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.
“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.”
