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Launch HN: Fintual Inc. (YC S18) – Automated Wealth Manager for Latin America

76 points by agustinf ↗ HN
Hello HN!! I’m Agustin, founder of Fintual Inc, from YC’s S18 batch. We’re building an automated passive investment platform for Latin Americans (https://fintual.com). I come from a computer science + business background so when we first started discussing this idea I didn’t have much experience on finance or investment other than what I had learned by playing around with Bitcoin. Since I graduated I knew I wanted to become an entrepreneur, but not having any work experience led me to pretty standard ideas like a music streaming website or a food ordering app. I realised rather late that I needed to join experienced partners to find better business insights and opportunities.

After many conversations with my current business partner Omar, who had been 8 years working for the largest wealth manager in LATAM, I was shocked to understand how Latin American people, including people around me, were unfairly paying enormous amounts of money to banks who offered very expensive and many times overly complex investment solutions to retail / uninformed long term investors. After investigating how Betterment, Wealthfront and passive investment strategies in general had been changing the landscape for Americans, we were motivated to do whatever it took to solve this problem in LATAM starting from our own country Chile which, despite being a tiny country, has more than 60 billion dollars allocated in Mutual Funds by itself.

We started by building a responsive website using AngularJS and Ruby on Rails as quickly as we could to get user feedback soon, we mostly copied the onboarding process directly from Betterment. At the beginning we thought automating every step of the investment process was the most important challenge, but now, after some experience and several conversations with YC partners, we have come to realize the real problem to solve is none other than distribution: how to reach millions of users in an economically viable way. Banks already have the clients, while we have to explain and convince people there’s a better way. At first we tried to find an incumbent to work with us, but after a year trying we decided to get our own license (the equivalent to a FINRA Series 6 license) which took a large part of the seed round and 8 months of work, but finally got it. We’ve been growing at a healthy 10% week over week since March now thanks mainly to word of mouth, but we know we need to have a better handle on this growth for the future.

I’m very excited to be at this point, I have been reading HN for 10 years now and I only dreamed about making a YC launch post. As I said, we need to find a more consistent approach on growth, If any of you has any new idea or has heard of approaches of how could we get more people to realize they’re overpaying (some even pay 7% annual fees!) and get them to know and trust our solution, that would be awesome, but anyway, I’m eager to read and respond to whatever this great community has to say.

48 comments

[ 3.5 ms ] story [ 97.2 ms ] thread
scrappyjoe
Passive funds have decades of experience selling low-cost products. In general, their awareness-raising focuses on bemoaining the compound effect of high fees - how paying 2% more in fees per annum can result in you having 60% less savings over a 40 year people, for instance.

A lot of ETF funds here play a bit of an educational mission. They have regular commentaries and features on financial media, often around ‘demistifying investing’ and always talk to how passive is so much better than active+fees.

I’ve often been shocked at how low the level of financial literacy is amongst even highly educated people. The standard passive marketing pitch appeals to them because it’s so much less opaque than active approaches.

I’ve long wanted to do something similar in South Africa. I think the key is ease of setup and building in scheduled contributions. If your customers are putting in a set amount each month then your revenue grows year on year even if your market share stalls.

agustinf
Yes, I agree. And to improve financial literacy has proven to be a very hard, there's just too much noise when talking about money. We've seen mutual funds in LATAM charge up to 7% and for some reason nobody seems to care. We are currently tackling the highly educated tier as you say, they care and want to understand, and we believe that this niche might help us expand further.
scrappyjoe
Is it legal in Chile to show synthetic returns? If so, you could backtest your passive strategy and plot that on a chart along with the median mutual fund return. Heck, in South Africa only 18% of mutual funds beat the market over 5 years. Break the mutual fund returns down into returns before fees and returns after fees to show just how dramatic the effect is. With that single chart you can point to anyone, regardless of education, and say, ‘see that wedge, labeled fees? That’s what is financing your fund manager’s yacht.’
agustinf
Legally, we cannot say "see, this is Fintual" when referring to the backtest, but we could definitely do the comparison and show how a passive strategy beats most of those yacht hungry managers. Great idea. We have done a simple chart that shows how fees eat people's lunch here https://fintual.com/simulador but we still need to iterate on top of that.
igitur
I'm in Cape Town and have had similar ideas. Want to collaborate? If so, hit me up on Gmail. Same username.
gcbw2
What advantage latin americans get for this be based on chile? There are other countries with much more population (your main self proclaimed challenge) and/or less tax burdens.
agustinf
Chile is a good starting point for us because it has a higher GDP per capita and is highly digitalized. There's a pending treaty called "Pasaporte de fondos" that would in theory allow us to serve people in Colombia, Mexico, and Peru without additional regulation.

