I don’t go into The City as much as I’d like these days, but when I do I always find myself taking pictures of adverts on the tube. I’m not sure why, maybe it’s because, like the conductors jauntily abusing commuters on the platform for not “minding the gap”, adverts on the tube tend to have a sense of humour.
Last time, I took a picture of a Wealthsimple tube ad, or I thought I did, perhaps someone’s head was in the way and I would have looked odd. Because I can’t find it on my phone.
Anyway, funny ads on the tube are there to make something dull like commuting, into something fun. A mecca of puns, poetry, and protein supplements.
And that’s what a new breed of digital investment platforms are trying to do with ESG investing. That is, make something that is exceptionally boring, enjoyable and fun. Obviously, you can know yourself, or read a book on how to better manage your stock portfolio, but investing is boring because if you want to successfully see your portfolio grow, you generally have to do nothing, for a very long time.
So, how do you balance a long term investment product, with being an ethical investor, yet capitalistic, and being boring, yet exciting?
We talk to Toby Triebel, European CEO at Wealthsimple to find out…
You’ve got a fairly extensive background in financial services, mainly on the institutional and financing side. What was the incentive for taking on leadership of Wealthsimple in Europe and what do you think it does better than anyone else?
I first heard about Wealthsimple when I was still running my own fintech start-up Spotcap, an online lending platform for small businesses.
I actually pitched my business to Paul Desmarais III, the current Vice-President of Power Corporation and Power Financial, who have invested $120M in Wealthsimple to date, for an investment round. He didn’t end up choosing to invest but instead introduced me to the founding team at Wealthsimple who were at the time thinking about launching internationally.
With Spotcap, we founded the business in Germany in 2014 and quickly expanded into the UK, Netherlands, Spain, Australia and New Zealand. Wealthsimple was looking to break into the UK market and it seemed like the perfect fit. I had just closed an investment round from a strategic partner with Spotcap and decided to step down and join Wealthsimple as CEO Europe, continuing to support Spotcap in an advisory role.
Even though I came from traditional financial services myself, I didn’t have the time, or desire, to manage my own investments and realised how complicated current providers made it to invest with everything from complicated language to hidden fees. It just seemed there had to be a better way to get invested where you didn’t need a degree in finance to get started.
What do we do better than anyone else?
Wealthsimple humanises the experience of wealth management. A central theme to our company and something we really believe in very strongly is this concept of human. How do you create a human financial services company? For us it means a couple of things:
Our service combines great technology with human advice to provide people with smart investment portfolios that are built with their financial goals in mind.
The second part is around the humanity in our design and branding. We’re building a lifestyle brand in financial services – which we don’t think anyone has ever successfully done – and a big part of that is telling honest and candid stories about money. So we do things like have a Money Diaries series where we speak with interesting people – like Jon Hamm or Margaret Atwood – about their relationship with money and focus our brand campaigns around making talking about money less of a taboo.
Thankfully, the world these days seems to be a more conscientious place. With millennials embracing ethical lifestyles as well as investing. How do your Socially Responsible Investment options differ from the standard products?
Many people, younger generations especially, want to believe in their investments. Millennials grew up during the financial crisis where trust in the financial system was shattered in many ways and they want to know that their investments actually represent their own values and will hold companies accountable.
The growing popularity of socially responsible investing may also be part of a broader shift around what consumers expect from businesses. We’re past an age where businesses just exist to make money. We expect them to be good corporate citizens and have a positive – or at minimum neutral – impact on the world.
All our portfolios are designed to help clients build wealth over the long term, and we don’t compromise on our strategy for our SRI (socially responsible investment) portfolios. They are globally diversified, offered at the same low fees as our regular portfolios and available with a £5,000 invested minimum. Our SRI portfolios are intended to be viable as someone’s entire portfolio.
They are different from our standard portfolios in the way that funds are screened for inclusion in the portfolio.
First, every fund that is selected is screened against environmental, social and governance factors to make sure companies included are making social responsibility a business priority. This is what’s called a positive screening method and includes 37 checks and balances to screen each individual fund (knowing that there are typically 10-12 included in your Wealthsimple portfolio).
