Andrew Lockley – Exponential Investor (United Kingdom) –
As you’re reading Exponential Investor, you probably know a thing or two about managing your money. But the personal finance industry is notoriously complex – and it’s no secret that the “millennial” generation doesn’t know where to start. (Kids today, eh… don’t know they’re born, etc, etc.)
Growing up in the post-crash generation, most millennials haven’t been shown a clear path to a successful financial future, unlike their baby boomer and Generation X predecessors.
You might think that technology has pretty much solved this problem – but, when it comes to long-term planning, that’s unfortunately not the case. The fintech industry still doesn’t properly cater for anyone outside the traditional financial-advice industry – and that’s an industry which doesn’t engage effectively with millennials. Financial illiteracy in this generation is a huge problem. It’s one that has been largely ignored by the existing financial sector, as well as by the emerging wave of fintech firms.
Enter Finimize, a new London-based company, with a mission to “make finance more accessible”. Its new offering Finimize MyLife (FML) promises a free financial plan in just three minutes – and has already got a five-figure user base of millennials.
Today, I’m interviewing Max Rofagha, who co-founded Finimize. He’s an experienced entrepreneur, and Forbes’ 30 Under 30 winner. Max has previously presented at WIRED Money – which is a good conference to go to, if you’re trying to stay on top of London’s world-leading fintech scene. (You might care to note that WIRED Live is on later this week.)
AL: Max, tell us about yourself, and how you got here.
MR: I’ve been lucky enough to work in a wide variety of companies and industries – but at heart I’m an entrepreneur. In 2014, I founded DeinDeal: the largest Swiss ecommerce platform after Amazon. We built this up to 200 employees, before a successful exit in 2015.
Whilst thinking about my next move I realised I was clueless about my own personal finances, and I wanted a quicker, easier solution. I set up Finimize with an old university friend, with the aim of making finance more accessible to millennials. My success with DeinDeal, and the founding of Finimize, got me into Forbes’ 30 Under 30 in 2016.
AL: What motivated you to choose this sector specifically?
MR: I think there’s a tendency for millennials, even those who have great educations and successful careers, to pretend they know more about personal finance than they actually do. Indeed, our recent YouGov survey of 1,000 millennials showed that 59% of millennials aren’t confident explaining what an Isa is. Shockingly, 41% of lawyers and millennials working in finance didn’t think they could explain an Isa either. We’re a generation that often feels it needs to project an image of having everything completely sorted out or under control.
I managed to save some funds from a past job, as did 86% of millennials according to Facebook. But I realised that I didn’t really know what to do with it – which appears to be a widespread problem, with more than 50% of millennials keeping their assets in cash (Nielsen). I had no idea whether to invest and if so where, and how much. I certainly had no financial plan in place. So, I asked friends of mine who were investment bankers and strategy consultants. Despite many of them advising some of the world’s largest companies on their strategy, or structuring their massive financing rounds, even they couldn’t really help me. A lot of them even admitted to me that they were similarly clueless. This is partly due to the fact that 53% of my peers have no they trust for financial guidance (Facebook). The issue of financial illiteracy is amazingly widespread: millennials have a very low level of financial literacy – only 24% demonstrated basic financial literacy (PwC).
People look at money in different ways – some of us want to own property, others want to travel the world. Some of us are constantly looking for bargains; others are saving up for an expensive purchase. But the fact is – everyone should have some sort of financial plan in place and there should be an uncomplicated way to get one.
I started Finimize to address this. To help people like me, who found they had nowhere to turn when they needed to plan their financial lives.
AL: Sounds pretty good, but why now? And will it really help people?
MR: The millennial generation is coming of age. The “baby boomers” are retiring and millennials have moved into higher paid management jobs. In the US, millennials now account for 20% of all management jobs. All of a sudden, our generation is accumulating savings, and taking on more life responsibilities. In fact, the global net worth of the millennial generation is projected to increase from $4 trillion in 2015 to $20 trillion by 2030 (Deloitte). But if you talk to the average millennial about their finances I can almost guarantee that the conversation will be brief.
We built Finimize MyLife (FML) to break this trend by enabling people to make informed decisions about how and where to invest. Users simply log into FML, and provide details such as income, savings and debts. They are then given a selection of financial goals to choose from, which the user can customise further if they want to. These goals include: saving for an emergency fund, saving for a house, saving for a pension or investing your savings. Once these details have been submitted, FML creates a detailed and personalised financial plan for achieving these goals.
Depending on the plan that has been drawn up for them, users have the option to click through to Finimize’s partners. If the user has chosen to invest some of their savings, they will be shown the relevant financial products available from the mentioned partners – at a discounted rate or with special perks. We have even partnered with the UKs largest robo-advisers such as Wealthify, whose products are now on our platform.
We were never taught how to manage our money whilst in school or university. The modern personal finance world is increasingly awash with confusing financial products, acronyms and terms. When millennials get out into the real world and start to accumulate savings, there isn’t an obvious place to learn what they should do with it, with most of us relying on outdated guidance from our parents.
AL: With a few exceptions, fintech has struggled to break out of the finance community. Why do you think that is, and what will break this trend?
MR: You’re absolutely right. Technology should be the logical answer to this problem of financial illiteracy, but fintech companies haven’t been much help. They’ve done some fantastic things to open up financial markets, or cut expensive bank fees. However, many are specifically aimed at those who are already clued up about investing, or finance. There’s little point in joining a share trading platform, if you don’t know anything about the financial markets.
I think much of the fintech industry as a whole is trying to run before it can walk. We need to address the fundamental problem of basic financial literacy, before building solutions that offer complex financial and investment advice. Up until now, the issue of financial literacy has been largely swept under the carpet. We won’t break this trend until we get more people taking an interest in and understanding their own finances. And that’s the problem we’re trying to solve.
AL: What do you think is at the heart of this current explosion of innovation in finance?
MR: The tech revolution has already brought about significant changes in the financial services sector. We have already seen how a number of traditional players are losing market share to fintech challengers and innovators.
In recent years, some of the best-known and largest banks in the world have been found guilty of rigging bank rates and other murky activities. What’s worse is that the way personal finance products are “explained” to people still seems deliberately confusing or exclusionary.
Financial advisers can help – but their average charge is about £150 an hour. That’s not something millennials are willing to pay for, and nor should they. This has created a real opportunity for innovation. We’re starting to see a new wave of companies. These are aimed at younger people, who use technology to do finance differently.
AL: So how does the future of consumer finance look? And what is Finimize’s role in that future?
MR: I think the future of consumer finance will be dominated by companies that are responding appropriately to the way we live our lives, and to the challenges we face.
Financial literacy is a real, everyday problem that needs to be addressed – but most of us are very good at burying our s in the sand. Finimize’s role is first and foremost about addressing the elephant in the room – we’re not as financially literate as we let on, and that needs to change. Secondly, we’re inviting everyone to learn about finance so they can make the most of their hard-earned cash.
Did you like Finimize’s vision? And are the millennials you know financially clueless? Please do let us know – firstname.lastname@example.org.