Digital wealth management start-up Exo has brought investing to the masses with a sophisticated AI-powered technology that until a few years ago was reserved for institutional and UHNWIs.
However, unlike other robo-advisers, the company is not aiming to eliminate the human element of wealth management, but rather free up their time so that they can do what they do best: manage clients.
Exo Investing acts as an expert "investment co-pilot" using AI to build investors a personal ETF portfolio around their own preferences. Machine learning algorithms then monitor each portfolio daily, continuously recalibrating to both the individual's risk appetite and market conditions.
We keep the human element and allow that person to spend more time on managing the client relationship"
"We do what the technology allows us to do: Fully automated portfolio management where we build for the retail client an individual portfolio, managed individually," Nikolai Hack, Exo's chief operating officer told International Investment.
Moving away from the traditional model of static products and predefined portfolios, the company says each portfolio is tailored-made.
"When you come into the platform and open the account, we look at some data. We ask you who are you as a customer, client, investor; how much risk you want to take; how much losses you can absorb; what kind of portfolio will work for you. It's fully individual as the machine creates it for you. It will look different if you do it again two hours later, because the market has changed. That's why no two portfolios are alike," said Hack.
Investors are free to make changes to their profile risk or portfolio composition at any time. Exo will instantly recalibrate their portfolio, at no additional cost.
Even as the company allows for full automation, it does not seek to take out the wealth manager from the equation.
"We keep the human element and allow that person to spend more time on managing the client relationship," the start-up's COO said.
"A wealth manager does one thing: He lets people through the door, he talks to them but then when they leave, he does two hours of admin to manage the portfolio. That is the stuff we take away from him. Free up their time to give it back to them where it matters," he added.
However, the idea of a robot managing your money might still seem odd and robo-advisers are still struggling to attract more clients. For Exo Investing, those fears stem from a misconception.
"What happens if I bring my money to a private bank," Hack asks. "They have a fancy building, a fancy banker with a fancy briefcase. They will have a portfolio manager but this person has a model. They are not just opening the newspaper looking at stocks. No, they have a model which basically means you have created a robot that tells you what to do. The underlying way of how the money is managed is automated in some way, no matter where it is. There's always technology behind it," he said.
As robo-advisers are seen to be thing for millennials, Exo Investing clients show otherwise.
"We were expecting a kind of 30 to 35 since it was an app, it is quite a sophisticated solution in comparison to some of the other robos. I think our average age is 50 to 55 when we originally started. I believe there is some kind of need for control and empowerment the older you get anyway, because you have more wealth and perhaps you're more engaged to it as a topic," Melanie Palmer, the company's CMO, said.
The AI-powered risk management technology, using quantitative management techniques and machine learning algorithms, has been developed over the last 30 years by Madrid-based asset manager ETS, which is also a major shareholder in Exo.
Until now the technology was only supplied to institutional investors and private banks, such as Rothschilds for their wealthy clients. Benjamin and Ariane de Rothschild have also invested in the company.
Exo Investing launched in the UK last year and as it continues to attract investors, it is already looking to take the next step.
"Going forward the B2B will be the core focus of our business. Our technology, if you're an IFA we do the automation of everything you don't want to touch yourself, if you are an insurance company who wants to set up a robo-adviser, we do that as well and you have a new revenue stream," Hack said.
The company currently charges 0.75% for the management the clients portfolio, going down to 0.5% if there is over £100,000 invested. The minimum amount is £5,000.
The firm has offices in Madrid, Switzerland, Luxembourg and the UK.