Second, negative screening is also applied to exclude any companies that are considered to be involved in negative practises like the tobacco or arms industry.
Interestingly enough there is some research that suggests socially responsible investing may drive better investor behaviour. If an investor isn’t just investing for their financial gain but also to support something he or she believes in, the investor may be less inclined to – for example – pull out of the market during a downturn.
In total we see about one out of every four clients investing in a socially responsible portfolio.
Long-term investing can be a fairly boring concept. With new digital investment platforms trying to make it exciting, do you think there is a danger in making long-term investment accounts too easily accessible so that inexperienced investors will be tempted to tinker and switch rather than leave alone and grow?
We have this really interesting challenge of trying to create a sexy brand around a really boring topic. We know that smart investing is super boring. It’s about buying passive, low-cost funds and sticking to that over the long term, no matter what your emotions are telling you to do. So really it comes down to giving people access to the right tools and information and most importantly, setting really great financial behaviours.
It starts with building real, authentic trust with clients and how we think about that is our marketing, or the brand we’re building, is the promise that we make to the marketplace and then our product is the way in which you deliver on that promise each and every day. What new players have done really well is create an investing experience that puts the client first and makes sure there is transparency in what is being offered and how much it is going to cost.
We have about 1 in 3 clients looking at our app daily. Their portfolio balance, earnings and time-weighted returns are all clearly displayed and we’ve added a dashboard of our magazine content below that is specifically customised to clients depending on whether they are starting out for the first time or are seasoned investors.
The other part is about encouraging and building the right financial behaviours. We do this through our Magazine by writing pieces on topics from why we think the stock markets will go up in the long run to how best to understand financial concepts like pound-cost averaging.
We also have a series of emails and prompts that reinforces the discipline of good investing that we send out when we see volatility in the market. In response to whatever has happened – whether it be the initial Brexit vote or Trump getting elected – we send out an immediate note to our clients that we entitle the ‘Keep Calm and Carry On’ series which talks about what’s happened, what it means for you and why you should likely do nothing about it. It’s been incredibly appreciated by our clients who are scared or do freak out in those moments to be reminded of the discipline of sticking to your plan, and we also do this on the reverse, when we are seeing moments of strong growth in the market.
I think there is a lot of responsibility around how we feel about educating people to be smarter investors over time. And there is a lot more we plan to do on that front by building even more helpful investment advice into our products.
The major appeal of digital wealth platforms is that the fees are considerable cheaper than established providers. As with MiFID II forcing funds to pay for research directly rather than pass it on to their clients. Do you think digital wealth platforms will be able to absorb the underlying fund management costs?
MiFID II is all about giving people greater choice, and protection, in the financial products and services they are choosing to use. It’s about restoring confidence in the financial services industry where many feel that trust has been completely broken. What new players have done better than the traditional industry is making sure fees, both service and underlying fees, are clearly displayed upfront and that nothing is hidden.
There isn’t a way for digital wealth platforms to absorb the underlying fund management costs as these fees aren’t charged by the platform to the client, they are factored into the funds themselves. What providers should strive to do instead is make sure they are clearly communicating both their service fee, and underlying fees, to clients. Ours are both included on our website homepage.
We’re not trying to compete on price. We are a low cost option, but we’re not trying to drive a race to the bottom. We do have an advantage where the average person in the UK is still paying 2.56% for investment advice and management, which is higher than Canada (our home market) where we always thought people were paying the highest fees in the world.
There is an enormous space between what the incumbents are paying versus the new players like us. So for us there isn’t a drive to take the cost to zero because the fees that we’re charging are almost a convenience fee. You could do better if you managed your own money, but we charge a small cost to do all the work for you.
And finally, what would you say would be your top three online resources for investors to become more confident investing?
- Boring Money – Their team does a great job of breaking down complicated investment terms and making them understandable to everyone, which is especially important for people who are starting out for the first time.
- Money to the Masses – Damien reviews all the major players in the UK and writes articles on easy investment tips that are as relevant to a seasoned or first-time investor.
- Vestpod – We’re huge fans of Emilie’s monthly newsletter on unbiased financial information and resources for women.