At the frontier of Direct-to-Consumer digital investing:

In Conversation with David Semmens, Chief Investment Officer of Wealthify, one of the UK FinTech sector’s most exciting and successful businesses, on the firm’s extraordinary innovations, the regulatory implications of democratising finance, and the importance of a positive corporate culture.

David, thanks for agreeing to catch up with us on the latest in your exciting company. As a starting point, what does Wealthify help people to do?

  • Simply put, we help people invest with ease. For many people in the UK, saving is as far as they get in their quest to build wealth, but at Wealthify, we make the transition to becoming an investor as smooth as possible. By removing the jargon, ensuring the platform is user-friendly, and carrying out all the investment work for them, anyone can invest. There’s no need for our customers to understand the precise details of how investing works and they don’t have to have a high net-worth to get started. We’re a platform designed to help anyone invest.

Why is it different from what is currently available?

  • Wealthify breaks down the barriers to entry for investing. So, while discretionary investing has been around for a while, we’ve opened it up to a new audience. Our customers can begin investing with just £1 and start a pension with just £50, and benefit from our low, fixed-rate fee that is very competitive within the market. All our payments are flexible with no fixed terms or amounts they need to contribute. Each customer has a choice of the level of risk they want to take and whether they would like to invest ethically or not. Combining affordability, accessibility, and choice like this makes Wealthify stand out among our peers.

You are the Chief Investment Officer of the business. What are the characteristics of the investment approach that you practice?

  • It is very much focused on the customers’ outcome. Every decision is communicated to customers in jargon-free language. Whether it is routine rebalancing or asset allocation change, this is spelt out accessibly in order to provide a less technical audience with the information they need to make effective decisions. We are very much long-term investors, not speculators and we have a disciplined investment process that focuses on long-run expected returns across a range of asset classes. We are often a customer’s first foray into investing; if the experience is too much of a rollercoaster, as it can sometimes be in the markets (and indeed, as recent weeks have shown, in retail investing as much as in anything institutional), we may turn them off investing and back into a saver for life, so we try to avoid doing anything too outlandish. To expand on the technical aspect, we undertake our investment approach with an academically sound assessment of both the potential rewards and risks associated with the positions we hold, and we have a strong focus on cost where it can provide efficiency. For instance, with tracker funds, it makes sense to select the lowest all-in cost, once you’ve assessed the market. On  the other hand, with an actively managed ethical fund, we look at cost as being one pillar of our considerations, as our research shows that ethical investors are comfortable paying for that additional level of due diligence around ESG factors that active managers will bring. We also believe strongly in harnessing the power of technology to both source information and to limit any of the emotional biases that we know are so harmful for investing as much as possible.

How does this approach differ from previous firms where you have held senior investment roles?

  • Wealthify has an incredibly friendly, positive culture. Everyone believes passionately in the mission of the firm. The firm is still young – we only launched in 2016 – which means there is a lack of attachment to legacy systems. This means that we can focus on constantly using the best and most up-to-date tools to challenge our own investment strategy process, unconstrained by the limitations of what may have been built previously. And this is true across the entire firm, from the investment team to the finance function. We’re very much a technology-led organisation.

What governance and risk issues has the firm encountered thus far?

  • We are an online-only business, so we don’t meet our customers face-to-face, but that doesn’t mean that we don’t run the same rigorous checks you would expect from a high street bank or law firm. As previously mentioned, as a nimble ‘Digital Wealth Manager’, we aren’t weighed down by any legacy systems, so if a better solution exists to help us protect customers and meet our regulatory obligations, we’re able to integrate it swiftly into our process. In fact we have several carefully chosen systems that we utilise to ensure we’re always applying the best strategies to combat risk in order to keep our clients and business safe. Generally speaking, to make sure that we are on top of any potential issues – and it is a fast-moving space so we are continually monitoring the situation – we have a dedicated team that makes sure our ethical integrity is safeguarded. Simply put, we want to do the right thing by customers, and we invest significant amounts of time to ensure that.

What issues might arise in future and how might these be managed?

  • Regulatory change over the last decade has required significant adjustments for investors and investment firms alike across the whole industry. However, these have generally been quite well telegraphed. From this point on, the evolution of regulation as it affects financial services businesses new and old, will remain one best addressed by both careful planning and augmenting smart people with specialist technology. We have proactively encouraged a strong ‘learning culture’ across Wealthify, providing encouragement and support to enable regulatory and management education at all levels of the business, from entry-level up to senior management. In short, we are hiring smart people and keeping them at the top of their game through continuous development, which often has a regulatory flavour. Our compliance team does its bit by ensuring that we stay within the lines drawn by regulators and maintain a high standard of education of applicable regulations. More broadly, our culture encourages everyone to consider it their responsibility to protect our firm’s ethical integrity. This approach means that our systems are current and fit-for-purpose, and our people are up-to-date with current and pending regulations, whilst also believing that they personally have a role to play. This combination helps to mitigate risk and keep our clients and business secure.

How do these regulation-linked activities contribute to the strategy for the business?

  • In these times of historically low interest rates, our key goal is to make investing more accessible and to help turn savers into investors, where it is appropriate to do so in relation to their broader financial situation. For instance, we have recently partnered with TSB to help their savings account customers build their future wealth using our platform, but we’re careful to make sure that these activities are in line with affordability criteria and customers’ financial objectives. Whilst our approach strips out much of the unnecessary complexity around investing for the customer, our teams are constantly thinking about both the challenges and opportunities this can present for us and them, whether that is within financial markets or from a regulatory perspective.

Thank you for these insights, David.