Interview with growney—robo advisory market 2020 In conversation with Thimm Blickensdorf, Head of Marketing, Sales and Customer Service, growney

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“Grow your money” is the mission of robo advisor “growney”, which was launched in 2016. Their aim is to offer particularly simple, transparent and cost-effective access to investments in the capital markets. As part of a series of interviews with various robo advice providers, Thimm Blickensdorf (Head of Marketing, Sales and Customer Service) shares his ideas on how they intend to communicate this to potential customers and how the coronavirus crisis has influenced business at growney.

 
Thimm Blickensdorf / Interview with robo advisor growney: robo advice / "robo advisory market 2020"

Hello Mr. Blickensdorf, how would you describe growney’s scope of services in no more than two sentences?

growney is a technology provider that delivers complete digital/hybrid asset management platforms to banks, insurance companies and other distributors. In addition, growney is one of the most successful robo advisors / digital asset managers in Germany and is happy to share its experience with its B2B customers.

What is growney’s investment philosophy?

To outperform the market, you need to be lucky. To outperform the market permanently, you need to be extremely lucky. As we believe that luck should not be part of an investment strategy, we passively invest in a world market portfolio composed by index funds (ETFs).

Depending on their risk appetite, the investors’ money is invested broadly diversified in over 2,500 equities in 45 countries according to their share of global value creation. During the term of the funds, we ensure their quality, carry out regular rebalancing and align the portfolios with the changing worldwide value creation.

Our strategies focus on reinvesting ETFs wherever possible to optimize returns, thereby allowing our customers to benefit from downstream taxation. Because even when paying tax, the compound interest effect is a decisive factor on the road to higher returns. Given an increasing investment period, we expect this investment philosophy to outperform over 90% of the other market participants.

Which target groups does growney address with its product range, and how many AuM and customers do you have in each segment?

In principle, growney is suitable for every investor. Tailored to personal saving targets, growney offers its customers five investment strategies. Thanks to low entry barriers, even investors with little prior investment knowledge can try out the growney investment strategies.

Our growney.de market presence today consists of more than 4,000 very heterogeneous customers—from companies that organize their company pension schemes with growney, to high-net-worth individuals who make their basic investment with us, up to career starters who save EUR 100 per month. The average age is 41 years. Our youngest customer is 18, the oldest customer is 86 years old.


In the wake of the coronavirus crisis, our authors have spoken to a number of other robo advisors about the effects of the crisis on the industry:

To the interview series with the robo advisors


How much do private customers with an investment volume of EUR 10,000 have to pay for growney’s services, and how do you compete with other robo advisors and traditional asset managers?

We charge a private customer with assets of EUR 10,000 only 0.69% per year on the volume deposited. For assets in excess of EUR 50,000, the fee is reduced to 0.39% per year. Our transparent investment concept, services and prices clearly set us apart from our competitors. Especially in comparison to traditional asset managers, we are pointing the way in this respect. The services we provide are in no way inferior, on the contrary, growney offers its customers a service level that they would not receive elsewhere.

Or have you ever placed an order with a classic bank after 6 pm? Or received a comprehensive overview of the performance of your securities account after office hours? Arranged a payout at the weekend? All this and much more is possible with us. However, the customer must bring their own coffee to a chat or telephone conversation with us.

 

What investment strategy do you pursue and how do you manage risk?

Our passive investment style enables us to achieve the best results for our customers in the long term. We diversify investor funds into 46 countries and 2500 equities and risk-reducing bonds. We invest exclusively in liquid assets and strive to keep costs, taxes and risks for the savers as low as possible. We adapt our investment strategy individually to an investor’s very own risk perception. Our aim is to ensure that investors keep their cool even in turbulent stock market phases.

growney’s investment strategy is currently based on eight passive index funds (ETFs). Our six equity funds make up a global market portfolio whose weighting of individual countries is based on their economic importance in terms of global value creation. The two bond funds invest in high-quality corporate and government bonds from the euro area.

At growney we follow a “best-in-class” approach to selecting those ETFs with which we convert the previously determined asset allocation into an investable portfolio. In order to determine the best ETF in an asset class—for example, the North American equity market—we use predefined criteria to compare all ETFs in this area that are licensed for distribution to private customers in Germany. We regularly review both the selection of asset classes and the weightings of the equity and bond portfolios, as well as the selected ETFs, and adjust them to current conditions if necessary.

Regular rebalancing ensures that the investment risk is always aligned with a customer’s preference. In addition, we periodically adjust the portfolio composition to reflect the distribution of value creation throughout the world.

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Meanwhile, there is a multitude of providers for robo advisory, B2B and B2C. How does growney differentiate itself, i.e. what exactly is your USP?

In a direct robo advisor comparison, growney stands out by offering an investment without major entry barriers. growney neither demands minimum investments nor minimum savings contributions. Another clear advantage is the possibility of combining any number of investment objectives with optional different strategies in one securities account. For instance, asset accumulation, personal retirement provision and funding of university studies can each be defined as independent investment objectives.

Our investment strategy is simple, transparent and comprehensible for the customer.

