Tim Levene’s office is a stone’s throw from the headquarters of some of the City of London’s largest firms, and while he competes with those, once you step inside you realise his outfit is a world away from the traditional image of a venture capital company.
The office is open plan, with no hint as to hierarchy, and the Silicon Valley slogan “move fast and break things” adorns the wall.
Levene is chief executive of Augmentum Fintech, a listed venture capital fund, and one of the sectors he is looking to “disrupt by investing in firms who will use technology to win market share” is the advice and wealth management industry.
He says: “One of my first ventures was to create flutter.com, which merged with Betfair, and we did that because we saw the betting market as being ripe for disruption.
“And while we look at a lot of companies and sectors, we think the wealth management market has absolutely got the same characteristics to be disrupted as did the betting industry when I got involved with that.
“Incumbents are not changing quickly enough. When I started we shared an office with St James’s Place (both companies were backed by Lord Jacob Rothschild), and even then — and this was many chief executives back — they were talking about how they were going to use technology more, going to shake things up in the industry, and then it never quite happened.”
Robot wars
Levene accepts that fintech has already tried to disrupt the advice market, primarily through a wave of businesses that became known as “robo-advisers”, which deployed lavish marketing budgets but did not necessarily grow large enough to disrupt the incumbents.
But he says a combination of changing demographics and the advent of artificial intelligence will mean that the next generation of disrupters should have more success.
He says: “One of the problems the first group of robo-advisers had was that the audience for such products was in their twenties and thirties, and really their savings goal is to raise the deposit to buy a house, so they leave the platform.
“And then you have to spend a lot on marketing to get another wave of clients. But what has changed this time is that those people who were in their twenties and thirties then, are now in their forties, and they have more wealth and longer-term savings goals now.
We think the wealth management market has absolutely got the same characteristics to be disrupted as did the betting industry when I got involved with that“But just as when they were younger, they still want a digital-first service, and also, crucially, they are used to switching providers as part of their daily lives. And that really does disrupt the incumbents in wealth management, because they have business models that have historically thrived on the assets they have being ‘sticky’ (that is, not likely to move to a rival). But that stickiness has also meant the incumbents have not really bothered to innovate, and that is where the opportunity is.”
Levene adds that he thinks the range of services provided by some of the older robo-advice companies were quite limited, particularly in terms of the amount of work the client had to do, but that AI can change this.
He says: “The next generation of clients want transparency and ease of access to their information. They don’t want long lunches with three bottles of wine and opaque fee structures.”
Despite his optimism, he is not invested in any of the new wave of robo-advice companies, saying only that he is “monitoring a few options”.
This fits into the broader investment style he deploys, as he avoids early-stage companies, instead maintaining a database of 2,500 such firms “and watching them to understand what they need to do to get to the next stage”.
One company in the wealth management universe in which Levene was invested is Interactive Investor, which was sold to Abrdn in 2022 for £1.5bn.
He expresses some frustration that the business was sold so early, saying: “Instead of selling it as a £1.5bn business, I would rather have been able to keep hold of it and help grow it until it becomes a £10bn business, which it can become, but it was a good investment for us.”
Inside out?
Levene, as the son of Lord Peter Levene, who was Lord Mayor of London, chair of Lloyd’s of London, and an efficiency adviser to Sir John Major, is an unlikely candidate to be a disrupter of establishment interests.
After attending the fee-paying City of London School and Manchester University, he become a management consultant with Bain Group, and was sent to Moscow in the early 1990s, working for the Russian government to talk to Russians to find out about the economic state of their cities.
The next generation of clients don’t want long lunches with three bottles of wine and opaque fee structuresHe says of the experience: “I was probably far too young to understand what I was learning just from being there. I went to Siberia and to other cities where no westerner had been for decades.”But one of the things the experience did teach him is that he no longer wanted to be an employee. So he left the rarified world of management consulting to set up what he calls “London’s first juice bar”, which progressed into a chain before he sold it.
It is an acutely tough time to be a technology investor, and Levene says that many investors have lost money recently by looking to invest in the “next big idea”, but instead he views his job as striving to “be 12 months ahead of what the next big thing is”.
He says: “The important thing is not to be five years ahead. Lots of people lose money by being too early, and there is no point in being behind.
“We say no to 99.8 per cent of the companies we look at, but one of the ideas that we are really excited about right now, additional to financial services is cyber security.”
While investors in technology have endured a bumpy ride over the past 12 months, the pace of change remains as rapid as ever. It may be that those advisers and wealth managers who are slow to change get left behind.
David Thorpe is investment editor of FTAdviser
