Just one year after it launched in the UK Moneyfarm has announced that it has attracted 10,000 customers and has £260 million of global assets under management (AUM), making it the second biggest robo advisor in Europe.
However, the cost of developing and marketing its platform resulted in the company reporting losses of £6.4 million in 2016 on revenue of £167,628; whilst undoubtedly a significant loss – £2 million was spent on advertising and £1.8 million on salaries – Moneyfarm says that it was in line with expectation and that it is on course to become profitable by 2019.
In the fledgling robo advice industry where accurate figures are often hard to come by Moneyfarm’s performance in the UK puts it third in the UK behind Nutmeg, which has £600 million AUM and Scalable Capital with £270 million; it is set to bring a number of new products to market in the coming months.
Although still small in terms of its share of the total investment universe, robo advice is growing apace; the number of customers Moneyfarm has achieved in the UK is roughly equal to the number it has in Italy, although it has been live there for more than four years.
In March Moneyfarm launched its first business-to-business partnership with Allianz Global Investors (Moneyfarm rolls out active management at ‘institutional cost’ to Allianz Staff), and has a number of planned launches; the first will be a Self Invested Personal Pension (SIPP) to be launched later this year.
Like many of the robo advisors, Moneyfarm has not struggled to attract investment, having raised in excess of £22 million, and having doubled its customer numbers in the first half of 2017, has been growing its AUM by 10% every month.
doubled its customer numbers in the first half of 2017, has been growing its AUM by 10% every month
Chairman Paolo Galvani said: ‘Customer growth is due to outstrip the 209% we anticipated at the start of 2017, and we’re confident we’ll continue to add more than 60% a year for the next three years.
‘Our ambition is to build a digital wealth proposition that could offer the whole spectrum and financial lifecycle, from accumulation to investment and then pension, but that can be offered to anyone independent of the amount they have to invest. We’re just at the beginning of what we can achieve with our current product mix. The pension we launch in Q4 this year will be a real game changer, not just for us but also for consumers’.
In the US it has been reported that a hybrid service that combines the best of human and automated advice is preferable to either in isolation, and Moneyfarm has operated this ‘bionic finance’ or sometimes ‘cyborg’ model since it started in 2012.
‘WealthTech’ propositions are moving beyond the use of robo advice for simple wealth accumulation and Moneyfarm has been working with the Financial Conduct Authority (FCA) Advice Unit with a view to delivering financial planning and portfolio reviews to the UK market.
Mr Galvani told New Model Adviser: ‘Part of the FCA’s Financial Advice Market Review has been looking at how technology can enable solutions for people that have been turned down by advisers due to the lack of a scale economy.
‘If you look at it from this perspective, we have been offering something that simply wasn’t there, rather than challenging IFAs, so I think we can complement the advice profession in that sense.
‘Open banking will also bring huge opportunities for future business growth, as APIs (application program interfaces) will enable us to deliver increased advice capabilities via our platform.
a digital wealth proposition that could offer the whole spectrum and financial lifecycle, from accumulation to investment and then pension
‘The speed of growth in terms of clients in the UK has been astounding. In just 15 months, we are already way ahead of our client base in Italy, where we have been operating since 2012. It shows that people here are really open to embracing innovation and technology.’
Moneyfarm’s commitment to improving levels of financial literacy and engagement it to be applauded as it is prolific in the quality and quantity of the content it produces; it has also taken positive steps to encourage younger and female investors.
The average portfolio size in the UK is £17,000, which is a little over half of that in Italy; however, it is realistic to expect that to increase over time as the company moves towards profitability.
With a number of the robo advisors reaching the end of their first year of trading they are allowed to release details of their investment performance for the first time; albeit that markets were very kind, most investors will not be unhappy with Moneyfarm’s performance as it ranged from 4.8% to 18.5% depending upon the risk profile of the investment.
Moneyfarm’s SIPP will be white labelled for retirement solutions provider Embark Group, continuing the trend towards partnerships and collaboration as an efficient and cost-effective means of customer acquisition.