Interview with Growney

Growney (a german robo advisor) wants to use new technologies and a brilliant economic research concept to create investments that are easier, cheaper and more profitable than anything you can get at your bank. To do this, growney offers a targeted investment in equity and bond funds (ETFs) that is tailored to the personal risk momentum of individuals and companies, targeting both investment novices and professional investors. growney is now an award-winning Robo Advisory platform based in Berlin and was founded in 2014. After 2 years of development work, the market launch followed in May 2016.

Our interview partner from Growney side is founder and managing director Gerald Klein.

growney interview
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1. Is growney also suitable for investors who know almost nothing about stocks and the stock market?

Yes, Growney offers an investment tailored to the personal risk momentum with all-round service and accompanies even inexperienced investors right from the start. In principle, little specialist knowledge is required to be able to use growney, but experienced investors also benefit from our investment concept. Opening a custody account is done in just a few steps. We take care of ETF selection, risk analysis, monitoring and rebalancing.
Nevertheless, it is advisable for an investor to know what kind of investments he is investing his money in and the risks involved. For investors with less experience, but also for investment professionals, we have created a blog in addition to the FAQ area, in which we regularly publish detailed articles and analyses on the topic of investment.
In addition to specialist knowledge, however, it is much more important for investors to be able to assess their own risk-bearing capacity and risk appetite. This is sometimes difficult even for very experienced investors, although the risk profile is decisive for the investment. To find this out, we have developed a risk readiness test for interested parties, which allows each investor to easily determine which risk class suits him.

2. What has changed at growney over the last few months and what will happen in the future?

We will continue to optimise our range of products, portfolio structuring and services in the future. At Growney, for example, a fund swap is carried out today after a customer has understood and agreed to our recommended course of action. In the future, we also want to win customers who want to pass this decision on to us and will therefore offer asset management services. With us you can
In the near future, customers will be able to choose whether they want to have a say in changes or whether information about changes that we make to the portfolio is sufficient.
In addition, Socially Responsible Investment (SRI) is a rapidly growing market segment that is becoming increasingly relevant. The current fund volume and the corresponding selection of sustainable funds is growing rapidly in Germany. We are therefore striving to cooperate with an experienced partner with whom we want to implement a sustainability concept.

3. What makes growney better than other Robo Advisor providers?

Many Robo Advisors still rely on active risk management and expect an advantage from it. We are convinced that a passive investment strategy with regular rebalancing and quality assurance of the funds used will provide the best return forecast for a private investor.
With growney, both private investors and companies will find an innovative and competent Robo Advisor whose investment concept is diversified worldwide according to scientific findings and, depending on their risk appetite, additionally secured by first-class bonds. Our costs are below the average of comparable offers (not to mention classical banking advice). With a service fee of 0.39%, we are the cheapest provider in the mid-investment segment for as little as € 50,000.
At growney, there are no barriers to entry such as notice periods, minimum investment amounts or minimum savings rates, and customers have the option of investing in any number of savings targets. For each savings target, the risk level, the one-time investment and, if applicable, the monthly savings rate can be freely selected. Concrete savings targets have a positive psychological effect on savings performance.
Shortly after our market launch, Finanztip placed us on its recommendation list and praised the functionality of the website, the transparent information offered and the quality of our products.
As the leading provider in the real money test of broker comparisons, our investment philosophy is confirmed as completely independent and emotionless.
growney is also an independent Robo Advisor with no parent company or similar ties. We do not accept any fees or commissions from fund companies and live exclusively with our clients’ service fees. Independence is an essential aspect because it is the only way for the client to be confident that truly objective investment decisions will be made. This enables us to guarantee a strong “Best in Class” approach. Choosing the right fund can have a strong impact on returns, even in the efficient ETF world.

