Robo-advice is an increasingly competitive market. In a move to expand its operations, Italian robo-advisor Moneyfarm has acquired its German peer Vaamo. Will there be further fintech consolidation, asks GlobalData.
In the same way that many larger wealth managers have pursued mergers and acquisitions to accelerate growth and market share, some online wealth management platforms (dubbed robo-advisers) have been mulling similar strategies. Moneyfarm’s acquisition of Vaamo shows this is a valid option for expansion.
It makes sense for Moneyfarm to want to expand into Germany. The company started in Italy, but after launching in the UK it was able to grow its assets to become one of the biggest players in Europe(it is Europe’s largest robo-advisory market by assets under management [AuM]).
Germany is already the continent’s second-largest robo-advisory market by AuM, but GlobalData’s 2018 Global Wealth Managers Survey found that 50% of the country’s wealth managers believe there will be a further increase in demand for robo-advice in the next year.
Going from one highly competitive market to another, Moneyfarm has to think outside the box. This acquisition will grow Moneyfarm’s AuM, while at the same time gaining invaluable expertise on the German market from Vaamo.
Having launched in 2013, Vaamo is one of Germany’s pioneers in robo-advice. Its AuM is undisclosed, but it clearly lacks the scale to compete with the likes of Scalable Capital, a BlackRock backed robo-advisor managing over £1bn.
Already we have seen some smaller robo-advisors fold, and it is becoming increasingly obvious that only the strong will survive. As previously pointed out by GlobalData, competition in the market is forcing companies to find new routes to growth.
For most fintech start-ups a key way to expand is to partner up or get acquired. Vaamo is no stranger to collaboration – it has a partnership with digital bank N26, for example – but evidently needs more to grow. GlobalData’s aforementioned survey shows that in Europe less than half of the big firms are looking to partner with or acquire start-ups, leaving space for robo-advisors to acquire one another.
This new growth strategy is a clever move, and one that may well be replicated by other robo-advisors if it proves successful.