About taxes, I think Chile is on the lower-burden side of Latin American countries, but I'm open to hear if you have deeper insights.

soneca
Congrats on the launch and good luck!!

Apparently not for Brasil yet, but definitely a product we need here. I would use something like it, but the only option in the space is a new startup (https://oiwarren.com/) with horrible UX (every form emulates a natural language chat bot, which makes muuuch longer to fill out simple fields that a regular <form> would take seconds).

Other than that, only brokers with very user-unfriendly online interfaces.

Easy, simple, wealth management is very much needed in here. I hope you do well enough in Chile to consider a expansion here.

agustinf
We don't have short term plans to get in Brazil. We met Luciano from Magnetis (https://magnetis.com.br) here in Palo Alto a couple of weeks ago and he seems to be doing great there, perhaps you might want to take a look at it.
soneca
Thanks, heard about Magnetis. I still believe there is room for much more of this kind of service around here.
capocannoniere
Who are your target users?

My understanding is that Betterment and Wealthfront are primarily aimed for upper middle-class millennials who have some savings but are not extraordinarily wealthy so as to have their own family office or dedicated wealth management team in Morgan Stanley / Goldman Sachs / JP Morgan / etc.

Since the upper middle-class in LATAM is significantly smaller than that of the US due to greater inequality, are you going after higher net worth individuals?

agustinf
We are going after that same middle-class group to start. It is for sure smaller in purchasing power than the US middle class in total, but competition for this market is also way less, which may allow us to grow faster than a roboadvisor in the US, specially if you take into account that the middle class here is growing.

Anyway, we know we will be able to expand from this market to higher net worth individuals because a good part of them are also being ripped off by banks.

primodemus
For non chileans, in the 'preguntas frecuentes' page, could you use CLP$ to distinguish it clearly from US$?
mariocesar
Didn't notice it was in CLP until I read your comment. :(

Also this is available for Chile only? I'm in Bolivia, will be able to invest?

The site needs communication work.

agustinf
We launched Chile in March 2018, we plan to reach some milestones first and then move to tackle the next countries. About communication work, sure, we are editing our FAQ just now, so thanks for your feedback. If you find anything else that needs clarification please let us know!
agustinf
Thanks for noticing!

Yes, we use $ for peso and US$ for dollars because that's what our current customers would expect. We might have to localize the page once we grow.

I feel putting CLP$ would be confusing for them now!

gfarah
Hi Agustin, living in Colombia it has been impossible for me to purchase selected US stocks/index, even with a large-ish 100K account I got, too much hassle too high fees. I will be looking forward for your launch in Colombia.

Additionally, I am working with a SF based e-lender www.pimes.com whose primary market is LATAM (Starting with Colombia, expanding to Chile and Peru soon), perhaps we could talk about some partnership opportunities there. My profile has my personal email if you feel like talking more about it.

agustinf
Thanks! I can't see your personal email in your HN profile, please email anything to vivacolombia@fintual.com to get your contact! Thanks again!
dannygarcia
I think this is great. Hispanic families in the US would also benefit highly from non-predatory financial products. I spent a few months learning about investing and tried my best to pass that knowledge on to my family but it was challenging communicating the value of savings. Hope you have great success in Chile and are able to expand to other markets.
genemachinery
In New Mexico Hispanic population frequents Indian Casinos. Both groups might better invest than waste time and money. I have tried to interest Hispanic and Native friends in investing in health care (Health Care Mutual funds avg. 16% over 40 yrs). The rate of diabetes in Native and Hispanic populationsis 30%. 40% of hospital costs is now in ICU for chronic disease. 1/3 State and US budget Medicare.
genemachinery
If Hispanic investors are victims of diabetes by eating processed foods as in US and Mexico. Investing will simply force them to spend their wealth on health as is happening in US and Mexico. If behavior in wealth is not matched with health the result is simply spending all the saved money on chronic disease.
bbrunner
Hey, I just went through your signup questionnaire to test it out (I work in a similar space in the US). It felt very long to me in comparison with most services I've looked at. I'm not sure what the regulations in Chile require you to ask, but for what it's worth, Betterment entirely skips doing a risk questionnaire and let's you immediately choose a goal/portfolio. The signup funnel for financial services is long and brutal due to all of the PII you have to collect, so making it shorter is usually a big win.

