MoneyFarm co-founder and chairman Paolo Galvani is pondering the “emotional implications” of the Brexit vote. That said, despite the surrounding state of uncertainty in the run-up, the Italian robo-advice firm had been prepared for a “leave” vote just four months on from the launch of its UK operations.
“We had worked before the referendum on how to prepare portfolios. Our decision to diversify asset classes and currencies proved right, so we did not experience any losses on the day of the vote. Indeed, Brexit has reinforced the idea that diversification works in times of crisis and that it is a better strategy than others,” Galvani says.
While everyone is hard at work trying to understand the ongoing implications of the Leave vote, Galvani says it is too early to make any business decisions. One thing he is afraid of is that London’s world-leading financial technology position might be badly affected by the consequences.
He says: “London was the best of all possible worlds when we decided to set up the business here. The City has long had the best scenario in the FinTech world, including human and financial capital and the regulatory environment. However, I am curious now to see the impact Brexit will have on all of this and whether London will manage to maintain that position.”
Galvani and chief executive Giovanni Daprà set up MoneyFarm in Italy in 2011. The business is headquartered in Milan and also has offices in Cagliari and London. The platform currently invests in 12 ETF portfolios. It charges nothing for the first £10,000 invested, 0.6 per cent for investments between £10,001 and £100,000 and 0.4 per cent for investments between £100,001 and £1m. Anything over £1m is also free of charge.
Since launch, its Italian client base has grown to 60,000 users and Galvani’s ambitious for the UK are just as high. He is confident the expansion plans will carry on despite the uncertainties Brexit brings.
He says: “There will be no downside for our business in terms of strategy in the UK. We will continue developing our platform technology on a daily basis, no matter what. What is more, our ‘Objective Europe’ will continue.”
MoneyFarm has plans to become a European-wide platform, with ambitions to launch into more countries besides Italy and the UK within three years’ time. The firm has not made a decision on which particular market will be next but Galvani admits Germany and the Netherlands seem valid options given the growing appetite for digital investing there.
Back in the UK MoneyFarm plans to grow organically, especially within its client-facing department. In the past two months, the firm has made eight new hires across the technology and design teams, as well as within customer services.
Galvani says: “The ambition is to create a 360-degree investment and digital proposition. In the UK we started off offering Isas and general investment accounts but we are planning to introduce pensions solutions in the next few months as well.”
The chairman is also trying to align the Italian and UK businesses in terms of services and products, despite the Italian model being an advisory and execution-only one, and the UK’s remaining a discretionary investment service.
Galvani has a background in statistics and a career that spanned investment banking and asset management before moving closer to technology. Technology, he says, has always been his passion, alongside finance. Before launching MoneyFarm, he co-founded prestiamoci.it, an Italian online peer-to-peer lending service.
The entrepreneur is keen to highlight the excitement he has experienced being part of the initial wave of robo-advice firms, although he admits the task of building and maintaining such a disruptive proposition has been quite the challenge.
He says: “When we started in the robo-advice space, there were four or five groups attempting the same thing at the same time and everyone had a similar story. But from the idea of MoneyFarm to its actual debut as a business took a while. It took a year to get authorised from both the Bank of Italy and the FCA, and another year to put together the team and the platform.”
The most pressing of all challenges for robo-advice firms remains enhancing brand reputation, he says.
“The biggest and most complicated job is to create brand awareness and reputation. In this space, consistency is key and you need to deliver what you promised. The fact that we have been around for four years already is a big advantage.”
Galvani is confident his firm has a competitive advantage when compared to rivals such as Nutmeg, which, unlike MoneyFarm, did not start with an advice offering using real people – although it is now attempting to add such capabilities.
And while he acknowledges the RDR made it possible for robo-advice firms to come to the fore in the UK, says the “robo-revolution” has only just started.
“The RDR has presented more advantages than disadvantages. It has a virtuous and fair objective. However, it has created a series of distortions, including the advice gap, as it increased transparency but left the poorer clients without help.
“Robo-advice is at its 1.0 version. The quantity of data that can be used from clients is so big that we have only seen a small part of its potential. In the coming months I expect to see more ways to personalise things such as usability, based on behavioural finance tools and using other variables for investment risks.”
What’s the best bit of advice you’ve received in your career?
What keeps you awake at night?
Fear of missing my flight the day after.
What has had the most significant impact on financial advice in the last year?
The surge of technology.
If I was in charge of the FCA for a day, I would…
Continue to embrace robo-advice and its role in filling the advice gap.
Any advice for new advisers?
Technology is not a threat to you.
July 2011-present: Co-founder and chairman, MoneyFarm
2008-2010 : Co-founder and chairman, Prestiamoci.it
2005-2008: Chief executive, Sella Capital Management
2001-2005: Managing director, Deutsche Bank
1998-2001: Vice president, Morgan Stanley
1993-1998: Executive director, IMI Bank