Wealthify is democratising investing by making it effortless and affordable, so that everyone can access the higher returns possible by investing.
With most other services, customers pick their own investments. At Wealthify, customers simply tell us how much they want to invest, their timeframe and investment style, and we do the rest, building them a personal investment plan with a diversified mix of investments. It’s a fully automated digital service, available online and on mobile. Sign-up takes ten minutes, with no paperwork or face-to-face meetings.
We are conducting this interim funding round to extend our runway ahead of our Series-A round, which we aim to conclude in Q3. We have received expressions of interest for the Series A round already and are highly confident in completing it.
Because we view this interim round as an extension of the last fund raise, equity will be offered on the same terms at £4.75 per share.
Wealthify appeals to two main types of people:
1) Frustrated Savers
With interest rates currently at record lows, many people are beginning to wake up and realise that they need to look elsewhere for better returns. We appeal directly to these people through our effortless service that enables them to take their first steps investing.
2) Existing investors
These are people who are frustrated with the performance of their own DIY investing strategies. Some recognise that they don't have the expertise, but more often people realise that they don't have the time to monitor their investments and make prompt decisions.
Substantial accomplishments to date
Since founding the company and starting work on the concept in mid-2014 we have:
• Built our own front and back-end systems from scratch, which automate the end-to-end investment process.
• Applied for and received full regulatory approval from the FCA.
• Launched our service to the public on 6th April 2016.
• Acquired over 5,000 users and 2,500 invested customers.
• Delivered strong investment performance, outperforming the benchmarks and our peers in the first year. (Risk Warning: Past performance is not a reliable indicator of future results).
• Expanded our team to 13 smart, highly driven and ambitious individuals.
• Developed and built fully in-house our dedicated app, which allows customers to track, add to, or withdraw from their investment plans.
• Generated significant positive publicity and reviews, including coverage in Daily Telegraph, Financial Times, Daily Mirror, The Sun, CNBC, Share Radio -google "Wealthify" to see more. Also check out our great customer reviews on reviews.co.uk, the AppStore and Google Play.
• Built a lean business based in Cardiff, well-positioned to achieve the highest margins and lowest operating costs in the sector.
Customers are typically investing between £250 and £50,000 with us.
On average, we expect to recover the cost of acquiring each customer from their first 3 years of fees. Thereafter we make a 70% gross profit margin on the fees we earn from each customer.
Our business model is not about acquiring large amounts of money from customers in the first 2 years, it’s about acquiring large numbers of customers, irrespective of their investment amount. We aim to deliver those customers: great investment performance relative to peers; great customer experience; and a greater confidence in investing. When we achieve that, we know that those customers will remain with us to invest more money – not least driven by the need to use their ISA allowance each year.
Use of proceeds
The funds we are raising today are to continue the development of the business, before the Series-A fundraising round completes later this year.
The funds will be used for the ongoing running of the company; continued development and enhancements to the existing service; new product development; and funding the digital marketing strategy for customer acquisition.
New features that we are expecting to launch this year:
• App enhancements for increased customer engagement driving more top-ups and referrals, and full in-app sign up for new customers.
• Direct debit payment mechanism, for which the first successful tests are complete, and full roll-out will follow shortly.
• Suite of APIs to allow other companies to connect to Wealthify to build white-labelled or co-branded investing services. This will accelerate our new customers acquisition and AUM quickly and easily.
• Self Invested Pension Plans (SIPPs) - new pensions and pension transfers.
• Junior ISAs and Lifetime ISAs.
Cash ISA Subscribers - Around 13M people a year invest in an ISA of which around 80% choose a Cash ISA as opposed to a Stocks and Shares ISA (aka Investment ISA). That's about 10M people a year who we can persuade to join Wealthify.
Cash - £700bn is held in cash savings accounts in the UK earning tiny interest rates and we aim to convince consumers to invest a proportion of this cash with Wealthify.
Existing Investors - DIY investors who use an online trading platform, or who hold money in a Stocks and Shares ISA. We expect to persuade a small but increasing share of these customers to shift to Wealthify, driven by recognition that having a trusted third party make the decisions is better than DIY investing.
Characteristics of target market
This market has become known as "Robo-advice" or "Robo-investing". The term “Robo” reflects that fact that most services use a high degree of software and automation, but possibly also that most services prefer passive investment strategies, which can be managed using automation at low cost.
The concept of Robo-advice originated in the USA about eight years ago when services such as Wealthfront and Betterment were launched. These two companies now manage approximately $7 billion, and the US Robo market is now valued around $60bn. One study by A.T.Kearney predicts that money managed globally by Robo-advice services will rise to $2.2tn by 2020.
Although Wealthify falls under the Robo-advice heading, it offers its service on a non-advised basis. We make no recommendations to our customers and we do not offer them advice. This means that our business has lower regulatory and lower operating costs, due to not needing to charge for customer-facing advisers.
Wealthify expects to acquire customers primarily through B2C channels but also using B2B and B2B2C channels to accelerate early customer acquisition.
The founders and team at Wealthify have considerable experience of digital marketing and we intend to leverage this expertise to bring to bear online marketing to acquire customers. The strategy includes use of SEO, PPC, social media, affiliation, email marketing & online display advertising.
In addition, the CEO has extensive business relationships with websites in the UK that already attract high volumes of financial services traffic. We seek to leverage these relationships to acquire high volumes of customers on favourable terms.
We have already conducted a successful public relations campaign since launch, gaining significant coverage in the national media. We intend to continue this successful approach and expect to gain increasing coverage in the personal finance sections of the mass-media in coming months and years, as Robo-advice becomes more well-known.
As trust in our brand and awareness of Robo-advice grows amongst consumers, the company will also consider above-the-line marketing strategies, so long as a low average cost of acquisition can be maintained.
Wealthify has a single, clear proposition which stands ahead of the competition, based on its simplicity and its focus on the mass-market of savers. Competitors are mostly targeting affluent customers with heavy competition over each individual customer.
There will be numerous new entrants to the Robo-advice sector. However, the market is large and expanding and we believe that the market will accommodate competition. The breadth of propositions and companies will drive the education and awareness required to support rapid expansion.
Wealthify has a number of USPs that will enable it to acquire and retain customers more effectively than competitors:
• The simplicity and ease-of-use we have delivered through the design of the proposition, and in particular its elegance on the mobile platform, positions us to lead the market.
• We offer a lowest minimum investment amount of £1 for a diversified investment plan.
• We have built in a social engagement mechanism, known as Wealthify Circles, which allows customers to introduce friends and acquaintances for a shared reduction in fees.
• Automation and Scalability: we have engineered our systems from day one to cope with mass-market volume. No paperwork or face-to-face meetings required.
We recognise that trust, reputation and performance will be paramount to our continued competitive success and we are working tirelessly to ensure success on all these fronts.
Our competition will consist of new entrants and incumbents. We believe that incumbents are not driven to push Robo-advice because it undermines existing revenue streams and they have a wide array of services amongst which their Robo-advice offering gets lost. The key opportunity for Robo-advice is the mass-market, expanding the market for investing. We believe the leader will be a single-purpose brand that establishes itself as the go-to name for British consumers.