Overall very impressed though! Awesome to see this sort of stuff launching in markets outside of the US.

agustinf
Thanks! well even though the answer is 'yes the law does require a risk questionnaire' what we've seen with our users is that they actually enjoy answering these questions about themselves. Almost like personality quiz or something ;) You might still be right though, I guess once we get a wider upper funnel we will be able to test this further.
conanbatt
Hola Agustin. Este es un mercado que necesita soluciones urgentes.

Entiendo la mayoria de las decisiones que tomaron ya, desde el diseño hasta el armado de perfil de usuario.

Se vienen varios problemas a mente, que me pregunto como resolvieron: el costo de transferencias entre bancos desde sudamerica a estados unidos para los montos que se transfieren terminan comiendos e mucha rentabilidad. (i.e. no podes depositar de a 500 dolares por mes, por ej). Otro gran problema es lo legal: argentina por ejemplo siempre termina poniendo restricciones de algun tipo. Hay mucho riesgo monetario tambien entre que se deposita en la cuenta y se compran los correspondientes ETF.

Mi pregunta es: mas alla de posicionamiento de mercado, como van a lograr ser competitivos considerando todas estas desventajas de infraestructura? Donde esta la innovacion?

Porque no usar fondos al estilo Vanguard de una? Super low costo y revender esos paquetes?

Muy bueno igual, y voy a estar mirandolos.

agustinf
Buenas preguntas, gracias! Para hacer frente a los costos fijos de transferencia lo que hicimos fue juntar el dinero de la gente en 3 fondos:

- Fondo Mutuo Fintual Risky Norris - Fondo Mutuo Fintual Moderate Pitt - Fondo Mutuo Fintual Conservative Clooney

Y asignarle a cada cliente una combinación de estos tres. De esta manera, se pagan comisiones como si fuera un gran cliente. Esto compite muy bien con las alternativas: al menos en Chile estamos listados como la solución retail más económica según El Mercurio Inversiones.

El gran costo inicial que tuvimos que asumir con este approach es el de la regulación, pues como creadores de Fondos Mutuos debemos cumplir con una serie de exigencias, y justamente ahí está la innovación: somos capaces de cumplir con ella sin arrastrar con el costo operativo porque automatizamos casi todos los procesos y la generación de los documentos que requiere la autoridad en nuestro caso no depende de personas.

Chilenazo
Hola Agustín, primero que nada felicitaciones por el tremendo proyecto que están sacando adelante, muy interesante y en deuda hace tiempo para el mercado chileno. Tengo un par de consultas:

- ¿Porqué Fondos Mutuos y no Fondos de Inversión? ¿Fue para dar mayor liquidez a los clientes? (Entiendo que los Fondos de Inversión tienen un beneficio tributario que no existe en FFMM).

- Al parecer sólo invierten en ETF de USA, específicamente del S&P 500 para el fondo riesgoso ¿Planean cambiar ésto en un futuro?

- Si cobran 1,19% de remuneración fija ¿Cómo es que en sus folletos informativos sale un monto menor de tasa anual de costos? Me imagino que los costos bancarios por transferencia + de administración de ETF + transaccionales deberían influir en dar un TAC mayor.

-¿Existe un proceso automatizado de inversión desde el punto de vista cliente? (Por ejemplo un cobro automático bancario todos los meses a la misma fecha)

Nuevamente felicitaciones por el proyecto!

agustinf
Gracias por la buena onda!

Respondiendo punto por punto:

- Usando fondos mutuos podemos pagar rescate de las inversiones en 3 días habiles, fondos de inversión tiene que ser sobre 10 días. Tanto fondos mutuos como de inversión tienen beneficios tributarios, creemos que los que aplican a fondos mutuos responden mucho mejor a inversiones de patrimonios menores a US$500k (en nuestro caso, beneficios como 57 LIR, 108 LIR y APV).

