At what point do robo-advisors become wealth managers? We have a chat with Giovanni Daprà the co-founder and CEO of Moneyfarm to find out what it’s been like to set up and run one of the largest new fintech investment platforms and what he hopes the business will eventually become.
Why did you found Moneyfarm? Did you see a gap in the market where big fund platforms weren’t looking after smaller customers?
This is an important point – we don’t see Moneyfarm as being just for small customers. It’s the way we entered the market and built, and it’s the way the press got hold of our message. The reality, though, is that the size of the customer’s account almost doesn’t matter. It’s really their willingness or ability to manage their money independently.
Where I saw our market sitting is between Hargreaves and AJP – ultimately, you either do it yourself or you have to pay 2.5%. This is where we saw the opportunity. I still think this is where the opportunity is. It’s really about people who want to delegate. They don’t have the time, willingness or ability to manage their money by themselves and sometimes it’s too complicated for them. They need service, they need simplicity, they need somebody to tell them what they should do.
We don’t have a particularly grand proposition – we have the most simple proposition we can get away with. I want the people who value simplicity and quality of service over complexity.
Where do you think Moneyfarm sits within the burgeoning ‘robo-adviser’ sector?
We prefer the term ‘digital wealth management’. The reality is that, although it’s delivered digitally, humans remain a core component of our business and our relationship with clients. We have an investment team with a Chief Investment Officer, so we’re not really ‘robo’.
We’re definitely pitched towards the higher range. I would say that Wealthify or WealthSimple go for much smaller investors, who can start from as little as £1. We don’t do that. We’re taking a different approach.
This is, fundamentally, where we know we can provide the most value. It’s very hard to provide true value for somebody investing £1,000, because the best you can do in this context is a good 4 – 5% return every year in the long-term. We’d rather concentrate on people who’ve already built a level of wealth that means we can actually make a meaningful financial difference to their life.
Was it difficult to build support and get people to initially invest in Moneyfarm?
It was definitely a difficult journey, as it always is. I think it’s a complex thing to get right. Firstly, investors have to trust you with their money. Secondly, you have to build the right infrastructure to be able to provide a good service.
That’s expensive in financial services. Particularly when you consider that we’re a regulated business – we handle people’s money so it’s really important that we don’t mess it up. Doing those two things together at the speed at which you’re required to was challenging.
I don’t think the pitch has fundamentally changed in the seven or eight years since we started. All it says is that, if you don’t have the time, willingness or ability to manage your wealth but you want to do something about it, then we can offer you the simplest and most efficient solution. We also offer the kind of superior service that only a modern digital infrastructure can.
We had to raise money before we went to market because, to have a regulated business, you have to have capital. We put some money in ourselves and we raised some seed capital. The value proposition is fairly straightforward.
If you think rationally, the vast majority of people either don’t get enough from their providers or they’re overpaying for what they do get, yet they’re still complaining about the service. I think what probably came as a surprise to all of us was the speed with which people changed their minds about investments.
What’s been the best part of running Moneyfarm so far?
Growing. I was thinking about this the other day. Every day we get one million, two million of new money coming in – £30 million to £50 million a month. These numbers demonstrate that there’s a lot of trust.
It’s a huge amount of money. When one single investor has given you £20,000 on five different occasions, it’s really rewarding. It’s rewarding in the sense that people trust us initially and that they grow to trust us even more. On top of that, we’ve generated a great deal of value for our customers.
What’s been the hardest thing you’ve had to deal with at Moneyfarm?
I think the most difficult thing is probably the challenge of adapting to the continuously changing landscape. There’s a new crisis every year. It’s not like you get a good five years of proper growth where you can plan clearly. That’s probably the hardest part.
Where would you like to see Moneyfarm in 10 years’ time?
I think that we should be the same; I don’t think we should change what we do.
We have a strategy where we consciously choose to focus on what we do best. In short, that means helping people to manage their money in a simple, efficient way, with a particular focus on investments.
We look at three key pillars. One is focusing on the core product. The second is about building a relationship with the customer base, and I think a relationship in the modern world means engaging with a customer in a way that makes them feel secure and makes them feel in control. The third point is continuing to leverage our B2B2C franchise. We found great opportunities to partner with banks to accelerate our growth and to effectively monetise the knowledge that we’ve built around managing and upscaling customers in their investments. That’s one area that I’m now looking at as a huge opportunity for growth in the business.
We have a large-scale partnership in Italy with Poste Italiane, which is the third-largest bank in our network – we power its whole infrastructure for digital wealth management. We have other partnerships where we don’t provide investment propositions but, instead, offer technology and expertise in areas like marketing and engaging with customers.
Do you have a go-to book about investing that you think everybody should read? One that’s been helpful to you in your career?
Swensen was the CIO of Yale Investment Management. He was one of the guys who invented asset allocation as a concept in the ‘80s. He basically turned around the logic of stock picking and market timing – I would definitely recommend that book.
What’s that one bit of advice you would give people to help them become better investors?
They need to stick to it. That’s probably the best piece of advice. Stick to the strategies. Investing is the best way to save, so you just need to have the courage to stick to it basically, through thick and thin.
Giovanni Daprà, is co-founder and CEO of Moneyfarm