Exclusive: Moneyfarm’s rising star CEO on disrupting finance and the M&G deal that got the City talking
Moneyfarm is a pan-European digital wealth manager with around 80,000 active investors and more than £2.2bn invested on its platform.
Until recently it has been better known in Italy than the UK, but this is likely to change very soon, a confident Giovanni Daprà – co-founder and CEO of Moneyfarm – tells Morning Wire today.
In an exclusive interview with this paper, Daprà opens up about the recent funding round led by M&G and the announcement of a commercial agreement with the City-based investment giant.
First of all, congratulations on your recent fundraise and M&G deal.
Thanks, we are really pleased. [M&G] joins our other backers Allianz Asset Management, Cabot Square Capital, United Ventures, and Poste Italiane, so they are in very good company. The funding will allow us to invest even more in our people and our technology platform and enable us to keep building the best investment service possible for our clients. The commercial agreement will see us provide our existing technology, digital capabilities and human investment guidance to create a new, innovative solution for M&G aimed at the next generation of retail customers in the UK.
Technology is a buzz word in the wealth manager and investment manager sectors at the moment. Why do you think your hybrid model is the best solution to serve customers?
I am passionate about the wealth management sector, but it needs to be shaken up and disrupted and the most innovative way to do this is the use of technology. But when you are dealing with people’s long-term savings, pensions and investments, it can’t just be about robo advice or DIY solutions, it has to be a blended approach. That means combining our automated approach with a team of investment consultants who continuously assess markets, make strategic adjustments and regularly rebalance portfolios, as well as being ready at the end of the phone when our clients need to speak with someone.
“The sector needs to be shaken up and disrupted and the most innovative way to do this is the use of technology.”
Giovanni Dapra
The blended approach, for me, combines the latest, most innovative technology with exceptional people to guide clients to ensure they don’t exceed their risk tolerance and, importantly, they reach their financial goals and dreams for the future. The blended approach also makes investing more accessible as we can provide an exceptional service without the costs associated with traditional wealth management providers.
Sure, but how does this work in practice?
For any prospective clients, they initially fill in a questionnaire about their willingness to take on risk, something which can often be underestimated. We then assess the investor’s ability to take on risk, this is essentially the same process as a traditional financial adviser would go through, just more user-friendly and digital. The combination of the two assessments determines the portfolio that best meets their needs. We offer seven risk weighted portfolios that invest in high quality, low-cost, exchange traded funds, which have proved to be a great way to achieve diversification. We also have a separate range of seven ESG portfolios, created with the same risk weighted approach.
Ethical investing, including implementing ESG standards in investment strategies, is becoming increasingly commonplace across financial services. Have you seen a shift in the way investors and clients think, and how have you responded to this?
We have seen a sharp increase in the discussions our consultants have been having with customers regarding ESG and sustainability. We made the decision to launch a suite of portfolios that solves this need, built with sustainability and social responsibility at their core.
Getting socially responsible investing right takes time. It’s not as simple as, for example, excluding polluting industries or companies of questionable morality. It is about ensuring that the investments themselves are effective while maintaining sound ESG principles – it’s a complex balancing act.
In turbulent, uncertain times like these, how do you reassure your clients?
We believe that the most important rule for the client is to remain consistent in their strategy. Investing should have a long term focus and if it does, short term turbulence is understood. Our investment consultants monitor markets on a daily basis, make changes to the portfolios where necessary and are never more than a phone call away from our clients, giving clients comfort that their investments are looked after and that they will reach their long term financial goals.
You recently launched a junior ISA product. With the current high inflationary environment, why target younger savers now?
Many investors are concerned about inflation and what that means for their buying power. In the UK, 2 per cent inflation has been seen as a manageable figure, it’s stable enough to keep the economy moving without eroding standards of living too dramatically. But recently this has been an unachievable goal due to the response to Covid and other subsequent issues, and inflation has skyrocketed to over 7 per cent, the highest figure in 30 years.
“Inflation has a particularly detrimental effect on cash savings.”
Giovanni Daprà
If you have £10,000 set aside and an inflation rate of 2 per cent, you’d need £10,200 to have the same buying power after a year. This may not seem like a significant difference but it’s cumulative. After 10 years of inflation at 2 per cent, you’d need £12,189 to have the same buying power and this is before you even start thinking about increasing your wealth.
Right now, almost no cash accounts offer an interest rate even close to this level, which means that you have the certainty of losing the real value of your savings if you don’t invest. So, it is vital to have a sound investment plan in place to stop your money’s buying power from simply withering away. One way of beating inflation is to invest in stocks and shares.” Starting to save earlier means that you have the benefit of compound returns, which helps to grow investments over time. The earlier you start, the better, and that is why we launched a Junior ISA.
Finally, in addition to the Junior ISA, do you have any new products or portfolios planned in the near future?
We constantly look at the investing trends of our customers and the wider population and one area we are considering is thematic portfolios, which focus on predicted long-term trends rather than specific companies or sectors. This should allow customers to invest more closely in what they believe in without sacrificing diversification and making sure we can continue to support them with our regulated advice and guidance maximising their investment success.