4. How does growney try to convince prospective buyers who lack the personal advice of an on-site investment advisor?

Growney deliberately acts as a pure online financial service provider and thus saves expensive branch costs. We see this as the advantage of investing digitally. Before I founded growney, I last spent 9 years in charge of financial product development at Landesbank Berlin and was intensively involved in securities advisory processes. The central question was what the optimal investment portfolio would look like for a client and how we would organise an advisory meeting there. When investing money, an investment advisor essentially goes through a decision tree with his client and at the end there is a portfolio that corresponds to the client’s risk profile. A Robo Advisor can go through this decision tree much more precisely than a consultant, because the machine is completely free of sensitivities and has no conflicts of interest. Here, the customer benefits from the absence of a personal consultant, and the costs saved also flow 1:1 into the expected return.
Despite the term Robo-Advisor, growney is of course always backed by real people who personally take care of the customer’s concerns – on weekdays between 09:00 and 18:00 you can reach us by phone, e-mail or via the online chat on the growney website.

5. What is the best way for growney users who have no idea how much risk they want to take to growney?

Which growney strategy best suits a customer depends on many factors. Each investor is individual. They have a personal risk appetite and different savings goals. With our risk willingness test, we support interested parties in selecting the investment strategy: by answering 10 simple questions, interested parties find out in just a few minutes which investment strategy suits them best. The result can then be easily and quickly configured as an investment objective when the securities account is opened.

6. How do you see the issue of “ETF risk” (i.e. synthetic ETFs, power of fund companies, securities lending)? And how can uncertain or skeptical investors be reassured?

Especially in recent times there have been more and more critical voices on this subject. ETFs and other index funds would threaten the stability of the financial system and increase the risk of a new financial crisis. We have covered some of these “fairy tales” in detail in the growney blog: https://growney.de/blog/etf-kritik-das-maerchen-vom-stabilitaetsrisiko/
In general, ETFs offer a number of advantages that set them apart from other investment vehicles and make them suitable for private investors to accumulate assets. The biggest advantages are the particularly low cost, the possibility of a broad diversification and the high liquidity.
A popular argument against ETFs is probably that synthetic ETFs in particular can only be discouraged due to the associated issuer risk. Of course, one should exercise caution when investing money, but it is precisely for this reason that it is worth taking a close look at how synthetic ETFs work. This may be too far to go here, but synthetic replicating ETFs have some advantages over physical ETFs: The most serious are the higher accuracy of replication and the ability to replicate markets that are difficult or impossible to replicate physically in favour of even broader diversification. As regards issuer risk, ETF providers and their swap counterparties take a number of security measures to minimise this risk. In the case of the synthetic ETFs used by growney, these include the permanent provision of collateral in excess of 105% of the swap value, which is reviewed and adjusted daily.

7. How would growney react to a new stock market crash that might come sometime? And how will you try to reassure anxious customers?

growney takes a passive approach: long-term performance is very important to us. We are convinced that world markets are very information efficient and that it is impossible to predict a stock market crash. That’s why we won’t be making an unscheduled withdrawal of capital from the stock market. Fluctuations are undulating and every downturn is usually followed by a stronger upswing. A customer who chooses a growney investment strategy with a high proportion of equities can therefore generate higher returns in principle, but should also be able to cope with short-term losses. In our view, this will enable us to achieve higher returns in the long term.

8. In your opinion, how will the Robo Advisor market evolve over the next few years? What is growney planning in this respect?

Digital investment has considerable growth potential, especially in Germany, and the number of Robo Advisors will continue to grow very strongly. The idea will prevail, because the advantages for the investor are enormous. The low-interest phase is driving the issue even further, because more and more people are looking at investment opportunities in the capital market as a result.
Robo Advisor picks up tomorrow’s customers where they already are today: For many customers, it goes without saying that their daily financial transactions are handled online. For the Digital Natives, the logical next step is to add financial investment to payment transactions. With the use of artificial intelligence, automated customer advice will continue to improve in the future.
Fintechs like growney have shown that there are alternatives to personal advice in the bank branch. Meanwhile nobody doubts any more that automated consulting solutions with passive products will belong to the absolute standard in the future. Traditional customer relationships and sales power alone will no longer be enough to convince the customer.
In five years, which is a long time in the digital change, we assume that all banks have introduced digital securities consulting as a supplement to their analog approaches. In particular, medium-sized and small banks are buying the automated advisory solution from a specialist like growney.
We see further growth potential in the many possible applications of Robo Advisory technology: For company pension plans for employees, for the management of company assets or for the brokerage of own financial products: growney already makes the tried and tested Robo Advisory technology available as a platform to other companies, banks and modern financial service providers.

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