Thanks Giovanni, for being here with us. Can you talk a little about you and your background? We’re aware that you are a former Bocconi student, and it can be interesting to know how you became an entrepreneur.
I graduated from Bocconi University some years ago; then I started a master’s degree in London while working in a bank. This investment banking job proved to be extremely helpful for my growth, especially for what concerns entrepreneurship, even though having an entrepreneurial family background did help me as well. My intuition related to the fact that investment banking needed to be resized and that technology would have had strong impact on financial services…so, I tried!
Was there a relationship between your previous job in investment banking and the entrepreneurial venture you decided, later, to start?
Yes, in banking I did different jobs, but I’ve always been fascinated by financial markets, and Moneyfarm is the result of exploiting markets inefficiency. Thus, the capabilities and knowledge of the industry came from my experience in London.
About Moneyfarm, how did you come up with such an idea? What were you doing at that time? How risky was deciding to leave your job and to start this new experience?
The idea came from Paolo Galvani, the other co-founder. I was reflecting about new distributing models that were leveraging technological solutions…At first, I wanted to start a bank while Paolo made me reflect about a gap in the market related to the absence of a digital financial consulting process. I was thinking broadly about such opportunities since wealth management is a very peculiar business: it is extremely solid once built, recurring (fewer volatile returns with respect to the banking industry ones), and so we decided to start this project that, eventually, ended up combining my passion towards financial market and digital entrepreneurship.
About your sources of funding in the early stage of your project, we generally speak about the 3F (Family, Friends, and Fools) who typically represent the first investors, before venture capitalists for example. For what concerns Moneyfarm, how did you manage to find funds? Did you need to self-finance the project?
Well, at first it was 50–50. We received some funds from two people, Massimiliano Magrini and Paolo Gesess, who eventually started United Ventures. They are venture capitalists who were operating as business angels at that time. We had to self-finance the rest. We needed initial capital, authorization and so on in order to be able to launch such a project.
Many years have now passed since the foundation of Moneyfarm in 2011. Which was the most difficult business phase? Start-up, scale-up, or what you are currently doing, a path to reach profitability (a sensible matter for fintech companies since few of them have been able to be profitable).
I believe that the hardest part was the scale-up phase, since when you’re a start-up there is space for creativity and development, while once you reach the scale-up, each decision has a considerable weight. A wrong decision might cost you a lot.
I can also imagine increasing responsibilities toward investors…
Yes, absolutely.
Digging more into Moneyfarm, what does it mean to be an independent consultant? What are the advantages compared with “traditional” consulting?
Well, the main issue of “traditional” consulting is that it’s tied to an unhealthy relationship with the costumer since the promoter, usually, is incentivized from fee mechanisms that lead the consultant to give misleading and wrong advice to consumers. It’s about commercial policies that strongly influence what is finally sold to the client. Of course, the promoter tries to balance these pressures but not always succeeds.
Instead, in the independent advice industry, when you give an advice to a client, we earn the same regardless of the final product sold. We do not have some kickbacks from distributors allowing us to give unbiased advice.
I catch the ball to reflect about financial education…From a research conducted by Ilsole24Ore of last year, Italy is in the last positions for what concerns financial education, below EU average. Does this represent a limit for Moneyfarm?
Financial education is fundamental and one of the things we changed was the idea that Moneyfarm could reach a mainstream market. In reality, Moneyfarm works well with people with an above-average financial education. It is an issue hard to solve because finance tends to scary people and it is considered too complicated and not interesting. Funds to solve this problem have always lacked in Italy and I do not think that it will be managed in the short run. We would need different incentivizing mechanisms which lead people to make coherent decision about financial and fiscal matters.
And so, what is your core target? A person who has both financial and technological competencies such a university student or also an older person who approaches for the first-time investments through a digital platform?
Generally speaking, our target clients are older for a matter of saving size. Average age is around 47 years old in Italy. They are people with some competence about financial investments and who already have passed experience. They use digital tools on a daily basis. Our target needs to have a certain availability of money.
So, if I understood correctly, those people were used to make traditional investments and are now moving towards new digital services?
Exactly. However, the digitalization of the service has not a key role. It facilitates the investment process, but people do not choose Moneyfarm mainly because we are “digital”. They choose us because we know how to do our job. They appreciate our investment strategy.
If I recall correctly, at first there wasn’t any limits about minimum level of cash to invest while now, €5000 are the entrance threshold to access Moneyfarms’ services. I wonder whether this led to some differences regarding the age of the investors since with this capital requirements younger investors are not able anymore to use Money Farm…
Yes. Auto-segmentation took place (on purpose) to be sure to focus on our core target segment in terms of profitability, since the value of our service decreases for people investing limited money (such as €1000).
Regarding your hybrid model of robo-advisory (with shared tasks between AI and human intelligence), which human tasks are irreplaceable by technology? What are the future prospects of human jobs in your field?
In the field of wealth management humans will always have a role, even if their relevance is decreasing. Our hybrid model consists in having a guided interaction (human or virtual, depending on the case) with customers, which is crucial to generating trust and large volumes of assets management. Therefore, I think that “digital” does not necessarily mean doing away with the human support. We constantly seek to improve the efficacy of phone activity, rather than creating a fully digitized one. Humans don’t play an important role in the transactional part anymore, but our advisories’ phone activity is crucial to support customers’ decision making. It’s not about competences but empathy, which cannot be performed by an AI assistant.