- Tendremos carteras diversificadas (no expuesto a ninguna empresa particular más de 3% por ejemplo), y vamos a ir diversificando más geográficamente a medida que vayamos aumentando la parrilla de ETFs. En la parrilla actual hay ETFs de acciones emergentes, deuda emergente, acciones globales, etc, y el algoritmo de asset allocation es el que elige cual entra y cual no. No han entrado ETFs fuera de US porque probablemente tengamos que aumentar la parrilla con ETFs que cubren zonas más puntuales o correlacionan muy distinto con el mercado de US.

- Cobramos hasta 1,19% de remuneración, puede ser menos. Nosotros cubrimos costos bancarios por transferencia y costos de transacciones de ETFs (corretaje). Lo único que no cubrimos es el management fee de los ETFs contenidos dentro de las carteras, que usualmente es muy bajo.

- Lo que sugerimos es agendar una transferencia programada desde el banco de cada cliente, nosotros detectamos las transferencias y las asociamos automáticamente cuando llegan.

diegoserranoa
Will this only work for Chileans? +1 for localization. I got confused with the amounts and currencies. Great work though!

Also, I'm getting a 422 error when trying to sign up. The error page doesn't say much, just:

¡Ouch! El cambio que intentaste hacer fue rechazado. A lo mejor trataste de cambiar algo para lo que no tienes acceso.

agustinf
It currently works for Chileans and foreigners that have at least a bank account there. We might get good news from the "Alianza del Pacífico" treaty this year though. Otherwise, we will expand once we get to certain milestones in the current base.
mlevental
i see you guys are hiring. i'm a us national with interests in emigrating to latin america. i doubt your rates are competitive with us rates but i'm curious what they are anyway (since you seem to have yc funding?). how can i reach you? y por supuesto hablo espanol (como un gringo pero sin embargo hablo).
anonu
Nice post. Best of luck in what you're doing!

My thought is people are averse to fees - but there needs to be a bit more of an impetus for someone to switch to your platform. Will you be using ETFs to gain exposures? If so, a lot of the marketing could be focused on diversity of investment or saving for retirement.

A lot of the reason the robo's have taken off is that some provide "fractional ownership". So you can invest as little as $1. There is some legal and compliance issues you would need to iron out in your home country. The "Acorns" approach is a good one in my opinion. Helps you get many small accounts quickly.

Ultimately, performance is what a lot of people go by. You need 5 years. Once you have 1 though - with 7% fees - you can easily start showing expense ratio drags on portfolios...

agustinf
Thanks for your thoughts! Cool insights there. In fact, we do use global ETFs so we do offer diversified exposure. As a regulated entity we are able to allow investment for as low as US$1. We haven't conducted our marketing as Acorns' does, though, because we feel the biggest problem (opportunity) right now is the one that relatively successful professionals in their 30s face: they are able to save money but they have no time to invest it right. You may be right suggesting that getting many small accounts quickly can be a good strategy though, thanks for that idea, will think it through.

About performance, I agree, it will take some time until regular people start noticing the difference.

genemachinery
Has this approach been tried with Native American tribes? Tribes now have Casinoes and solar farms for revenue. But tribal members lack local banking. Tribes are the fastest growing population in Canada. How canwealth management help this population?
jscholes
Are you, or do you have reason to believe you might be in the future, hiring in Mexico?
MrGando
Hey Agustín, Nico Goles here.

Just wanted to write here to congratulate you and your team. I've been following what you guys have been doing for many, many years, and you have never ceased to impress me.

Since I've been living here in San Francisco, I've gotten quite into personal finance and retirement investment. I've wondered many times why my family there in Chile can't have access to some of the tools available here. Having read your post and done a bit of research the reasons seem pretty clear to me.

Thanks for working on such a meaningful solution, I've already recommended it to several family members.

