How this fintech startup made their robo-advisor appealing to millennials

Money Design CEO Jin Nakamura / Photo credit: Money Design

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This article is part of Tech in Asia’s partnership with Disrupting Japan where we publish the revised transcripts from the show’s podcast interviews with Japanese entrepreneurs. This is heavily revised from the original transcripts. For the full interview, go here.

Jin Nakamura co-founded Money Design as a way to introduce millennials and other young Japanese to investing. Money Design is the creator of Theo, one of Japan’s first robo-advisors.

Robo-advisors are a lot simpler than their name implies. Basically, you contribute a small amount of money each month and the robo-advisor will invest certain percentages of that in stocks and bonds and will make some adjustments if the allocations get too far out of alignment. It’s a simple concept, but young Japanese have shown very little interest in it.

So, to reach them, Money Design created a lifestyle brand, one that had absolutely nothing to do with finance or money. Here, Nakamura also shares some insights for anyone running a fintech startup.

nCan you briefly describe Theo?n

We are providing a robo-advisory service in Japan, and our global competitors are Betterment and Wealthfront.

We are providing this financial product via smartphone. Once you access our website, you just need to answer five questions:

nnHow old are you?nDo you have any experience in investment?nAre you conservative or aggressive?nWhat would you do if the market is going down?nAre you afraid of inflation?nn

Once customers put their money into our portfolio, we manage that discreetly.

nWho are your customers?n

Fifty-one percent of our customers are in their 30s, and 15 percent of them are in their 20s. Compared to our competitors, like large financial institutions, only 5 percent or 7 percent of their customers are in their 20s. So, we provide our service for the younger generation.

nHow did you reach the millennial demographic?n

We differentiated ourselves with two strategies. The first was our UI and UX, and the second was branding.

Our UI/UX is very simple. Large financial institutions always add something and add something and add something, and then the website gets complex. So, we make ours very simple, and we make it easy for people to register and start. That’s our first differentiation strategy.

The second is branding. Theo is the name of Vincent Van Gogh’s younger brother. Van Gogh sold just one painting when he lived. However, Theo supported him mentally and financially. That’s why Van Gogh could paint one painting his whole life. Our concept for Theo is “We care about the money, you can enjoy the life.”

nWhat has been your customer acquisition strategy?n

We use three strategies. The first is, of course, internet advertisement, the second is media, and the third is partnerships.

We partner with local banks. In Japan, there are almost no unbanked customers. However, there are too many unadvised customers. They own a bank account, but they are never provided any kind of advice on the financial side. Banks in Japan are just a function. They own a large number of customers, but these customers just focus on depositing, sending money, and something like that.

nIt’s costly to advertise about finance on the internet. How did you do it?n

We have our own media site called Outliers. We pick some very famous people who are popular among the young generation like Nobukazu Kuriki (the mountain climber). We did interviews with them. At the end of the article, there’s Theo.

The stories were about why they enjoyed their life. That’s how we created a fanbase on social media. The concept or how you make fans of the product is much, much better than just focusing on the function of the financial product.

nDo you think people will try to copy your approach?n

It is easy to copy the technical aspects, but it’s not easy to copy our concept and our brand.

What we would like to do is first have a very strong brand and strong trust from our customers—maybe from innovative users first. And then after that, we can expand it to the average users.

When we look at the iPod or iPhone, some innovative user used the iPhone first. After that, it expanded to the average users. So, we’re thinking around the same business model. Of course, it’s easy to copy the iPhone technically, but there’s a core fanbase for the iPhone in the world.

nIf there’s one thing you could change about Japan, what would it be?n

The Japanese people’s mind for trust.

So many Japanese people trust legacy institutions, particularly in the financial side. Even though startups provide very good financial products, when customers compare them to traditional banks, they believe traditional banks are more trustworthy. That’s why they cannot transfer their money from the traditional bank to a startup.

This may be because of Japanese culture. When we look at the US 10 years ago, the company in the top 10 of market value is quite different from now. However, when you look at Japan, it’s almost the same—Toyota, Mitsubishi, and NTT, or something like that. It’s been almost the same for 10 or even 20 years. Japanese people believe in large corporations too much.

Read more from this series here.