008.

Aspiration offers several products: a sustainable investment fund called the Redwood Fund, a mutual fund called the Flagship Fund and a checking account called the Summit Account. It also began offering an IRA in March.

Customers must invest $500 minimum in the Redwood Fund or Flagship Fund, and both are open to new investors.

The Summit checking account requires a minimum opening deposit of $10 and pays 0.25% annual percentage yield for balances under $2,500 and 1.00% APY on balances that are more. Customers access their accounts with a debit card that they can use at any ATM in the U.S. or abroad, for no fee. If customers incur an ATM fee at any point, Aspiration reimburses them. It has no monthly service fee.

Aspiration itself is not a bank; it sets up the account through a partnership with Boston-based Radius Bank.

The account’s annual percentage yield is higher than that of many traditional banks; for example, the Wells Fargo Preferred Checking WFC, -0.89% account pays 0% APY for balances less than $500 and 0.01% for those $500 or more, and Bank of America pays 0.01% APY on personal checking accounts less than $50,000 and 0.02% for accounts worth more.

Ally Bank ALLY, -0.89% , which is based in Detroit, offers a rate more competitive with Aspiration: 0.10% APY on personal checking accounts less than $15,000 and 0.60% for those with $15,000 or more.

And Aspiration’s partner Radius Bank offers a checking account that offers up to a 1.0% APY on the portion of money in the account that is over $2,500.

Aspiration doesn’t offer a savings account or any loan products yet.

The Aspiration checking account does have some fees associated with it — customers who overdraw their accounts are charged $25, incoming domestic wire transfers cost $10 and outgoing domestic wire transfers cost $20. It also charges a $5 daily overdraft fee for accounts that remain in the negative.

Right now, it also doesn’t have a mobile app, which may be inconvenient for customers who like to access their accounts via apps on smartphones and tablets, but Cherny said the company is developing one that should premiere within a few weeks. And customers can’t set up accounts instantly; some reviews and comments on Aspiration’s Facebook page have said customers have waited weeks or more to be approved for the checking account after they signed up.

Cherny says once customers log on to the site and sign up, they should receive an invitation to join Aspiration within about a week, because the company only sends invites out in batches weekly. At that point, Aspiration will confirm a potential customer’s identity online, which should also be a fast process, unless for some reason there is a problem with the customer’s sign-up, or difficulty confirming their online identity, he said.

Investment funds are often criticized for charging high fees, and while although Aspiration lets customers choose their own fees, the company notes on its website that it negotiates and subsidizes third-party fees on its investments, but it can’t completely eliminate them.

Still, Cherny says Aspiration caps third-party fees at 0.5%. If the company is unable to negotiate those fees to 0.5%, Aspiration covers them, and the customer does not pay them.

For consumers who are in the market to open a new checking account, it’s also important to consider companies with long histories of good customer service and conveniences like mobile apps, said Devan Goldstein, a banking expert at personal finance website NerdWallet, which ranks best checking accounts.

Aspiration ranked second on NerdWallet’s list of best accounts when ranked by interest rates, only behind Radius Bank, Aspiration’s partner.

Goldstein said to be aware of Aspiration’s overdraft fee, which is fairly high. (Several institutions charge more, including Chase Bank and Wells Fargo, which charge $34 and $35, respectively).

Interest rates are also subject to change, he said, so consumers should be aware that Aspiration’s rates could change in the future.