What Happened To Swell Investing & Why Did It Fail?
January 24, 2025
Swell Investing was a digital platform launched by Pacific Life in 2017, aimed at socially conscious millennials. It allowed users to invest in companies aligned with UN Sustainable Development Goals. Despite initial enthusiasm, Swell struggled to scale and attract enough clients, leading to its closure in 2019.
What Was Swell Investing?
Swell Investing offered a digital platform for socially responsible investing, aligning with the UN Sustainable Development Goals. Its unique value proposition was ensuring every dollar invested had a positive impact, with curated themes like Green Tech and Clean Water. Notably, it attracted 15,000 clients and managed $35 million in assets.
What Happened to Swell Investing?
The story of Swell Investing is a compelling narrative of ambition, challenges, and eventual closure:
Initial Enthusiasm and Growth: Launched in 2017 by Pacific Life, Swell Investing quickly attracted attention for its focus on socially responsible investing. The platform managed to gather 15,000 clients and $35 million in assets, showcasing a promising start.
High Customer Acquisition Costs: Swell faced significant challenges in acquiring customers, with initial costs reaching up to $350 per person. Although these costs were later reduced to about $150, they remained a substantial burden on the company's finances.
Target Audience Financial Struggles: The platform aimed to attract millennials, a demographic often characterized by low net worth and high debt. This financial reality made it difficult for Swell to grow its customer base and achieve the necessary scale for sustainability.
Competitive Disadvantages: Swell's management fee of 0.70% to 0.75% per year was higher than many other robo-advisors, which posed a competitive disadvantage. Additionally, the platform's focus on newer, midsized companies led to volatile portfolios, which were not ideal for small retail investors.
Closure and Future Prospects: Despite its innovative approach, Swell Investing ceased operations in August 2019. The team behind Swell remains committed to sustainable-impact investing, suggesting that the platform may have been ahead of its time, with future opportunities likely as wealth transfers to younger generations.
When Did Swell Investing Shut Down?
Swell Investing officially shut down on August 30, 2019. The platform ceased accepting new clients and deposits as of July 24, 2019, and instructed existing clients to withdraw their funds by the closure date.
Why Did Swell Investing Shut Down?
High Customer Acquisition Costs: Swell Investing faced significant challenges in acquiring customers, with initial costs reaching up to $350 per person. Although these costs were later reduced to about $150, they remained a substantial burden on the company's finances, making it difficult to achieve profitability.
Target Demographic Financial Constraints: The platform aimed to attract millennials, a demographic often characterized by low net worth and high debt. According to a Deloitte study, the average millennial has a net worth of just $8,000, which made it challenging for Swell to grow its customer base and achieve the necessary scale for sustainability.
Higher Management Fees: Swell's management fee of 0.70% to 0.75% per year was higher than many other robo-advisors. This posed a competitive disadvantage, as potential clients were deterred by the higher costs compared to other automated investing platforms.
Volatile Investment Portfolios: The platform's focus on newer, midsized companies led to volatile portfolios, which were not ideal for small retail investors. This volatility made it difficult for Swell to retain clients who were looking for more stable investment options.
Misalignment with Core Business Strategy: Pacific Life, the parent company of Swell Investing, stated that the Swell model was not a long-term fit for their core business strategy. Despite believing in the value of sustainable-impact investing, the company decided to shut down Swell due to its inability to align with Pacific Life's broader business goals.
Lessons Learned from Swell Investing's Failure
Understand Your Audience: Targeting financially constrained demographics can limit growth. Ensure your target market has the financial capacity to support your business model.
Control Acquisition Costs: High customer acquisition costs can drain resources. Develop cost-effective strategies to attract and retain clients.
Competitive Pricing: Offering competitive fees is crucial. High management fees can deter potential clients, especially in a crowded market.
Portfolio Stability: Volatile investment options may not appeal to all investors. Balance innovation with stability to retain a broader client base.
Alignment with Core Strategy: Ensure your business model aligns with your company's long-term strategy. Misalignment can lead to unsustainable operations.
We Shut Down Startups
Swell Investing's closure highlights the complexities and challenges startups face, from high customer acquisition costs to misaligned business strategies. If you're navigating similar hurdles, Sunset can help you manage the winding-down process smoothly.
Sunset takes care of all the legal, tax, and operational burdens, allowing you to avoid penalties and reduce liabilities. Book a demo today to see how we can assist you in moving on to your next venture seamlessly.
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