Your business focuses on the Italian and the UK’s markets. What are the main differences in terms of profits and customers’ behavior? Are you planning of expanding your business any further?
We are focusing on just these two markets because they are potentially very profitable, so effectively promoting the brand is crucial. There are few differences between them. The UK’s population is generally younger and has higher disposable income, but the two are very similar in terms of costumers’ behavior. As the UK is also more digitized, it’s a more competitive market. On the other hand, in Italy we tend to focus on market creation.
For the moment, we decided to focus on consolidating the business in these two markets, rather than targeting new ones.
Let’s talk about strategy. In 2019 you signed an important partnership with Poste Italiane. What are your main achievements? Have you been able to expand your target customers?
It’s too soon to say. Due to the Covid-19 pandemic, we had to postpone many activities we planned to carry out. However, Poste Italiane is a very strong and trusted business in the Italian asset management arena, so we’re facing huge opportunities. We need time to generate profits. Moreover, we need to design a business model and only recently Poste Italiane has been investing in going digital. We can still have big ambitions, as we can see great opportunities coming.
What about your partnership with Fabrick? Do you value B2B as much as B2C?
Yes, of course. We built a value proposition for people that wanted modern wealth management, flexible and with a variety of competences. We’re working a lot on this. Fabrick is a way to join a beautiful reality, i.e. our very first B2B partnership started in May 2018 with Banca Sella (ecco la soluzione, per intenderci, che si chiama Sella Evolution: https://www.sella.it/banca-online/privati/investimenti-e-risparmio/gestione-patrimoniale.jsp)
What’s your strategy for acquiring new customers? Are you balanced in terms of investment/value?
We mainly use direct channels, which comprises 90% of our customer acquisition strategy. The B2B part is the one we’ve been working on for the past 9–12 months. However, our strength is our product, namely the digital platform. How to sell it becomes crucial because the product is truly unique. For a long time, our radio channel was the one we used the most. This is because radio, unlike other types of media, allows us to use storytelling, which is a better marketing strategy for investment services than simple bans.
At the moment, we are satisfied about our investment/value. Our business’s main issue is not investment/value but that we have a long payback period. This is part of the wealth management business model.
Which are the major gaps in this type of services? Which technology we may observe entering into play?
Do you know what it is the combinatorial innovation (Innovator’s Dilemma, by Christensen)? Well, we may expect, rather than a particular technology, a combination of those already existing, to build a business model that may experience the same margins with half customers’ cost or with a better savings quality. Although we reached € 1,2 billion of AUM, we are still small compared to the industry standard, even just the Italian one.
Institutional investors are starting to pay attention to cryptocurrencies, what do you think about it?
It’s a very interesting argument in term of diversification, although I believe it may not yet be stable and mature enough to be put into a portfolio, especially that of a customer not experienced enough to understand the possibilities coming from cryptocurrencies.
Do you think your partnerships with Poste Italiane and Allianz may bring prejudices with respect to your position of independent financial consultants? For example, in case you would start selling Allianz insurance policies.
Well, actually we already sell an Allianz policy, which in truth is just a box with the Allianz brand where we put our product. Although superficially this risk may arise, substantially it does not, since it is not something that is reflected in the business model.
Is there a definition for declaring autonomous and independent?
Autonomous and independent are basically the same thing but “Independent Financial Advisors” do not exist officially in Italy. Autonomous financial advisors do and “Albo dei Consulenti Autonomi” has been incorporated into the Register of Financial Consultants. Let’s simplify saying that the Italian industry did not like the word “independent” while in the Us and UK there is an “Independent Financial Advisors” Register.
What kind of synergies do you manage to create with Poste Italiane?
Well, in case of Poste Italiane, we bring to them new products that make us reach a very larger customer base, that it is that of Poste. We also bring them a higher level of digitalization in wealth management to help them scale their services; although this partnership began with PosteFuturo, we hope that it’s the beginning of a long collaboration.
More on a macro level, we saw how Satispay raised around 70 million of new capital, this is something that we were not used to see here in Italy, do you think that something is changing or are we still too small as a market and things are still difficult?
Surely something has changed in the last few years and I feel like Moneyfarm has played a key-role in this transition. Today there are many Italian companies that are competing internationally, like Satispay, Bending Spoons and Credimi. The trend is really encouraging.
Do you believe that other countries, like the USA, may realize the opportunities here in Italy for the financial industry?
I think it is very difficult for someone from the US to come here, in Europe in general, and start a financial service business, due to the size of the opportunities and different regulations. Nonetheless, Italian companies are able to attract foreign capitals, even big figures, see how Satispay was able to receive capital from Tencent, this is something very positive.
A very direct question Giovanni, will Moneyfarm become the first Italian Unicorn?
Well, I don’t know ahah! There is still a long way to go!
This is something that there has been not talked about: MutuiOnline (MOL) is worth more a billion today! MutuiOnline started 20 years ago and those two guys build up a company that now is worth € 1.2 billion.
Thanks for your time Giovanni and good luck for the future of Moneyfarm!
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Bocconi Students Fintech Society
Authors:
Carlo Mariani