Wealthify boss Andy Russell has said his fintech is “not competing against IFAs” but helping them, as the firm concentrates on small pot consolidation in tandem with third party advisers.
The Aviva-owned online investment service, which targets savers who don’t want to self-select investments, started working with IFAs back in September 2020, signing two co-branded partnerships with network SimplyBiz and the UK advice arm of LGT Vestra.
Having built the company up through its direct-to-consumer channel, Wealthify decided to expand into the IFA market to reach more savers with smaller pots - typically those with £50,000 or less in savings at a flat fee of 0.6 per cent.
The Cardiff-based firm’s partnerships with SimplyBiz and LGT Vestra work like “incubation relationships”, according to Russell.
“They [advice firms] refer the small pots to us and we help them grow. And then we give them some MI [management information] on a regular basis. So when [the customer] gets to a certain size they will consider whether they want to go back [to the IFA] or not.”
Wealthify is not regulated to provide financial advice. It also doesn’t allow customers to consolidate pensions with lock-ins, guarantees or defined benefits. This includes pensions with a protected pension age or scheme specific tax-free cash protection.
“We help people with multiple jobs and simple pensions,” the chief executive told FTAdviser. Those with more complicated pensions are guided towards financial advice.
“Every IFA will have pots of people not worth taking on,” Russell explained. “So we’re not competing against IFAs. We’re actually resolving their historic issues.”
Alan Smith, CEO of boutique chartered financial planning firm Capital Asset Management, aired his concerns over a Wealthify customer testimony back in December. The 51-year-old had used Wealthify to consolidate 25-years-worth of lost pensions.
Smith told FTAdviser: “There’s a difference between a £100 Isa contribution and pension consolidation. If that individual came to us, we’d have had to review it and identify if it was fair to move them versus doing it on a non-advised basis.”
A spokesperson for Wealthify said customers are warned about things like exit fees prior to any transfer, and that if a customer’s pension transfer is declined due to the defined benefits or guarantees attached, a Wealthify employee will explain the reason and recommend the customer seeks financial advice.
Need for financial advice
Russell is keen to highlight that rather than taking advantage of clients who - if advised - wouldn’t have made the transfer, Wealthify’s customer support team actually does some of the job for advisers.
“The people that look at pension transfers or moving away from savings to investments find it hard. Customers don’t understand what they’re doing. They don’t understand some of the guarantees, or [are] even aware they’ve got one,” Russell explained.
When people get to that scenario of talking about a guarantee, people are like, ‘oh, what is this? I need someone to help me’.Andy Russell“Job one is to get people to refamiliarise themselves with their pensions and understand their position,” he said.
Asked whether customers have complained about not being able to afford the leap to paid-for, regulated financial advice, Russell said the firm hasn’t seen too much of this.
“When people get to that scenario of talking about a guarantee, people are like, ‘oh, what is this? I need someone to help me’. So when you're in that position, it's easier to accept and recognise the need for financial advice.”
Wealthfiy is wholly owned by Aviva. Since the acquisition, Russell said the firm has roughly doubled funds under management every 6-9 months, with customer numbers doubling around every year or so.
Whilst the business model might seem to run the risk of losing clients after the £50,000 savings mark, Russell still hopes Wealthify will be a part of a client’s investment solution into their later life. Be that keeping smaller pots with the firm, or referrals from family and friends.
Well-positioned on the direct-to-consumer side, Russell said Wealthify’s business-to-business distribution channel was still “relatively young”.
“We are going to be looking to grow our B2B books,” said Russell. “Also our Isa products are more established than our Sipps, so [we] intend to build out our Sipp offering.”
ruby.hinchliffe@ft.com
