Saving apps and investment platforms

Saving apps and investment platforms are attracting the next generation of future savers and investors. Millennials (who interact with the world through their smartphones) have gone full-blown digital they prefer (trust) saving apps and investment platforms compared to suited and booted investment advisors.

With the traditional asset manager likely to become an extinct animal some in the industry are already morphing into Saving apps and investment platforms.

Millennials are being targeted through saving apps and investment platforms because it is technologies that they use as second nature

Perhaps smartphone saving apps and investment platforms and chatbots powered by artificial intelligence will shape the savings habit of the next generation.

“Round-ups” is an example of how these saving apps are spreading a culture of saving amongst millennials.

How do “Round-ups” as saving apps and investment platforms work?

Saving apps and investment platformsAs the name suggests “Round-ups” rounds up the payments that user make and put the difference into an investment or savings product. For example, say the user buys a baguette at Nonna’s kitchen for say £ 3.20 an extra £0.80 is automatically deposited in their investment portfolio.

Millennials are already comfortable using their smartphones this way so with saving apps the smartphone has a dual function, making transactions and simultaneously saving/investing.

So saving apps and investment platforms are likely to have a significant impact on the saving habit of future generations.

Saving apps and investment platforms have yet to attract the attention of an established asset manager

The initial investment made by young people are small compared with older savers older. Nevertheless, the latter group eventually fades into the economic sunset making less of an impact on saving. Millennials are soon overtaking baby-boomers in terms of growth trajectory and economic power.

Saving apps and investment platforms are changing the way future savers/investors interact with investment services

That is posing a challenge to the sales strategies of large asset managers. Asset managers view saving apps and investment platforms as a prelude to their more traditional service once the investors accumulate more significant wealth.

Saving apps and investment platforms have already attracted millions of users all under 45 years.

“These tools had been dismissed by some asset managers based on the belief that once the investor has ‘real’ money they will seek out a full-service relationship, so existing distribution arrangements will come back into play,” says Gabriel Altbach, founder of Asset Management Insights, an investment industry consultancy.

But other asset managers argue that assumption “underestimates both the comfort that digital natives have with technology as well as how far the tech has advanced and will continue to do so.”

Indeed, I am inclined to believe that saving apps and investment platforms will advance significantly in the next decade, bearing in mind the scalability of technologies. Moreover, this tech-savvy generation will be best equipped to adapt and exploit the benefit. Wealth is likely to be skewed to those who are able to leverage these technologies.

Technology savvy investors with more wealth to invest will be inclined to use saving apps and investment platforms

Over 59% of 18-34 are either very or fairly likely to use saving apps and investment platforms.

A recent survey by YouGov of adults aged between 18-34 underscores this changing trend in the way millennials will access financial services.
This pie chart illustrates that more than half of millennials will use free saving apps and investment platforms to save and invest.

Moneybox is another saving apps and investment platforms which uses the image of a user purchasing a coffee to promote its service.

Moneybox has more than 125,000 investors on its platform. The average user typically puts away £1,000 a year each. The average age is 31. The app offers three products: a Vanguard global equities fund, a Janus Henderson money market fund, and an iShares global property equity fund, which charge 0.22 percent to 0.24 percent. Moneybox has a 0.45 percent platform fee plus a £1-a-month subscription after three months.

“A whole generation was growing up without the tools and information they need to build their financial future,” said Moneybox cofounder, Mr. Mortimer. “Wealth managers tend to help people with wealth to manage, while banks try to sell products like mortgages but don’t help young people build up their deposits. Younger people often feel alienated,” he added.

Darren Winters also offers for free three of his best investment strategies.

Saving apps and investment platforms could fill the gaps in the education system

Despite years of compulsory public education financial literacy is shockingly low. More than half of millennials don’t know what an ISA, bond, equity, asset manager, shorting, hedge funds, derivatives, Index tracker fund are.

A YouGov survey of over 1,000 UK adults asked the following question;
Which of the following financial terms could you confidently explain to someone else?

Are saving apps and investment platforms an industry game changer or a compliment to traditional asset management services

Moneybox cofounder Mr. Mortimer insists they did not set out to disrupt traditional players. Instead, Moneybox is helping big managers access the younger investors that they struggled to attract.

“The people we are bringing to the market would probably have eventually started investing, but not for another 10-15 years,” said Mr. Mortimer

But saving apps and investment platforms could be yet another part of a world going digital and if you’re a business today that is not thinking about going digital you will be gone.

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