Given Claro was only started last year, remembering how we got to where we are now is testing my memory. So much has happened and at such pace that it’s difficult to recall when one phase started and another ended.
Originally, we set out to build an investing app. Something stock investment-aligned, because that’s what most of my career had focused on up until this point. It seemed like the natural route.
But when we started doing our research, we noticed that there were a lot of people doing the same thing in a very saturated market. What we realised we needed to do wasn’t to offer another investing platform, but to change how people were being approached to start investing.
Stock picking isn’t for beginners
Very few people in the UK invest. In fact, just three years ago, only 12% of people had invested in the stock market.
We had some concerns over the morality of marketing a stock trading platform, specifically for people who were new to investing. If we were to create a stock investment platform, we would be taking people who had never invested before and throwing them into a high risk world where they had to make complex, informed decisions around very specific and non-diversified investments. It’s a big jump to go from not being an investor to taking on stocks (I can tell you that from over 10 years working on the trade floor).
But before you invest in a company – which is what happens when you buy stocks – you should have a pretty good grasp of the business and its performance. Most people have no idea how to do that kind of research, let alone take the time to do it.
Our view of investment product types
We still wanted Claro to help people with their investments, so the next option to consider was financial advice.
A gap in the market
Everyone in the financial advice industry is going after the few, rather than the many. In 2018, 1 in 10 UK adults sought financial advice on investments. While there’s a clear need for it, it’s a privilege that many can’t afford. Advice is ultimately for rich people (who tend to be older, as well) and is designed to make them richer. For instance, people who seek financial advice tend to be £40,000 better off than those who don’t. And there are plenty of brokerages and firms fighting over the few who can cough up for those services.
It’s a much harder task to create a service that helps the masses, from both an achievement perspective and a moral perspective. Attacking a problem like this for the many has a much more significant social impact – something that’s key to our mission at Claro.
The early stages of product conceptualisation
Something we were also aware of is that sometimes the market needs something it doesn’t fully understand yet. Remember back when people asked for faster horses before they knew a car could do the same job but better? As Steve Jobs said, “our job is to figure out what they’re going to want before they do.”
Which leads us onto…
How we discovered financial coaching
We wanted to help people make smarter decisions when it comes to their money. We also wanted to harness the power of technology to make the process quick and convenient. So it made sense to combine the two.
Like most people, we didn’t even know financial coaching existed. A few companies were dabbling in this space but most of them were ex-financial professionals who’d become disillusioned with that world. Banks were also providing a similar service, but really, when was the last time you went to your bank and asked them to explain your options? Anyone can do this, but it’s onerous and a biased journey. They will only recommend their own products regardless of what’s best for you.
We knew we could do better. And so Claro, the UK’s first financial coaching app, was born.
No one has created a digital financial coach like this before. And it’s clear – even at this early stage – that we’re meeting demand and filling a gap in the market. We’ve already had over 13,000 people sign up for early access to the Claro app and our in-house coaches have helped hundreds of people with their finances.
A happy byproduct of what we’re seeing so far is that Claro is resonating with women more than other investment platforms. At least 50% of our users are female and 66% of our coaching calls have been with women, despite the fact that men are more likely to seek advice.
Coaching is for everyone
One of the reasons we settled on financial coaching is that it’s suitable for everyone, regardless of your background or salary or goals. It offers a wider remit than financial advice, which is naturally much more focused on investments because that’s how advisors make their money. Find out more about the difference between financial advice and financial coaching.
We’re not denying that we make money that way too, but we’ve tried to create a broader revenue model that means we can also help people whatever their needs – even if they just need to build an emergency fund. And because we’re offering coaching at scale, we can help more people and we don’t need as much revenue from each person. It’s a win-win.
We love that coaching doesn’t have an established model yet, giving us the freedom to create one. Our digital experience provides the perfect platform to support the 88% of people who aren’t investing, in a way that doesn’t encourage them to take too much risk or make decisions they’re not comfortable with.
Plus, with 15,000 Financial Advisors set to retire within the next decade, financial coaching could help to plug this gap and make financial confidence more accessible to everyone.
Our first mockup on paper
The educational element of financial coaching
We realised pretty early on that while financial advice has its uses, something it’s lacking is education. Because the advisor can make specific recommendations, you don’t necessarily come away with an understanding of the decisions you’re taking. Coaching, on the other hand, provides you with the tools you need to learn and explore and make your own decisions.
Unsurprisingly, adults with higher qualifications are more likely to have financial advice, which seems unfair. The impact we can make on someone’s financial life – for example, someone who’s planning to buy their first home or a couple preparing for a child – is huge. Some people don’t have the education they need to make such significant life decisions. So the problem is twofold: they can’t afford financial advice in the first place, and even if they could, advice doesn’t always provide the education they need to make the best decisions going forward. For us, creating a product that achieves that is a much more fulfilling journey.
Our coaching experience is helping to improve financial literacy, something that too many Brits are lacking (as we found in our Money & Mental Health Report recently). And while people might not fully understand financial coaching, we’re planning to create an accredited qualification for coaching in the hope of raising the standards in an emerging sector. This is also why we made the decision to hire Rachel, our Head of Financial Planning, to lead the coaching team here at Claro. This is a longer term project we’re working on, so watch this space!
If you’re curious about financial coaching, I’d recommend this article ‘Is Financial Coaching right for you?‘.