The wealth management industry struggles as customer acquisition costs are higher than the lifetime value of a customer. The high costs prevent small companies and startups from acquiring B2C clients—both investors and advisors. Lennart Asshoff, founder and CEO of Nucoro, a U.K.-based startup, sees an opportunity for startups to work in the B2B sector through partnerships with banks and other large financial institutions.
In our interview, he outlines how startups can deal with client acquisition and what differences there are in the European and U.S. markets in this regard.
Ways to overcome acquisition problems
These are the top-five best practices Lennart learned from using his B2B product, Nucoro, to fight against high client acquisition costs.
1. Focus on large institutions. In the retail market, there is intense competition for new clients. The amount of investment required is too large, so only big players with big budgets are able to acquire clients. Smaller companies, in turn, are trying to focus on providing B2B services for financial advisors.
2. Invest in publicity. To popularize a new brand with people so they trust you with their money and their savings is super difficult. That’s why startups have to make a lot of publicity efforts, especially marketing, in order to get them on board. Clients should have no doubt that a company is a reliable partner, no matter whether it focuses on institutions or people.
3. Build a digital-first product. Product should be way better in terms of user experience versus the competition. An important aspect of this is being mobile-first. This enables clients to obtain access to your account in a matter of seconds. You can change your risk level on our portfolio, which gives clients a lot more control and reactiveness.
“Let’s say medium to large financial institutions have half a million, a million, or a few million customers,” Asshoff says. “They know that at some point these customers will leave for better digital solutions because people like a digital-first product, not a product that has been around the retail brick-and-mortar stores.”
He adds that his project, Nucoro, aims to help those institutions make the leap into the current generation of digital products.
4. Innovate. Another way to attract customers is innovating and providing a cheaper service, such as done by Robinhood, Acorns and others. These companies reach millions of customers with a very simple proposition: be an extremely easy-to-use and convenient platform and have zero commission stock trading. Making products easier and more affordable requires innovation.
“You have to innovate, from a product perspective, whether that’s innovative saving solutions or commission-free stock trading,” Asshoff says. “Whatever you provide, it has to be a better product that attracts customers easier and cheaper than investment advice or investment management.”
5. Eliminate technology debt. If the speed of implementing innovation influences customer acquisition, so does technology debt. It prevents your startup from innovating faster, thus limiting your opportunities. It’s equally difficult to integrate financial institutions because they often have a lot of technology debt.
“There are certain integrations you have to do with 100 people because it’s such a mess internally that you need a lot of more hands,” Asshoff says. “Hiring 100 people now would be a nightmare scenario for me. It’s extremely difficult to find professionals.”
To help with that, Asshoff would like to partner with an integrator company because they have worked with the system they’re going to integrate with before, and they have a lot of experience in that field.
Do Europe and the United States differ in client onboarding?
According to Asshoff, there are different benefits and setbacks for both markets. The U.S. is the world’s largest market for WealthTech; however, from a regulatory perspective it’s a nightmare. Purely technological companies outpace wealth management companies here. Additionally, compliance limits the talent options for those who can’t afford to hire regulatory experts.
In Europe, he says, it really depends on where you go. For example, Nucoro has offices in the United Kingdom and Spain, which are two completely different markets. In Spain, the technology is outdated, which complicates integration and innovation across the market. In the United Kingdom, integration is a lot easier than on continental Europe from a tech perspective in that if you have an open API infrastructure in place, you can easily integrate with some of the players there.
“In Europe, the passporting of the license from the regulatory perspective is a lot easier,” Asshoff explains. “But now there’s Brexit, so you don’t know exactly what is going to happen.”
The European market is quite big, but it’s segmented. If companies want to enter into a new market, they should prepare for a lot of changes and adaptation. It can’t be done as easily as moving inside the same market in the United States. Still, there are ways to eliminate negative aspects and win over customers.
Takeaways
Customer acquisition is expensive and depends on the quality of your product, regardless of what country you operate in. There are factors that can help you resolve many client acquisition issues such as having a mobile-first user experience, inexpensive services and effective partnerships. Having the right focus can also help startups lessen the costs of client onboarding and take their place in WealthTech in whatever market.
About
Lennart Asshoff, founder and CEO of Nucoro, started his career at ETS Asset Management in Madrid, which advises around $16 billion in assets. He worked in the product development department and helped build unique, tailor-made quantitative investment solutions for large institutions and high-net-worth individuals.
Vasyl Soloshchuk is CEO and co-owner at INSART, a fintech and Java engineering company. Vasyl is also the author of WealthTech Club, which conducts research into Fortune 500 companies and start-up robo-advisor and wealth management companies.