Originally posted by Melanie Friedrichs on The Andera Blog. Follow us on twitter @AnderaInc.

On June 13th Andera will be hosting a webinar with JP Nicols called “What About the Overbanked? Attracting Affluent Customers in a Digital Age.”  (I’ve seen the slides and I think it will be a great presentation- you can register here). JP talks often on his blog about the importance of a “high tech and high touch” strategy for wealth management in the modern era. Wealthy individuals tend to be more technologically savvy and demand the ability to monitor or conduct basic transactions through online or mobile portals, but they also want personalized attention and tailored financial advice. For financial institutions who see the value of more affluent customers and members (and who doesn’t), high tech and high touch is a must.

Despite the title of JP’s webinar, a reference to the almost comical amount of attention the term “underbanked” has received in the financial technology / marketing space in the last year (we ran a webinar on the underbanked as well in January, with Patrice Peyret of Plastyc), I couldn’t help thinking about how “high tech and high touch” might apply to the financially underserved.  Specifically, it reminded me of the Financial Coaching offered by a local microfinance organization called The Capital Good Fund.

The Capital Good Fund is a social enterprise, which means that it uses market methods to fulfill a social mission, and relies on a combination of earned income from interest and fees and grant funding.  It was founded in 2008 by a couple of Brown students, and has since made more than $200,000 in loans to local community members turned down by traditional financial institutions. For several years the Capital Good fund has also offered financial coaching to its borrowers for a small fee, and last year teamed up with the Rhode Island state treasurer Gina Ramaindo to create the Financial Coaching corps,  an organization that matches financially savvy volunteers with Rhode Islanders in need of financial advice.

From the Financial Coaching corps website:

For people in banking,  budgets and credit scores are bread and butter, and managing mortgage payments is certainly not as complicated as managing a $10 million dollar portfolio for a trust fund baby. But then I remember that the crisis in 2008 was largely caused by borrowers who didn’t know how to manage debt (and lenders who didn’t care to teach them). I think about a college friend who is petrified of student loans because her parents have been living payment to payment for years. I also remember reading my cousin’s graduation card, filled with life advice from family members and friends.  One theme stood out over all the others: don’t get into debt. Clearly financial coaching fills an unmet need.

Perhaps financial coaching wouldn’t be necessary if financial education was provided in schools. I don’t mean the proverbial “how to balance a checkbook” because no one does that anymore, but basic things like how a credit card words, what refinancing means, where to go if you want an auto loan, etc etc.  It’s incredible how little practical knowledge I gained in high school and college. I remember applying for my first credit card and stumbling over the APY.   I thought: ok that’s the interest rate, but do I have to pay that regardless, or only if I go over the credit limit, or only if I miss a payment?  Wait, APY.. what does that mean exactly? In my corporate finance class we just assumed a 10% annual rate or we compounded continuously.. is APY compounded continuously?  It was pathetic.

The Financial Coaching Corps is less than a year old and has yet to prove its model, but it is interesting. It could be a way to sustainably provide “high touch” banking services to the underbanked. It also makes me wonder if the the model could be incorporated into financial institutions. Obviously, free paid financial advisory for all customers and members doesn’t make sense; no bank or credit union I know of can afford to offer in-depth, personalized advice to every checking account owner and still break even.  But I can easily imagine member-to-member volunteer financial advisory within credit unions (in fact, such a system may already exist).

If financial coaching and financial education is the “high touch,” personal finance management is the “high tech.” Where technology allows wealthy can monitor their many accounts from mobile apps and set up bill pay and direct deposit, it can help the less wealthy stay under budget, make payments, and gradually improve their credit score. LearnVest, SmartyPig and CreditKarma are a few of my favorite apps for that.

Ultimately, the underbanked and the overbanked have different needs; they purchase different products, they use different services, and they need different advice.  I’m not sure if we’ll ever get to a point where the needs of the underbanked can practically be met with a “high touch and high tech” strategy, but I hope that day will come!