If low-cost financial advice becomes “pocketable”.

A different path to a more sustainable client acquisition cost and to tackle trust issues in robo-advisory.

In the early days of AdviseOnly back in 2012, I remember a conversation with a friend who has been involved in digital banking well before the word fintech became a buzzword. AdviseOnly was born as a pure robo-advisor, owing a proprietary financial technology and a business model that was entirely B2C. My friend is a true visionary and the piece of advice he gave me at the time was: “If you want to break through the retail banks offer, you would need to design something that is remarkably cheap and easy and engaging. You need to build a McDonald version of financial advice”.

A few years have passed, my friend has left the banking industry, he is now involved in some top secret bitcoin related initiative, and the business choice we made since then was to move from regulated pure B2C roboadvisory to a more sustainable B2B2C approach. We invested in layering our technology with APIs and became a platform provider of digital investment services for banks and wealth managers. Basically we shifted from an approach of competition with incumbents to one of cooperation.

However, we decided to keep our presence in B2C with a soft approach. We have about 25 thousands of users and we monitor for free on a daily basis about 16,000 of investments portfolios are. These are valuable assets in terms of data and a living laboratory to experiment.

We opted for generic financial advice which is not regulated under Mifid (bespoke portfolios and general information) and no execution, at the end of the day our company is named AdviseOnly.

In the last couple of years, we happened to realize that our direct online experience with users can be big edge when competing in B2B with big software houses that often are a hundred times bigger than us, and excellent at system integration. Most players in that space use to build sophisticated technological platforms for digital investments with zero client facing experience.

Our website has been offering since inception a number of free bespoke portfolios created by the financial quant team, headed by Raffaele Zenti: who is not a robot but an experienced risk manager. The solutions we provide are either goal based investments or thematic and tactical portfolios. Users can follow, copy and amend our portfolio for free.

A few months ago we decided to experiment a different concept in financial advice. Once an investor has selected the investment idea (portfolio) he likes, we introduce a service simply named “Tutor” that represents a turnkey investment solution.

The Investment Tutor is a virtual investment assistant (yes we are working to develop a chatbot!) it takes care of everything an investor needs: it sends personalized alerts, it calculates the portfolio rebalancing needed when the markets move. Final users can access and explore the investment any time with full transparency and high quality, yet understandable risk metrics.

Investors are lazy, so there is no calculation or adjustment left on their side. Personalized alerts are sent by email and are available on the user’s dashboard on the website, with the list of trades to execute. Any investor can decide to execute the trades directly, through an online broker, or send the list with all details such as ISIN code and quantity to the bank for execution.

The portability of financial advice and the absence of execution are key features.

If you don’t receive any money from clients and provide no execution, the amount of trust needed on the client’s side to foster adoption is much smaller than with traditional robo-advisors.

With such a model you get high quality advice for a small price but you don’t need to change bank or move any money from where you want it to be safely kept. It’s just the user that can take more control of its own savings. It’s e-commerce more than banking.

On top of that, all the customers of the “Investment Tutor by AdviseOnly” can benefit from a periodic video chat with our investment outlook and a detailed explanation of the asset allocation. They also get a personalized newsletter anytime we modify the asset allocation. Such tools are meant to provide education, better investment awareness and engagement.

We strongly believe that financial education and investment awareness are the only trigger to make investment go digital.

The price for the service is 49 euro per year, no matter what the size of the portfolio, by using ETFs the minimum portfolio size can be as small as 500 or 1000 euro.

After the launch of the service we have been quite busy with B2B, (the only way to generate revenues in Italy) and being very honest, we had no money to invest for marketing campaigns, so we have been not focusing on it for a while.

A few weeks ago, we decided to invest a little money on Facebook marketing campaign for AO Tutor and the results have been surprising: a conversion rate above 5% and a CAC well below the service costs.

That’s why we have decided to take it seriously and to look for funding to invest in a service that is extremely scalable and can be exported in most markets. This is probably the right approach to successfully tackle the advice gap. The service is so handy and low-cost that can reach the millions of people unserved by traditional channels, who are going to face the big retirement crisis that will affect the Western world in the next few years .

Probably my friend was right, the key to break through and reach the millions of investors that are underserved by the traditional financial industry is to build a low impact, low cost, solution, a similar a approach that suppliers like H&M and Zara took to disrupt the clothing industry.

The service looks good, doesn’t require much effort or trust, or a big wealth to access it, it’s cheap and easy, at the end of the day: why not trying it?