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🔒 🔒 An inside look at ICM and founder Fred Phillips

Katie Tabeling March 16, 2022

WILMINGTON — In many ways, Fred Phillips IV’s story is one about leveraging human capital for maximum potential. He tends to see possibilities instead of obstacles in the path ahead. […]

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Investment Cash Management CEO Fred Phillips IV and his wife, ICM Chief Administrative Officer Carolina Phillips. DBT PHOTO BY JIM COARSE/MOONLOOP PHOTOGRAPHY[/caption] WILMINGTON — In many ways, Fred Phillips IV’s story is one about leveraging human capital for maximum potential. He tends to see possibilities instead of obstacles in the path ahead. He describes himself as competitive, even against himself as a young student at the prestigious St. John's School in Houston, where he attended on scholarship. Back then, tests were like puzzles, a game he could solve if he just looked at it the right way. Decades later, while Phillips was in Argentina after working with international private equity funds he mused over a tremendous problem: the volatile currency of the country. Twenty years ago, an American dollar would have been worth 2.5 Argentine pesos. Today, it’s about 108 in Argentine pesos. Phillips would want his ideal currency to be stable and generate a steady return, but also be used to buy things, so immediate liquidity would be needed. In short, a government money market fund. “But if I’m doing that, why not make a mutual fund or an exchange-traded fund? If I can do that, why not come up with a liquid bond ladder, so I can have a cash product for up to 30 days and a bond fund for six to 12 months and so on?” Phillips thought. “Then, I started to think, ‘This could be really interesting because I had never seen anything like this before.’” That was the inception of Investor Cash Management, an upstart financial technology firm that leverages its own software to link debit cards to both cash and securities. In turn, that means securities can be turned into digital currencies to pay for everyday transactions. ICM is a star on the rise. Launched in Chicago with $6 million raised in venture capital from board members like MBNA co-founder and former Mastercard chairman Lance Weaver and Morningstar founder and chairman Joe Mansueto, the Pitchbook valued the company at $24 million in 2018. After closing out a Series B round of fundraising, another $10 million was raised, and the company’s value was at $120 million. Late last year, ICM was awarded state funds for his plan to build a $15 million headquarters in downtown Wilmington — a credit card capital of the world — and bring 395 jobs with it. Phillips, with his wife and ICM Chief Administrative Officer Carolina Phillips at his side, is now looking to launch its product internationally this year, and is in “intense conversations” with at least two countries now. In June. ICM will be one of two fintech companies to join the U.S. Commerce Department for a financial innovation trade mission in June. But Phillips believes that ICM won’t transform downtown Wilmington like MBNA did back in its heyday — for one, the focus is on technology and on a smaller scale. But the hope is to play a pivotal role in the city’s future, through its work and social programs like improving financial literacy in the local schools. “The standard for us is what we can do to make our community better, not only through our products, but through the different contributions we can make,” Phillips said.

Harness good fortune

While he and his family have been welcomed into the First State fold, Phillips is an outsider. But that could be the biggest asset as ICM looks to reshape the investment narrative. At the age of 4, his parents divorced and his mother, an immigrant from Veracruz, Mexico, went back to work. While she was working at the VA Hospital in Houston, the chaplain saw something in Phillips and connected the family to a friend who served as headmaster at St John’s. Phillips would be one of two scholarship students, studying alongside scions of billionaires and executives. Every penny his mother made went to Phillips’ education and extra curriculars, and when Phillips visited his friends’ homes, he was trying to work out the steps to achieve that success. Finishing studies at Cornell, Yale and Oxford and with a law degree from Yale in hand, Phillips clerked for federal appeal judge. He soon was awarded a Fulbright scholarship to the Philippines and later traveled to the Chinese Hengduan Mountains for the experience. “A lot of what motivated me was curiosity and not putting limits on what is attainable,” Phillips said. “If someone will win a Fulbright, why not me? Someone did that, and I would be interested to try my own journey.” While he was unhappily working at an international law firm, a chance encounter at a dinner party led him to manage TesCorp’s assets in Argentina. After the company was sold, ABN AMRO was looking for someone to manage its technology investment portfolio. By that time in the 1990s, the NASDAQ valuation of private equity firms rose from 1,000 to 5,000 points. Once again, suitors came calling, and this time it was the Carlyle Group. If good fortune is a preparation meeting opportunity, then Phillips has it in spades. He points that much of his success was a serendipitous journey, down to the day he met Carolina at a cafe in Argentina. Their paths wouldn’t have crossed if Phillips wasn’t meeting a ABN AMRO colleague in that café. “So much of my life, I think, is being able to recognize there are so many opportunities of good fortune and harnessing them,” he said.

The future of fintech

Much of that serendipity pushed ICM from an idea to reality, as Phillips met someone who worked at Morningstar at a dinner party, and offered to introduce him to the company’s founder and chairman Joe Mansueto. After thinking about it for a day, Mansueto was in, and ICM took off. Investments came in from MBNA co-founder and former Mastercard chairman Lance Weaver and Ariel Investments founder and chairman John Rogers, who also serves on the board of McDonalds and the New York Times. Rogers was particularly interested in ICM’s social inclusion aspect, gearing the products for the average person who have less assets than billionaires. “For people like my mom, you don't invest for three reasons: there’s a cost, there’s thousands of investment products out there, and they don’t have a lot of money, so they need to be able to access it,” Phillips said. “It's a benign Trojan horse to get them started in investing.” ICM’s mission is to convert people into investors— but Phillips said one of the ultimate goals was creating a tool that would improve the community through building wealth. Or boiling it down: presenting a more “reasonable choice.” “It’s not that you’re leveraging your mortgage to buy the latest big stock. You’re making conservative products that will perform or ever outperform every time,” he said. “And if you harness an investment product to a free bank account, it’s something that can speak to a broad group of people who have historically underinvested.” In 2014, a Pew research Center study showed that a quarter of Black households would have less than $5 if they liquidated investments and retirement, compared to the $3,000 of a quarter of white households in the bottom of the income brackets. Over time, that wealth gap has grown even more vast - a recent study from Goldman’s Sachs shows that Black families have a median net wealth of $66,000 compared to the $260,000 combined wealth of a white family. “One of the things we're very proud of, is that our product we think benefits everyone. I do think here in Delaware the government officials at all levels are supportive of that message, and trying to support balanced growth,” Phillips said. Right now, the latest puzzle is what does work look like in the post-pandemic future for ICM, and how does it compete for a skilled workforce? The company hopes to hire coders and programmers as well as marketing, finance and managerial positions for an iconoclast workplace looking, in some cases, to change financial outcomes for marginalized populations. Phillips has already tried working in monolithic companies, and he knows there’s thousands of people in Wilmington still doing that work. But he’s betting there’s a small subsection of that workforce who already has the experience that’s looking for something different. “It’s like the fallacy of saying everyone in the city loves pizza because every restaurant is a pizza place. We want to be a Chinese place - and who knows, maybe you won’t eat pizza every day.”he said. “I would rather work in a place where I have more autonomy and you’re creating a unique product.”

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Harness good fortune

The future of fintech

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