Not Advice, but Orientation for Investors

By Vasyl Soloshchuk, CEO and Co-Owner at INSART Not Advice, but Orientation for Investors

Founded 2012
Clients Private investors and professional asset managers.
Value proposition The democratization of the investment market
Top management Andreas Kern, Founder and Chief Executive Officer (CEO)
Timothy Bell, Chief Marketing Officer is a Vienna-based FinTech startup that develops an online platform for investment strategies and aims to combine investing money and the principles of social media.

I had a chance to talk to Andreas Kern, CEO, and to learn many details about the company, its inception, and how the idea of a social trading platform differentiates from other offerings in the wealth-management market.

Andreas has been in the FinTech area since the very start of his career. He was CTO of a company that provided e-commerce and mobile payment applications. But when Andreas moved to WealthTech, he had no experience in wealth management:

“I had no wealth-management background before, which I think was quite helpful because wikifolio did very innovative things. It was very helpful that I didn’t have all this legacy knowledge about problems. I could apply really fresh thinking to our business model.”

The idea behind

To explain how the idea of a social trading platform appeared, Andreas used the customer advisors of banks as an example:

“They are called advisors, but in fact they are just salespeople and they sell [the] products which earn them [the] most fees. As a result, the customers are moved towards very expensive products.”

Andreas was thinking about how financial products should be created and distributed. Thus, the model appeared; anybody can publish their trading strategies (so-called wikifolios) and others can then observe and vote for some. Once a wikifolio receives 10 votes, the company creates a fully fledged exchange-traded product (ETP), which perfectly replicates the performance of the published wikifolio. Then, platform customers can buy any wikifolio exchance-traded products (ETPs) and get the same performance as the chosen trader.

The popularity of the platform

Currently, the platform has 1.5 million unique visitors, 160,000 registered users, and 22,000 published strategies. Andreas points out that investors do not necessarily need to be registered on the platform, although registered users do receive some benefits, such as:

  • They can publish a wikifolio;
  • They can form a watch list to observe particular traders;
  • They receive emails (so-called risk alerts) if the risk of a chosen wikifolio goes up. screenshot

The total trade flow through the platform is approximately 20 billion euros. According to Andreas, there are several hundred million capital investments on the platform:

“If you look at the trades that happen on [the] Euwax Exchange, wikifolio ETPs are amongst the largest and the fastest-growing investment product.”

When publishing their wikifolios, a private trader may propose a performance fee of 5–30%. The company then offers a revenue share of up to 50% for the trader and charges the rest. For professional traders, offers different sharing models that depend on whether the trader is a media company or an advisor, and on the number of assets the trader may achieve. Andreas remarks that the sharing models for professional traders are higher.

Partners and a custodian

Andreas explains that the company is currently focusing on the German, Austrian, and Swiss markets. The company partners with the Stuttgart Stock Exchange (Börse Stuttgart), the leading European market stock exchange for private investors. All investable wikifolios are listed in its Euwax segment, and almost all banks in the market are connected to Euwax; this enables’s customers to invest in wikifolios.

Another partner is Lang & Schwarz, the issuer and market maker for wikifolio certificates:

“A Dusseldorf-based company called Lang & Schwarz is doing the lead framework, the structuring, and also the market-making of our products.”

wikifolio ETPs are collateralized. For this purpose, the equivalent value of the investments in the collateralized securities is deposited in whole or in part with the selected custodians.

Orientation instead of advice

The platform is not a robo-advisor. The platform does not provide advice, as explained by Andreas:

“We are execution only. We show what others are doing and customers choose what they want to have. There is orientation for the investors, but there is no advice involved.” screenshot

Andreas is sure that this approach is the reason why a number of wealth-management companies, such as online stock brokers, prefer to cooperate with

“They don’t want to provide advice, but they want to provide some orientation to get more active customers. From an online stocks broker[’s] perspective, we are a way to activate their customers.”

wikifolio’s traders also provide seminars and interact with their customers to help them understand what the traders are doing.

The development process’s team contains 55 people, most of whom work on product development and IT operations. There are four development teams and a product-management team.

The platform works on the Microsoft tech stack using C# and MS SQL Server. The distributed architecture helps to optimize for latency and includes the following measures:

  • Some parts of the software run on partners’ websites.
  • They run one service on premise.
  • A number of applications run in the cloud.

The development process is very close to Scrum, with two-week releases.

wikifolio product team at work

The product-management team has a product-steering committee that meets biweekly and decides which project shall be implemented. The team includes the product owner, who is focused on components, and the product manager, who contacts stakeholders.

“It’s the key task of the product owner and product manager to define projects in a way that [the] teams can work as autonomous[ly] as possible. It’s more an app than a science.”

When discussing data security, Andreas highlights that they do not have access to the customer’s personal data because the investors trade via banks. Nevertheless, all data is treated very carefully:

“Of course, we have analyzed our processes in terms of data protection [GDPR] and we have done some things a bit more serious[ly], but in fact nothing has changed. We treat customer data quite sensibly.”

Knowledge transfer

Like many executives in WealthTech, Andreas has to face the issue of developers who are focused on the technical part but have no experience in the domain. To move developers towards product thinking, the company has launched an internal academy where one employee teaches others about the industry topics they may need. Andreas hopes that such education will motivate tech people to be more free-thinking and make more decisions about smaller business things.

Future plans

At the moment, the company is actively developing its platform:

“We [are] now develop[ing] the wikifolio Media House around the platform offer… Media House will be focused on retail investors and aims to be a very high-quality source of information for investment decisions.”

Andreas mentions that the company analyzes the markets in order to expand its business. They have hired Rupertus Rothenhäuser as a chief sales officer and expect him to help the company extend beyond the German-speaking markets.

Andreas is an advisor for the Minister of Finance in Austria and advises on how to shape the regulation of securities on blockchain. Andreas sees this technology as a mainstream trend and, thus, the company investigates the framework, the ecosystem around it, and the technical feasibility:

“[In terms of security,] there might be some aspects, especially if we aim to have trading on public blockchains. Privacy might be an issue, but I’m very confident that blockchain will also provide a solution for the product created.”

Andreas expects that, in the future, blockchain might provide some kind of mixer where transaction history will be transparent for the regulator but not for others.

Andreas mentions another industry trend that he believes is an opportunity for the company:

“ETFs are still rising in Europe, and also in the retail segment. I see these things [as] complementary. In the future, I think customers will have money in passive ETFs on the one side and in really active product[s] like wikifolio certificates on the other.”

WealthTech Club takeaway

Unlike many WealthTech companies, does not provide financial advice but enables investors to share their portfolios (so-called wikifolios) with others and earn additional money from doing so. The company does not analyze the market, but offers the opportunity for their site visitors and users to do it themselves and invest in the most successful trading ideas. This approach is called “the democratization of the investment market.”

The company is rapidly evolving and intends to extend out into European markets to provide the same opportunities to even more people.

Interviewed by Vasyl Soloshchuk, CEO and co-owner at INSART, FinTech & Java engineering company. Vasyl is also the author of WealthTech Club, which conducts research into Fortune and Startup Robo-advisor and Wealth Management companies in terms of the technology ecosystem.