UK challenger ikigai to launch flat-fee investment account

via FinTech Futures

ikigai, soon to become one of the UK’s latest challengers, is just a couple of months away from launching its flat-fee investment account.

The start-up intends to charge a flat £20 per month fee for all customers, no matter how much they’re investing.

“When you look around at investment propositions, they’re always as a percentage of the assets under management,” co-founder Edgar de Picciotto tells FinTech Futures.

This is the case with both incumbent and newcomer fintech investment management services in the UK, says de Picciotto. The difference is that incumbents’ fees generally get higher the more you invest, whilst fintechs’ fees generally get lower the more you invest.

Fellow ikigai co-founder Maurizio Kaiser says he’s never understood why, if he invests £10,000 with a traditional wealth manager, he’ll be charged £100 a month, but if he invests £100,000, he’ll be charged £1,000 a month – “it’s the same service at the end of the day”, he says.

“I think the pain points are quite similar across different income levels,” says de Picciotto, firm in his belief that whether someone’s earning £50,000 or £150,000, the percentage model is just as frustrating.

kigai, which means ‘a reason for being’ in Japanese, will not be an investment platform for everybody, rather it will serve those trying to grow larger, longer-term investments which are currently capped by percentage-based fees.

“[The target is] people like us, who know that their money should be invested, but aren’t sure of how or where to start,” says de Picciotto.

Kaiser adds that despite high street banks dividing customers into different buckets – be that affluent, or high-net worth – “at the end of the day, what I think most people want is just something which is really beautiful and smooth, and which just works”.

The ikigai platform is two-fold. It offers a basic banking service with a Visa card like many challenger banks. This current account is then used to set monthly budgets which automatically push savings into an investment portfolio account at the end of each month.

Both de Picciotto and Kaiser worked at McKinsey & Company together for a time before setting up the start-up. “We realised that despite all the very cool new apps that were coming up, we weren’t seeing the ones that would push us to switch,” says Kaiser.

“From there, it was immediately clear to us that we needed to combine the best digital banking experience with a transparent and straightforward investment financial institution,” he adds.

So ikigai is tapping the middle ground between challenger banks’ “overpriced” metal cards and incumbents’ “clumsy” travel insurance bundles, explains de Picciotto.

For Kaiser, the world seemed ready for another fintech when his vicar asked him for his advice on whether to get a Monzo or Starling card. “This is what convinced me that the barriers are well and truly broken now,” he says.

The co-founders want to break down the ominous “one-pot” view of investing, by adding features in the ikigai app which can segment investments into different categories subject to longer or shorter timelines.

The investment portfolios will then be segmented by risk, and Kaiser says part of the design of the platform is to help “protect people from human instinct”, which, in the instance of the ongoing coronavirus, might otherwise encourage people to sell all their assets.

For Kaiser and de Picciotto, investing should be kept very separate from trading. “I think a lot of people always confused investing with trading”, says Kaiser. “I know traders, they spend 100 hours a week just looking at 10 different stocks – there’s no chance that a retail investor could replicate that.”

So ikigai won’t try to pretend to understand the fast-paced Wall Street anytime soon.

Looking ahead, the London-based ten-person challenger purely has its sights set on the UK for now, certain it can build a good proposition by focusing on one market for an extended amount of time.