Fintech on Friday: A digital private bank for the millennial generation
The conviction that high net worth millennials are largely underserved by private banks led Azamat Sultanov and Firdavs Shakhidi to start their own firm, Fortu Wealth, two years ago. Their aspiration is for the business to become a digital private bank for this client segment, allowing them “to manage every aspect of their finances in one place”.
The duo, with a background in private banking and asset management, founded the London-based firm after managing a boutique asset management firm with more than $500m in AuM. But to scale the business, capture the potential innovation in this space and gain first mover advantage, their only option was to go digital, explains co-CEO Mr Sultanov.
Their vision is centred on the idea that the wealth management sector is going to primarily adopt e-wallets as the method of payment and investing, to meet client demand.
“Unlike baby boomers, millennials do not use credit cards. They think credit cards are a trap set by banks to make money out of the clients,” he says. They instead use prepaid cards and increasingly online service solutions such as ‘buy now pay later’ offered by digital firms such as Fortu.
Through a proprietary mobile app and web platform, Fortu users can gain access to a secure electronic money account and be able to make instant global transfers and payments in any currency.
They will also be able to access a range of investment opportunities, with “mission driven investing” being the core offering. The firm’s proprietary “niche baskets of stocks” focus on themes ranging from renewable energy to autonomous driving, and have a full transparent structure. “Any millennial believes in a certain futuristic mission where the world is moving,” says Mr Sultanov.
The firm, which employs more than 20 staff, is also aiming to build a network of alternative investment providers to give clients access to popular alternative solutions, such as asset-backed loans and cryptocurrencies.
Clients will be able to access all these services through a single point of entry, one app, paying one annual subscription fee of £1,000 ($1,395). The fee is justified if clients have at least $100,000 on the platform, explains Mr Sultanov.
“Our research shows that millennials like transparency on the fee structure. Private banks have a lot of hidden fees inside their products, which millennials don’t understand, but they know they have been fooled.”
The firm is due to launch its wealth management offering in September, subject to regulatory approval, and already boasts close to 1000 clients on its waiting list.
Fortu’s model is going to be different to that of digital wealth managers. These mainly offer portfolios of ETFs, charge clients on AuM and tend to target the mass market.
The digital bank is not going to compete with traditional private banks either, says Mr Sultanov, because it is targeting HNW millennials, who do not understand their value proposition.
In fact, the company is also looking to offer “b2b banking-as-a-service solution” for private banks and wealth managers. On a pilot project, it is already partnering with Swiss banking group CBH on the digitalisation of their offering, through white-labelled solutions.
Pain points
Unlike commission-driven private banks, Fortu is not going to push products, states Mr Sultanov. “Millennials are cost-cautious and are more DIY investors than baby boomers, who would trust someone who knows better to pick and choose for them, and don’t care about fees.”
The firm is also planning to offer educational content online, to meet millennials’ desire to learn, read and watch videos online. It is also testing the idea of including investment advice in the package, allowing clients to have a one-to-one discussion via Zoom with their investment adviser.
“We have been working with this industry for a while, we understand where the industry is broken, its main pain points or correction points, and we try to address them by opening a new type of digital private bank,” adds Mr Sultanov.
