Tavistock joins D2C ‘fist fight’ with low-cost app

Firm’s CEO says clients could possibly set up accounts for free

Tavistock Investments is hoping to drum up interest for its “game changing” protected portfolios by launching a low cost D2C app next year.

The smartphone app called ‘i-stock’ will give customers the ability to open both Isa and investment accounts.

The firm has said client accounts will be “very low cost” and “possibly free of charge”. There will be no administration, dealing, entry, exit or other charges applied, it said.

Game changer

CEO Brian Raven (pictured) told Portfolio Adviser the app was developed to provide easier, more direct access to Tavistock’s protected funds which were launched back in May.

The Acumen Capital Protection Portfolio (ACPP) and Acumen Income Protection Portfolio (AIPP) are described in the firm’s literature as “keenly priced”, daily-dealing Ucits products.

Raven said they are “a game changer” for the business. “I’ll be disappointed if we don’t raise several £100m [for the ACPP fund] in the next 18 months,” he said.

The ACPP fund will be the only fund consumers can purchase via the app initially. If Tavistock sees strong demand for the ACPP fund from the app, it will look to make its other portfolios available for purchase, starting with the AIPP fund.

D2C fist fight

Holly Mackay, founder and CEO of Boring Money, said competitive pricing alone is not enough to grab consumers’ attention in what is already a highly saturated marketplace.

“It’s like a fist fight out there in the D2C space. You have to spend money to get people to your website. The cost of acquisition for robo and D2C platforms is about £250 to £300. Those are just the rules of engagement at the moment.”

She noted that rivals to Hargreaves Lansdown had so far not been able to “rip the carpet from beneath their feet” despite undercutting the FTSE 100 platform on price.

Mackay doesn’t think consumers will be persuaded to download the i-stock app because of the Tavistock brand on its own which isn’t as well known as other larger competitors in the space.

“I’m really sceptical when I hear of new groups coming in and saying their USP is going to be price,” she continued. “You can have an app, but people have to download it. There has to be that prompt. Why Tavistock? It’s not going to be the brand because it’s not a big enough brand. They think it’s going to be price but is there anything else?”

Encouraging demand

Raven said initial adviser demand for the protected funds had been encouraging. Since launching in May the funds have attracted combined inflows of £65m.

“All the advisers we talk to are impressed by the product. There’s a growing pent up demand to invest in the product and we’re hoping this [the app] will help to unlock some of that.”

Asked whether i-stock can stand out in a crowded marketplace, Raven was adamant that low charges would help draw people in.

“We’ve got a product like nobody else,” he said. “There aren’t that many people who are prepared to say they’ll do something for nothing. It should appeal to people, whether or not it does only time will tell.”

He anticipates that the unique approach of the protected funds will also help attract investors.

Traditionally,  protected funds are underwritten by a constant proportion portfolio insurance (CPPI) mechanism which kicks into gear and reallocates investments into cash whenever markets fall. But if markets fall too far, the bulk of portfolio has to be switched into cash which can be difficult to recover when markets improve.

The Tavistock funds instead use put options, which are underwritten by Morgan Stanley, to ensure the NAV of the funds does not fall below a certain level (90% of the highest ever value for the ACPP fund and 85% of the highest ever value for the AIPP fund).

Interim update

The D2C app announcement was included in the firm’s interim results where it revealed funds under management had ballooned by 26% to £941m year-on-year.

This was the sixteenth consecutive quarter of growth in FUM at the firm, which is now up 190% since 30 September 2016.

Ebidta was up 276% to £516,000 over the first six months of the year and the firm reported losses from operations dropped 61% to £187,000.

Tavistock’s i-stock app will launch in the first quarter of 2019.

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