The Robots Taking Investments Away From the Big Brazilian Banks

The big banks are closely following a new way of investing that threatens to steal a good part of their customer base – robo-advisors. Investing through these tools usually costs less and yields more than many of the financial products of traditional banks, and does not require financial knowledge from the customer.

Automated financial advisor apps and services are expected to manage approximately 10% of all global assets under management (AUM) by 2020. Let's take a closer look at the robo-advisor segment in Brazil:

Who are the robo-advisors in Brazil?

Company Information

Vérios

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Vérios has BRL 100 million of assets under management, with monthly average growth in the number of clients at 29% per month in the last 12 months.</p>

• Cost: 0.95% per year, including all third-party fees.
• Minimum investment: BRL 12,000 directly, or BRL 5,000 if you're invited by another customer.
• Contribution received from third parties: BRL 4 million, in a round of investment and another seed. Investors are individual and have not had their names disclosed.

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Magnetis

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Magnetis does not disclose the number of customers or patrimony. Its CEO, Luciano Tavares, was Vice President of Merrill Lynch in Brazil.</p>

• Cost: Average cost of 0.76% per annum, including taxes.
• Minimum investment: BRL 10,000.
• Contribution received from third parties: BRL 3 million from Monashees Capital, Redpoint e.ventures, 500Startups, NH Investimentos and investor Guilherme Horn.

</tr> Warren</p>

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Warren launched in January 2017 and already has 7,000 customers.</p>

• Cost: 0.8% per annum, including taxes.
• Minimum investment: BRL 100.

</tr> Monetus</p>

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Monetus was launched in August 2016. </p>

• Cost: 0.45% per year.
• Minimum investment: BRL 100.
• Contribution received from third parties: BRL 80,000 for the acceleration program SEED. Also received an angel investment from Wilson Brumer, former Secretary of Economic Development of the State of Minas Gerais, founders' home state, of uninformed value.

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Alkanza

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Alkanza was launched in Brazil in 2017 by a home brokerage company Rico.</p>

• Cost: Administration fee of 0.5% per year plus transaction costs.
• Minimum investment: BRL 5,000.

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Advantages in relation to banks

While in a bank, the management fee can reach 4%; with any of the FinTechs, the cost goes below 1%. Another advantageous factor for FinTechs is that they have no conflict of interest with the client, as in the case of financial institutions. "Advisors from broker firms and bank managers earn commission on the products they indicate, so a customer can get a product that is much better for who is selling than for himself," explained Warren CEO Tito Gusmão.

It is worth emphasizing that, although the robot automates the choice of investments, its success depends on the people who build the algorithm. "Although the robo-advisor investments are automated, the strategy behind the algorithms is necessarily human," explains Magnetis' Luciano Tavares.

The size of the market

Brazilian robo-advisors are eyeing people who keep money in applications that yield little or are costly. Today, Brazilians together hold over BRL 600 billion in savings, with Treasury Direct applications as well as private securities with a higher net income and similar security. Still, there are private firms challenging big banks with higher profitability.

According to Felipe Sotto-Maior, CEO of Vérios, there is a lot of space in the market for robots to grow. "Today, customers in the segments that banks classify as Retail and High-Income Retail together have about BRL 1.5 trillion in products of low profitability."

Magnetis also has plans to take clients out of the banks. "Our goal is to manage BRL 1 billion in investments by 2019," says Magnetis CEO Luciano Tavares.