Albert Soleiman, Head of CMC Invest on the sustainability of free investing apps and why you need to know why you are investing

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There has never been a better time to be an investor, if you ignore what has happened to the markets recently. New investing apps are launching all the time which make it easier, quicker and cheaper to invest than ever before. You can now buy shares for free, pay no account fees and there is more analysis, data and coverage of the stockmarket than you could possibly watch, read or listen too. But, essentially, investing apps all do the same thing, they let you buy shares, and then sell them again. So, if all investing apps basically cost the same, give you access to the same markets and your money (to a point) is protected by the FSCS, how do you decide who to trust with your investments? One of the latest investing apps available in the UK is CMC Invest, we chat to Albert Soleiman, Head of CMC Invest to find out what makes them different, if there is a future in providing investing for free and how they can help investors get the most out of the markets.

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Tell us a little bit about CMC Invest. Why did you guys decide to set it up and why is now the right time?

CMC Invest is CMC Markets venturing into investment platforms. Of course, we’ve got a pretty well-established investment business and stock broking business in Australia, but this is our foray into the UK investment market and hopefully beyond that. The reason we set up CMC Invest was really to fill a gap we identified in the market. We felt we could provide a very modernized investment journey designed for people to invest the way they choose to, remove as much of the friction that investors face as much as possible and develop something that is focused on the individual needs of today’s investors. We are in a position where we own our technology, we have the industry know-how having been around for 30-plus years, and we felt that this was the right time for us to diversify into this space.

What would you say is the one thing that sets CMC Invest apart from all the other apps in the app store that are trying to get people engaged in investing?

I think our focus on providing a personalized service focused on the local UK investor really sets us apart. I think that the fact that we know the market, we’ve been in the market with our existing business, and we’ve got the appetite to develop a long-term relationship with our clients, we’re not building something that is the latest trend or the latest fashion or that has got other motivations other than to focus on the ultimate success of our clients. The way that we see it is that if we build for our clients if they’re successful over the long term, so will we.

Once you’ve captured the UK market, are there plans to expand the CMC Invest brand globally?

CMC markets as a business are quite ambitious, we’ve got ambitious targets and ambitious goals and we’re always looking for ways to grow and really use our core strength. The CMC Invest brand is quite established in Australia and there are expansions in other markets with Singapore and Canada, there’s a few other markets that we’ve earmarked for expansion. On the European side, our focus today is solely on the UK and really building out that app, getting it right for our clients. Over the medium term, we keep all options open and we hope to be able to look at other markets in time.

You’ve got SIPS coming on soon?

Shortly, yes.

Why have you chosen to start from scratch with CMC Invest rather than just plug an investing capability into the CMC Market’s platform?

That’s a really good question, one that we toyed with for some time. What we’re aiming to do, our ambition is to really genuinely disrupt the investment industry with, as I said earlier, a platform built for the way people like to invest today, removing the frictions that they face and provide an overall value great for clients. We felt that doing that as a separate platform, it’s not 100% independent because we still rely on our core technology and our core infrastructure but having the platform separate to what we currently have really speaks to the fact that we are catering for a different need and potentially a different client. Giving people the ability to build their wealth and think more longer term. If they want to speculate, we’ve certainly got the service for that, if they’re looking for more of a training experience, we’ve absolutely got that but this is more targeted towards the longer term investor with the tax wrappers, as you mentioned earlier, that we released as well as the way the product itself works.

What would you say is the biggest friction or the biggest barrier to people starting to invest? And also, what do you think is the most important thing to investors, whilst you’re building the product? 

The one thing we thought if we can nail, we can really improve the investment journey plus open the market to a much wider base, and that is around guidance and accessibility. Not accessibility in terms of being able to log in and buy and sell, but knowing where to start, knowing what to do, knowing why you’re doing what you’re doing.

If we can get people to at least ask themselves why and understand what their objectives are, we feel we can put you on the right path to helping you develop long-term success. Over time, we want to be able to build for that knowledge gap, we’ve identified that knowledge gap as perhaps the biggest gap we’ve found in the market today and that varies, knowledge doesn’t necessarily mean people are just starting out, but it could be you’ve done this for a few years and you don’t know what your strategy is, you may not have a strategy, but it’s getting investors of all levels of experience to really focus in and hone in on what they’re trying to achieve.

How will you address providing investment advice in a world where it’s very difficult to actually do it?

That’s a challenge. Obviously, we work with the regulations that we have to operate within and obviously, as you say, there’s a lot of noise that we need to make sure that we block that out.

The way that we are looking at addressing is through an iterative approach. So, we started as a foundational step in understanding or asking clients to understand their own investment goals and I think once you have an objective, once you have a clear end point, it makes the journey so much more efficient than investing just for the sake of it. So, whilst we get you to start thinking about why you’re doing what you’re doing, then we can extrapolate things such as risk profiles, time horizons and over time, we hope to be able to continue to add modules upon modules of that for clients.

How do you think providing free investment accounts is going to go in the future? Do you think it’s sustainable or do you think people will always have to pay for investing one way or another?