We can draw on a wealth of experience regarding the B2C sector, share this knowledge with our B2B customers and provide tips and advice on how to successfully place a platform in the market. We also offer to completely take over marketing activities and/or customer service.

Another feature that sets us apart from many other providers is our technically outstanding platform, which we can adapt individually to each B2B customer. Many potential customers are surprised at the low cost of implementing such a digital platform in their own companies—and all this with relatively little effort.

What is your (marketing) strategy to gain new customers? What role do partnerships play?

Our marketing strategy has a strong digital focus, and we benefit greatly from the fact that our private customers recommend us to others. growney targets its own branded products towards private customers as well as (non-profit) companies.

A further component of our marketing strategy is cooperation with website operators, who compare our range of services with those of other providers and often make a recommendation for our offering.

We place great value on transparency, clear messages and fairness when communicating with our customers. This includes in particular a clear product explanation, fast customer service—by e-mail, telephone and chat—and the full disclosure of the costs incurred in connection with an investment. We apply this communication style across all marketing channels.

In addition, we work with fee-based financial services distributors and independent brokerage companies who recommend our services to their customers. We provide platform technology, asset management and a comprehensive service package in the form of individual white label solutions.
Which business area do you believe holds the greatest growth potential? What areas do you want to focus on in the future or add to your business?

growney is not only a robo advisor, but also a technology provider in the financial sector. We notice that banks and insurance companies take advantage of the current crisis situation to reflect on their own digital strategy. How can customers open securities accounts without having to come to the branch? How can a customer easily purchase the in-house funds? How can I dispense with paper documents or digitalize them? This is where growney comes in. We accelerate the digital transformation of the financial industry and offer financial companies a tailor-made solution for their customers: a digital, state-of-the-art and efficient investment platform.

Furthermore, the general ETF trend continues. Many investors have discovered ETF savings plans and progressively build up their assets with regular deposits. growney offers low entry barriers, as we demand neither minimum investment amounts nor minimum savings contributions for an ETF investment. Investors finally have access to a modern and fair investment that is designed flexibly and is tailored to the investor’s phase of life.

The huge growth potential therefore lies in the financial sector’s digital transformation and the growing popularity of ETF savings plans for personal asset accumulation.

Let us now turn to the challenges of the coronavirus crisis…

How has the coronavirus crisis affected your business so far? What are your biggest challenges right now?

At the beginning, our customers asked us a lot of questions about this topic: from “Can you actually work in the current environment?” to “Is my money safe?” to “How can I sell my shares?”. Only one week later, the questions changed to something like “How can I use the weakness of the market to invest?”. Fortunately, since the outbreak of the crisis we have had considerably more deposits than withdrawals and continue to gain many new customers every day.

We are happy to note that our customers have fully understood our investment concept and that we therefore have virtually no disappointed customers or cancellations.

The crisis has not really affected our business model. Even before the crisis, we motivated our employees to work partly from home. Currently, almost all colleagues work from home. We encountered no difficulties whatsoever during the changeover.

How has the coronavirus crisis affected your customers’ return? How would you rate yourself compared to your competitors?

One investor who has invested at the highest prices in our riskiest portfolio is currently lagging about 18% behind. The customer who at the same time invested in the lowest risk level currently suffers a loss of 5.5%. This result compares very well with our competitors and with our benchmark, the MSCI World.

What medium to long-term risks do you expect the coronavirus pandemic to pose for you and the robo advisory market in general?

The robo advisory / digital asset management market has proven very successful in the coronavirus pandemic. Customers were very well informed about the development of their assets and able to act at any time from any Internet-capable device. We are happy to see that our contingency plans, which also provide for decentralized operational control in the event of a crisis, worked so well. Online-based business models tend to have a risk-reducing effect in this crisis.

What opportunities could arise from the crisis?

Customer interest in digital asset management is growing and financial services providers are recognizing this trend. This development is obviously in our favor, because we as a digital asset manager and technology provider for banks, insurance companies and independent distributors benefit from it.

We have one last question for you …

What have you always wanted to state in an interview, but have never been asked?

In the past, a globally diversified equity portfolio was the only asset class that at least maintained the purchasing power of money in every 20-year period. German investors virtually waste money because of their high proportion of demand deposits in their savings. Many investors miss the lack of profit later on, when they dissave. The Question:

What would it take to promote German investors’ private investment in shares?

The government could introduce two simple measures to help small investors in particular to build up their assets through shares, for example with a monthly savings contribution of up to EUR 250.

1. Tax exemption
Gains from diversified equity investments are tax exempted.

2. Capital guarantee
At the age of 67, the saver is guaranteed the sum of their savings contributions less costs.

The Norwegian government already ensures this for its citizens by investing its surpluses in a worldwide equity portfolio. In my opinion, however, it would be far better to leave the responsibility with the citizen. Ultimately, it would probably prove far more beneficial for the German government to reinforce the willingness to save in shares and subsequently have to support fewer people.

Many thanks for the interview!


In uncertain times it is more important than ever that financial services providers remain good partners for their customers and present themselves as part of the solution. You can find further information on here.


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