Claro Money offers the UK’s first digital financial coaching app which aims to simplify personal finances, with a focus on those under the age of 45. With features such as its jargon-busting glossary and the ability to set smart goals, Claro Money makes empowering financial guidance available for all.
Rob Brockington is the CEO of Claro Money, and here he shares his insights into the financial advice gap and how Claro Money are working to improve financial education.
What has been the traditional company response to financial technology innovations nationally?
Larger traditional financial institutions talk a lot about innovation and “digital” transformations. As far as I can remember they have been doing so for at least the last 15 years, if not longer. Only really in the last 5 years have products that directly impact end-users started to change dramatically. Largely that seems to be due to the absolute necessity to now compete with the level of technology that is being created within smaller, more agile fintechs.
An area that has seen very little innovation so far is traditional financial advice. Financial advice still relies heavily on face-to-face meetings and paperwork. High costs and relatively low competition have meant that the balance of power has sided with the advisor, not the consumer.
At Claro Money, we spotted the opportunity to create an affordable and accessible alternative to financial advice. Claro is a financial coaching app that provides users with expert financial guidance regardless of how much they have to invest or where they are in their financial journey. Our combination of technology and human expertise means we can offer financial coaching to the mass market, improving both the wealth and financial wellbeing of our users.
How has this changed over the past few years?
Unfortunately, the ‘products’ are still somewhat dictated by the revenue model they can create, and not by the experience and convenience to the end-user. Additionally, larger financial institutions are often limited by internal legacy infrastructure and tech, which requires significant financial investment to migrate into cloud-based, scalable offerings that allow easy API integration.
There are signs that this is changing, though – the fairly recent introduction of PSD2 open banking has meant that banks specifically had to open up data and systems to match the offerings of competitors. In turn, this now requires banks to match the pace of fintech innovation in that space, else people won’t need to use their banks to analyse their spending and budget, as anyone can now access this core data set.
When it comes to financial advice, which is a heavily regulated industry (as it should be), it’s unfortunately been designed to be only suitable for the ‘few’ – and not the ‘many’. This is mainly due to how revenue is made from such services. Robo-advisors are making great headway in this space but there still seems to be a long way to go to fully provide the quality of services seen in the traditional service.
At Claro Money, we decided to build from the ground up focussing on the advice gap (66% of the UK population) who are not in a position to access financial advice due to costs/capital requirements. Our app provides guidance-based financial coaching, and not directly ‘advice’. We’ve taken a personalised approach that can include 1-1 human interaction, but merged with the latest technology to allow for a scalable solution. We are focused on ensuring we can offer this experience utilising services such as Open Banking, video calls, and fully digital access to savings, investments, insurance and pensions (and more) but without the burdensome data collection techniques and capital requirement restrictions that put the traditional services currently out of reach to that demographic.
Is there anything that has created a culture of change inside the company?
At Claro Money, in order to be able to provide the best product to our customers, we have to build quite a large product (in both a technical nature and in terms of underlying partnerships/products). For a new startup, this is a mammoth task. This means we are focused on the long game, and really making a significant impact (in our case, societal impact). Our employees understand and appreciate that task, and indeed the risk in that approach. We could have chosen to do one small part of this project and built a quicker revenue-generating piece of tech. However, we don’t believe that will successfully achieve the mission of increasing financial literacy across the UK.
If the pandemic taught us anything, it’s that being in control of your finances is really important. Not just for financial security but also for mental health, with financial literacy being a large component of overall mental wellbeing.
We took a particularly fussy approach to hiring, that really put personality and work ethic at the forefront of our requirements. Team fit is important and helps to create a culture that can sustain the difficulties that fast-paced, high-pressure businesses inevitably encounter. Alongside this, we make a significant effort to involve our teams in business decisions and are incredibly transparent about what the obstacles and issues are that the business faces.
In addition, our research before building Claro Money really highlighted the pain points for people with regards to how they feel about their finances. Early research found particularly strong themes among the younger generations; that they weren’t receiving good financial education, and they were unsure of how to approach organising their finances and experiencing real worries about money. It highlighted a systemic problem that wasn’t being addressed and instead, getting increasingly worse. This was motivation alone for the team at Claro Money to ignite change and disrupt the traditional industry and we recognise that people can personally associate what we are building as a solution to problems in their own lives.
This core mission has built into our culture of wanting to impact as many people’s lives as possible whilst forcing change on the archaic traditional advice industry and also retaining and embracing a culture of change at Claro Money.
What fintech ideas have been implemented?
At Claro Money, we had to go back to basics before we could innovate with technology. We had to define what financial coaching really is, as so far there is no scaled version of such a service to really learn from. We then had to run hundreds of 1-1 coaching calls to allow us to gain as much insight from our customers as possible to enrich that experience further and validate that people can gain real value from a session.
After that comes translating those learnings into a fully digital experience. There is not one piece of technology that accomplishes that, and we are far from finished. But with the use of open banking, web to mobile app security transitions, and utterly simplistic access to suitable financial products, we are in the middle of building a journey that we feel will achieve our mission.
Next year we will be launching an updated version of Claro Money that applies the insight from our current coaching offering and allows users to create a personalised financial plan in a fully digital manner, with direct access to the coaches for help when needed.
What benefits have these brought?
So far we have seen a great response to the quality of our coaching. We currently have a 4.96 rating based on 48 reviews and feedback has been that people have found the sessions extremely helpful and tailored, enabling them to understand and make plans towards reaching financial goals.
By moving away from the AUM model and developing an inclusive app, we are working to provide financial guidance to people from all walks of life, assisting them in developing a smart money mindset. Being able to book a coaching session quickly and easily via the app is an efficient way to get financial guidance and allow people to begin their journey to increased financial confidence.
Do you see any other industry challenges on the horizon?
One challenge is charging a subscription for financial services. Quite often, people expect that the service will pay for itself. There is no other industry vertical like this: if you liken financial coaching to a gym personal trainer, you wouldn’t have the same expectations. However, in finance, if you are getting coaching and guidance, customers tend to expect to see the amount they pay returned to them in investment returns or cost savings. Time will tell if consumers are ready to pay for financial services via subscription, albeit at a low cost (£10/m). The irony is that the AUM model is what prevents most people from accessing financial expertise and tools in the first place and often leads to bias in the practice.
Can these challenges be aided by fintech?
Yes – significantly lowering the costs should help. Also delivering immediate value at the point of need via solutions such as video calling, live chat etc. We hope this will demonstrate real value to users and they’ll be happy to pay.