Moneyfarm CIO talks advice credentials and appealing to higher-value clients

On the surface, it might feel like Richard Flax, chief investment officer at robo-adviser Moneyfarm, has come a long way from his formative years at major international banks like Morgan Stanley and Goldman Sachs.

But while Moneyfarm’s North London headquarters, an ex-factory building, has a distinctly industrial feel, a world apart from the shiny skyscrapers of the City, Flax says the fundamentals of the job are not that different from what he was used to in mainstream asset management.

He says: “From an investment perspective, I came from a world where a group of people sat in a room and tried to come up with the best portfolios they could. I came to a place where exactly the same thing happens: a group of people sit in a room with all the information, data and analysis, and try to come up with the best portfolios they can.”

However, he suggests there may be one difference: “It’s not purely about ‘here’s a benchmark, generate the best returns relative to that benchmark’. We are trying to solve a broader problem here.”

That problem is the so-called “advice gap”. While Flax heads a three-strong asset allocation team at Moneyfarm, the digital manager also recently said it wanted to enhance its advice proposition.

Currently, the client’s journey with Moneyfarm starts with a questionnaire, which risk-profiles them on a scale of one to six.

Flax (pictured) says Moneyfarm has broadened its set of risk capacity and risk tolerance questions to enquire about the client’s life goals and the probability of achieving those goals.

“There is a lot of information you can learn before the necessity of face-to-face meetings,” he says.

Although principally an online investment platform, Moneyfarm does offer telephone support, which Flax says aims to provide clients with personal interaction tailored to their needs.

He adds: “Even today, there are clients who like to talk to someone and people who absolutely don’t want to speak to someone.”

When asked whether in times of market volatility clients call to ask about their assets, he notes: “We are dealing with retail clients and we have an important duty to explain as much and as often as we can about volatility, risk and rewards, and make sure they understand this and that their portfolios are appropriate.

“Inevitably during market volatility, you have people who do call up and want reassurance that we are monitoring their money, which we are, and also it is an opportunity for them to see whether they are comfortable with the risk they are taking and potentially move things.”

Flax adds: “In general, it is about reassuring customers that we are looking after their money, that this is how we spend our day, and we explain to them the reasons for volatility, and in some instances that they need to have a long-term view.”

He says the priority is to provide each customer with the type of interaction they want.

However, the company does not intend to offer a face-to-face advice service at the moment, as other robo-advisers like Nutmeg are also looking at ways they can generate business from financial planning services.

When the FCA looked at the robo-advice market last year, one of the issues it was concerned with was providers’ ability to identify vulnerable customers.

Flax says: “We think of vulnerable customers in terms of knowledge; that’s a red flag for us.

“We are providing services for people who are maybe not comfortable doing that themselves, but you also need to make sure that the customer you are dealing with knows the risk they are taking.”

While Flax says that Moneyfarm is, alongside its peers, trying to come up with ways to serve customers as efficiently as it can, people who cannot get advice or guidance in a traditional way are not the firm’s only target client segment. Flax sees it as a challenge for the industry that people need advice or guidance of some sort to help them save and invest for the long term, but are not quite sure how to do it, or maybe do not have the sums of money that would make them a client for a traditional adviser.

Moneyfarm recently raised its minimum investment requirement from £1 to £500.

But why should someone with a greater level of assets come to a digital manager like Moneyfarm?

Flax says: “At the end of the day, the customer will look at the net returns after fees that we generate. The market is transparent in that sense, especially after Mifid II. The wealthy customer can see this is the service that you get, this is how much it costs. You decide how well it stacks up against what alternatives you currently have.

“We will need to compete in that space, the client will stack us up against the other alternatives and see how we do. We want to be part of that conversation.”

However, Flax admits that a client with complicated tax arrangements, for example, might not be ideal for Moneyfarm.

He says that the company is not at the moment intending to add tax planning to its services.

The business, which originally started in Italy, expanded to Germany a couple of months ago, on top of its UK entry.

When asked where next, Flax sounds an ambitious note: “Our goal is to be pan-European.

“As Moneyfarm, we are in the UK and Italy and, in my view, that doesn’t constitute pan-European.”

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