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EXCLUSIVE: “Making It” – Simon Holland, Wealthify in ‘The Fintech Magazine’
We spoke to Simon Holland from Wealthify to discover how robo-advisors are adapting to the changing retail investments space, whether they really can alter the savings habits of a nation, and the partnerships that are increasingly key to their success.
The world of retail investing has changed a lot since Wealthify was founded in 2016 with a mission to make investment accessible to all.
It was one of the first to offer a primarily app-based service that championed fractional shareholding, giving ordinary people the opportunity to invest with as little as £1 – a modest incentive that opened the wealth management door to a wider demographic.
Of course, Wealthify now has its fair share of competitors. There are other plan-based robo-advisors like Nutmeg and Moneyfarm, as well as retail investment apps such as eToro, Trading 212 and Freetrade that all teleport the confusing world of stocks, shares and indices from the trading room floor to your mobile phone.
There are more opportunities than ever to ‘make your money work harder’.But competition isn’t Wealthify’s prime concern – rather it’s still about convincing more of the UK population to invest in the first place. Wealthify’s own research from 2023 found that 85 per cent of Brits still prefer to let money sit in a savings account.
Research from Money.co.uk at the start of this year told a similar story. It showed that £8.3billion was put into fixed-rate bonds and ISA accounts in August 2023 and that 57 per cent of UK adults were using savings accounts as their main way to save money – no doubt spurred by the Bank of England’s decision to raise the base rate that month by 0.25 per cent to 5.25 per cent (although now, the expectation is that it will sink back to around three per cent by the end of 2025).
A significant barrier to investing uncovered in the Wealthify survey was that 69 per cent of savers just don’t trust where their money is going; there is a distinct reluctance to switch from legacy institutions to fintechs.
Investment apps often flaunt their superior user experience as a good reason to join them. It’s a value proposition that has undoubtedly encouraged many people to change their habits and seek out a robo-advisor, but it’s nowhere near the surge predicted during the pandemic when lockdown created a spike in interest in do-it-yourself and do-it-for-me investment apps.
The correction we subsequently saw in the markets and the impact that had on thousands of inexperienced enough investors to sustain standalone wealthtech apps in the long run. But Wealthify isn’t standalone. It has been fully owned by the financial services giant Aviva, since 2020. And it may be that future success in the sector will be determined wwby similar partnerships and acquisitions.
WALLS COME TUMBLING DOWN
Wealthify launched with the ambition of breaking down barriers to investing, ‘the biggest of which was having enough money to invest, which we solved’, says its chief product officer Simon Holland. Accessibility and continuous improvement remains its focus – the app was ‘rebuilt from the ground up’ just over a year ago and Wealthify is currently trialling a pilot under the UK’s open banking standards to allow customers to see all their money in one place.
“It’s helpful for answering important questions like ‘do I have enough money to put away at the end of the month?’ and having that in one space, rather than having to hop between apps,” says Holland.“We’ve found that if you give people the confidence from knowing how much money they’ve got in their account, they’re able to make much better decisions [because] with long-term investing, there’s always a fight between putting money away for the future and spending it now.”
While a human customer services team is always on hand, 80 per cent of users only interact with the wealthtech through its app, so closely monitoring how they are behaving and engaging with it, is key. Above all, it’s a matter of communication.
“It’s really important for us to make sure that people can do all of the things that they want to do, whether that’s move money around, top up money, etc,” says Holland. “Understanding investment performance is also obviously critical.
“But, with Wealthify managing their investments for them, they also need to understand how we’re managing their money, what investment changes we’re making, what’s going on with markets, and how our plans are positioned to go through particular market events.
“With long-term investing, there’s always a fight between putting money away for the future and spending it now”
“Our investment team write their weekly investment updates that look at what’s going on in markets and that goes through a content writing team that strips out the jargon. There’s a good dialogue between those teams, to make sure it still says what it needs to say, from a market’s perspective. And when people speak to our customer care team, we’re tracking whether this content is relevant and answers the questions they have about market events, and how they impact their investments,” says Holland.
That support is particularly necessary due to the high volume of young people using robo platforms. According to Wealthify research in 2023, 68 per cent of Gen Z have considered investing in the past year and data from the CFA Institute published in the Financial Times says that more than 80 per cent of Gen Z had started investing by the time they turned 21. Popularisation through social media and ‘FOMO’ are cited as reasons.
That only 15 per cent used finance professionals to help them make decisions is further evidence that apps play a key role in young people’s financial education. The problem for the wealthtechs, though, is the relatively small size of their individual portfolios. Those with larger funds, generally older people, aren’t investing via such platforms. Of the people surveyed, only 20 per cent of those over 66 have considered using a robo-advisor.
Which brings us back to the question of how long many such wealthtechs can survive on their own.
PARTNERSHIPS ARE KEY
Wealthify is not alone in the fintech world in joining forces with an established institution – investment apps Nutmeg and Moneyfarm have struck similar deals with other big names. In Wealthify’s case, Aviva’s funds have certainly helped it to scale, as CEO Andrew Russell acknowledged in a recent interview, saying how such a partnership ‘can help smooth the ups and downs of a typical funding cycle by keeping investment flowing in’.
The benefits of such a partnership cut both ways, particularly if a legacy institution can leverage the startup’s tech and customer demographic.
“I’ve worked in several large financial institutions, and I know the challenge they have [with technology],” says Holland.
The Wealthify platform and name are embedded in Aviva’s website; it continues to operate with autonomy but with the backing and big-brand affiliation that would appear to be crucial to a robo-advisor’s continued success. That doesn’t preclude it from working with other legacy institutions, such as with TSB Bank in the UK to provide an investment service for its customers.
“TSB, obviously, has a great offering, in terms of current accounts, savings accounts, etc, but it didn’t have an investment offer,” says Holland. “That was a clear opportunity. We’re good at the investments, and they’re good at banking, which makes it a really great partnership.”
It’s bridged the gap to other newer banking apps where the business case made sense, too.
“We’ve had a longstanding collaboration with Starling, where customers can link their bank account to us with their app,” continues Holland.
“We also share investment information with them, if the user consents.” While there isn’t an open banking standard for wealth management, yet ‘we’re working with the industry to see if that’s something we can develop, because I think it is important that people should be able to access things how they want’, says Holland.
“Ultimately, we’re a long-term investor,” he says, “so we want to make sure that people are able to put money away and not have to access it for a period of time.
“Being able to manage their day-to-day finances means they’re able to better manage their long-term finances and apps give us an opportunity to help in that space, understand how people are feeling about the amount of money they’re spending and the costs they are facing, which is obviously really relevant at the moment. But also how they feel about the money they’re putting away – and helping them feel more excited about it.”
This article was published in The Fintech Magazine Issue 31, Page 37-38
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