I think people will always have to pay for investing one way or another, I think it’s just critical clients understand what they’re paying and when they’re paying it, I think. And equally, on the broker side, I think having a sustainable business model is critical because from a client point of view, you want to make sure that the person looking after your assets is going to be around and is going to securely protect them. So. I think it’s important clients understand if we are getting something for free, how is my broker making money? And for us, this is all a question about transparency, being very clear as to what we’re charging for and where we’re not charging, why we’re not charging and again, I mentioned earlier about being able to lean on our existing relationships, our existing infrastructure to really push down the cost of providing that service for our clients and ultimately, we’re able to pass those cost savings on through lower fees.

People will always have to pay to invest, but I do think offering a free investment initial account, the freemium model works really well because it gets people investing who otherwise it would just be too expensive, even paying £10 a month puts a lot of people off.

Correct. And I think we are able to do it, as I said earlier, from our position of being able to rely on the wider strength of the wider CMC group but within that, we are very transparent, we explain to clients exactly how we make our money and I think that’s quite important because where we can provide a cheaper service is ensuring that we have our own cost and manage those and maintain those at a level that we can pass on those savings to the end customer.

There’s a big shift in people not just wanting to invest ethically, but impact investing and there’s been a lot of greenwashing going on with ETFs and funds and so on. Are you doing anything to address greenwashing or allowing people to invest ethically?

Yes, absolutely and that’s a key focus for us, I think you’re absolutely right about greenwashing. What we’ve tried to do is bring a more personalized experience. So, at the moment, I think trying to pin down anyone’s ethics, it’s always going to be a struggle because what’s ethical to you will be different to what’s ethical to me and trying to find the consistent metric across the board will always have its challenges.

One of the things that we are trying to do is really focus on the personalized journey from an individual investor’s point of view. And to give you an example, one of the tools we use will show you all the ways companies can make money and for me personally, when I saw palm oil in there, I didn’t like the idea of trees being chopped down so I can have soap, so, that’s something that for me is very important and I’ll be able to filter that out.

So, the tools that we’re trying to build are more focused on not us telling you what’s ethical but putting the power in the customer’s hand and giving them the flexibility to be able to choose what they consider ethical rather than us presenting that final outcome.

What’s been the best moments of setting up CMC so far?

Undoubtedly getting your first client on the platform.

Who was the first customer? Can you tell us?

Someone very connected to CMC Market. So, yeah, Peter Cruddas was our first customer and once you see that first tick, once you see that first trade, that was a very satisfying feeling for myself and the wider team. It was a combination of many months of hard work and I think to this date, every time we get a new customer, we still high five, so, it’s still a big deal for us.

You don’t have a bell that you rang?

We did ring a bell; we do have a bell in the office and it has been rung once or twice. But no, that’s been a very exciting part of the journey and, as I say, very satisfying to get your customers on there.

And what about the worst part? What’s been the hardest?

I think the hardest bid is been discovering the unknown. Building a platform this size and with this level of ambition and I touched on earlier about sort of the core strength that CMC Markets has as a group, but ultimately, some of these challenges we weren’t aware of.

So, the nuances within the investment journey, for example, defence stocks are some of the biggest stocks in the FTSE, BAE, Easy Jet, are considered defence stocks, so, we need to ensure that we have the nationality of the client trading those stocks. So, you get these speed humps along the way that you hadn’t necessarily planned for, that delay what you want to do at the time you want to do it, but ultimately, it’s for us to solve.

What do you think is the one mistake people make when investing and what do you think they can do to become better investors?

I think what I touched on earlier, without understanding your why or what your ultimate destination is, it makes the journey a lot more complex and it doesn’t give you the opportunity to learn from your mistakes, in investing, mistakes cost, money and I think wasting that lesson is both costly and really a shame.

So, I think understanding why you are investing and what your alternate objectives are and understanding how you handle risk and how you handle discipline and investments is critical.

We always ask for a book recommendation, do you have a go-to investment bible that you think, if you want to understand why you are investing or become a better investor, is there a book you’d suggest people should read?

So, there’s a book I’ve read recently and it’s called How I Invest My Money, it’s by Josh Brown, who’s an author, I think is a CNBC contributor. And for me, that book was incredible because what it did was interviewed professional investors and you see the way people develop habits, regularity, but equally, how investment fits into the context of life.

So, for example, if your mortgage is huge and emotionally, it’s going to make you feel better to pay off your mortgage, then invest all your money, even if interest rates are really low and returns are really high, ultimately, there’s a psychological or an emotional impact of your investments and doesn’t necessarily need to be, I make a lot of money, it’s what makes it easier to sleep at night and, for me, that was quite powerful.

That makes sense. There are some people who think paying off their mortgages the most important thing in the world and there are other people who are happy to have a mortgage until they die.

Exactly, but it’s an individual thing because it’s what’s going to make you feel comfortable, what’s going to make, as I say, what’s going to make you sleep easier at night? Is it knowing your mortgages going down or is it knowing that you’ve invested all your money in a high growth fund, for example.

Albert Soleiman is Head of CMC Invest

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