Good luck to you and the team, and if I can help with anything don't hesitate and reach out :)

Best, Nicolás

agustinf
Thanks for recommending our solution to your family! What you say is definitely true. It is really surprising that investment culture and knowledge is so different between countries that in other aspects are not that far appart.
educruzat
Congrats on the project, I believe that your website removes most of the frustration I had with other players in Chile, specially on the sign up process, the investment, specially withdrawals needs some work, but is a small detail. Agustin, do you expect more competition, specially from incumbent , I saw that Larrain Vial, BICE and Principal launched a quite similar service and I know there is at least another one preparing to launch their own robot.
agustinf
Yes, we're aware current incumbents appear to have interest in getting into this space, in fact, people working in some of them have directly gotten in touch with us regarding potential partnerships. Without even mentioning these companies typical technological capacity/skills, my main doubt is how would they solve their ambivalences, because having a roboadvisor of their own would strongly cannibalize their current profit.
ivm
Wow, congratulations! Happy to see a HN'er rocking the conservative boat of Chilean financial institutions!

Though I feel like 1.19% is a bit too much: I'm currently using Renta4.cl for ETF IPSA from Itaú (CFMITNIPSA, 0.6%) and Interactive Brokers for Irish All-World ETF from Vanguard (VWRD, 0.25%).

educruzat
Regarding the IPSA ETF : 0.2% entry comission + 0.6% ETF Fee + 0.2% exit commission ...the 1.19% seems quite reasonable, besides your are buying an assets which has a quite poor risk return profile (if you buy a solid corporate debt fund you obtain broadly the same return but half the risk). I believe Fintual pricing seems reasonable for the benefits of having a more solid portfolio.
ivm
Renta4's commission is 0.15% but I use it only for Bolsa de Santiago. Most of my portfolio is in Vanguard's ETFs that are significantly cheaper. I understand that Fintual's offer is still much better than any "fondo mutuo" from a local bank but hopefully they will be able to reduce the fees in future.

Anyway, I'm just picky because I have a choice. Meanwhile, the average person in Latin America definitely needs better instruments for investing. Best of luck to the team!

kemeny
Hi Agustin! First of all, congrats! I think I must have been one of the first 100 or so users of Fintual and am constantly pitching how cool the onboarding is and how simply you explain the service. On that regard, I’m sure I have pushed 5 of my close friends and colleagues to invest in the platform and the first feedback I get is how stable their investments seem to be. I do get a lot of un faithful responses from people who don’t trust online services with their money... they compare it to bitcoins and crypto markets... here’s my first feedback, I think you need to work on explaining how and where your funds are being invested. I have experience on traditional banking investments and I see the same pdf document my bank used to pitch their funds at me. You should work on that.

Another I miss, and have to start tracking on my own is the fluctuations of my investment. I am a bit of a control freak and keep an spreadsheet with the percentage earned each day. It be great to have that info within the platform. Every time I show it to my friends they seem to trust the platform a bit more. That’s another... more data, easier it is to influence others to join.

Sorry if this seems like a feature request! :P

tixocloud
Agustin, congratulations and good luck on your wonderful journey! Passive investment is something I've been following closely in Canada and hoping you can really help people secure their finances.

I have been in financial services strategy for quite a while now in various parts of the retail banking world and have been leading customer acquisition for both cards and retail banking in general. You're right - distribution is a big challenge but another big challenge is getting people to trust you with their money.

For me, you can either build the trust on your own (hard) or rely on your existing customers to help funnel the trust (i.e. referral schemes). Case studies, online calculators, customer videos speaking about the product, partnerships (have to be careful that this is a win-win) are some tactics you can think about.

Other questions for thought: - Does the government in Chile provide deposit guarantees? (i.e. if you go bankrupt, does the govt pay back the depositors a certain percentage?) - Can you convince people to move just a small percentage of their savings? Are you expecting people to use your platform for 100% of their investments or can you get people to consider you as part of their wider investment strategy? - Can your existing customers help in some way or form (i.e. referral scheme, communities, etc.)?

Wealthsimple is a great company that you can look to emulate as they do automated investments for Canadians.

Monzo is another great one. Based in the UK, their acquisition growth has been incredible with minimal marketing. Effectively, relying on word of mouth and a great product experience.

If you wanted to discuss more, happy to talk it through my experiences in Canada and the UK

rauhfranco
Hola Agustin, muy interesante la propuesta de Fintual. Me gustaria preguntarte como logran realizar inversiones en ETFs fuera del mercado de Chile, ustedes hacen la conversion de pesos a USD? El portafolio es en pesos chilenos o en USD?