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EXCLUSIVE: “Building a Long-Term Plan” – Giovanni Daprà, Moneyfarm in ‘The Fintech Magazine’

Twelve years and £3.7billion in assets under management later, Moneyfarm founder Giovanni Daprà says the wealthtech has ‘crossed the hurdle of survival’. So what now?

A slick, self-serve platform, low-fee products and the option of human advice, pitched at the digitally savvy. Sounds great – except those customers are, typically, young with only modest amounts to invest. It’s been dubbed the ‘hybrid robo paradox’, and it means life can be tough for this new breed of fintech seeking to disrupt the stuffy world of wealth management.

The first robo advisers launched in the UK a decade ago when the Retail Distribution Review forced financial advisers to agree charges upfront instead of taking a commission for selling products. Using questionnaires to determine a customer’s attitude to risk, the robo advisers were and remain attractive to younger investors due to their low management charges. But that reliance on clients in the accumulation stage of life means many robos are constrained by an average customer investment of less than £10,000, according to the Financial Times.

It’s a challenge Moneyfarm founder Giovanni Daprà readily admits constrained his own wealthtech’s growth during the early stages – but almost 12 years later he says his business has safely ‘crossed the hurdle of survival’.

“It took a long time to acquire assets. It’s hard to scale, and to scale fast, but in wealth management, it’s even harder [than in other sectors of fintech] because people take a long time to make decisions about their money,” says Daprà. “So we built a very strong operating model, which is a combination of asset management, engagement and technology, all three of them delivering the experience and service we want to provide.

“Underpinning this, we own our tech stack, which will deliver value for the next 20 years and allow us to innovate and disrupt what is a very backward industry where change has been very, very slow.”

Moneyfarm was launched in Italy in 2012 and four years later began operations in the UK to where it moved its headquarters. It now has 130,000 active investors and manages £3.7billion in assets, and its financial results reveal both customer numbers and assets under management were increasing at around 15 per cent annually last year.

The firm reports its average customer holds £26,000 with it and more than a third of its investors are women – an unusually high metric when 75 per cent of women don’t invest at all, according to a survey last year.

A STRATEGIC SPREAD

Daprà reveals the Moneyfarm strategy for growth now is twofold – to become a ‘total wealth manager’ for its customers, supporting them from youth to retirement, and build out its white-label B2B operation.

It currently offers a stocks and shares ISA, junior ISA, SIPP and general investment accounts, with traditional risk-rated portfolios and sustainable investment portfolios to choose from. Customers can also access funds managed by star-name asset managers through its Liquidity+ product, and trade shares, ETFs and mutual funds through an execution-only service.But, since 2018, it’s also provided white-label services and its client list now includes eToro, Poste Italiane – the largest distributor of financial services in Italy – Unicredit’s Buddybank and Banca Sella.

“We have to balance what the customer wants with what they need… a combination of skills is required to address such an emotional and complex topic as money management”

Most recently it developed the &me investment app for the company’s stakeholder M&G. Acquisitions are another strategy strand to create a wider offer for customers – the 2023 takeover of Profile Pensions means Moneyfarm customers can now track down old pensions and consolidate retirement earnings more easily.

Following last year’s frenetic period of growth, Moneyfarm launched a brand refresh in January with a TV and billboard advert campaign for the UK and Italy to highlight the business’s wider focus.

Daprà says: “My vision for Moneyfarm is what we would call total wealth management. I want to be able to support our customers from the early accumulation phase – so where we are today – when they are starting a family and start to have disposable income and savings, to building for the future, up until retirement. “To do that you have to create an adequate offering to generate value for the customer in all their life stages. I don’t think anybody has done that in the digital world yet and we are already much further advanced than anybody else.”

The white-label operation has, effectively, become a business within a business for Moneyfarm. We’ve basically plugged into big distributors who have a lot of customers that we wouldn’t be able to access, either due to brand affinity, cost, or maybe they’d rather go into a branch to make their first purchase,” says Daprà.

The product offer will continue to develop as Moneyfarm seeks to attract older, more experienced customers, he adds. But the core principles of ease of use, transparency, low fees and independence will remain. And good customer service has been, and always will be, key to the Moneyfarm proposition.

“Being the person who, not just as a platform, but as a counterpart, helps you make the right decision, is where I want to take Moneyfarm,” says Daprà.

NAIVETY AND ADVICE

A survey conducted for the firm by brand consultancy Siegel+Gale revealed 88 per cent of retail investors would value ‘the guidance and reassurance of an investment professional at some point in their investment journey’. Under Moneyfarm’s hybrid robo model, customers can speak to a consultant at any time, but they will first encounter one during the onboarding process, after choosing their investments, which are algorithmically picked, based on their attitude to risk and financial goals.

Daprà says, so far, the firm has won business from people who are typically reluctant to invest due to ‘cognitive overload’ when faced with the huge range of options for their savings.“Because investing can seem complicated people tend not to do it, they procrastinate,” he says. “Making investing accessible is where we drive value for the customer. During the onboarding journey with Moneyfarm, you get a video call with one of our consultants, which explains what the portfolio is and how it works. That call allows people to be 50 to 75 per cent more confident, to understand the fluctuation of the market and long-term performances.

“So, it’s all about building a customer’s confidence at a price point that is very different from the traditional industry’s.”

Investing always comes with a risk caveat, but Daprà believes the biggest risk most customers face is losing sight of their long-term goals due to their inexperience. He says around 70 per cent of them log in to the Moneyfarm dashboard every week. That indicates to him that the company has to be an educator, too, so they aren’t spooked by market fluctuations.

“We need to create an experience that is simple, but provides the information the customer wants without leveraging their inherent bias,” he says. “For example, if we show them the intraday performance of a market, the customer will crave that information, but it’s not necessarily the right information to look for because it will incentivise bad behaviours. They may see the S&P has dropped one per cent and wonder whether to sell or buy.

“So, we have to balance what the customer wants with what they need, and how we do that is by having investment consultants talking to product managers, so emotional need is translated into an experience that works for the Moneyfarm user. A combination of skills is required to address such an emotional and complex topic as money management.”

It means product development must be, in Daprà’s words, slightly more ‘Apple’ (building the product, then finding customers) than ‘Lean Startup’ (being guided by customer interest).

“In wealth management, it is very difficult to ask the customer what they want, because they will say, ‘I want 10 per cent a year, with no risk’,” he says.“Because of this, writing educational content is important for us. If you are a customer of Moneyfarm, you might see one or two push notifications a week from us, talking about the market, the outlook for the economy or basic financial planning – 101 kind of tips.

“That overlay of content and education is part of the service. People value it, and it’s a differentiator for us.”


 

This article was published in The Fintech Magazine Issue 31, Page 40-41

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