A new firm has already garnered awards, been ranked in wealthtech guides, and is talking about how its digital business model can disrupt a wealth sector still tackling outmoded and incompatible legacy systems. We catch up with its CEO and founder.

UK-based Welrex, which launched its end-to-end digital wealth management platform in October 2022, has come a long way in a short period. Already, the business – recently an award-winner from WealthBriefing – is planning to work with multi-family offices in the UK, Spain and Saudi Arabia. 

And it says its lack of outmoded and incompatible legacy systems of the sort prevalent at more established managers and banks give it an edge.

Welrex was launched when conventional business life was turned upside down by the pandemic. If you can make it in such conditions then it’s a robust testing ground, argues Yevgeni Agerd (pictured), founder and CEO. He recently spoke to this news service alongside Joe Clift, the firm’s chief marketing officer, at its offices in London’s St James’s district.

Yevgeni Agerd

“The pandemic crystallised the need for a strong digital presence. It accelerated the nascent trends of digitisation and self-employment (including working from anywhere) that we’re facilitating through our tech stack,” Agerd said. “It is worth noting that Covid has cemented the need to have internet messaging and video call functionality to be embedded from the outset in the end-to-end client journey in the form of a multi-channel communication suite.”

Since the business last sat down with this news service, there have been arrivals. Following the appointment of Glenn Berry as chief operating officer (ex-HSBC Asia-Pacific COO), it recruited Geoff Carpenter, chief financial officer, formerly from Pershing, part of BNY Mellon’s Wealth arm. It has also, Agerd said, attracted a general partner from Silicon Valley’s VC sector, involved in transforming an emerging markets private bank. (The name of that individual has not yet been publicly disclosed.)

A degree of Welrex’s time and resources have been spent in adapting to the new UK Consumer Duty regime – taking effect from late July 2023. (The regime has already prompted wealth managers such as St James’s Place to change fee charges (see a story here about recent developments).

Agerd thinks the wealth management industry must change further.

“We engaged with the regulator on our Consumer Duty plan and received feedback. We have also reviewed our pricing structure and reconfirmed our transparent value-based approach whereby clients never pay for what they don’t use. In truth we feel that Consumer Duty provides an opportunity for Welrex because of our inherent digital nature, our lack of legacy systems and overall agility, unlike incumbents involved in pricing scandals and other non-Consumer Duty-friendly business,” he said.

Talk about consumers and establishing high standards prompted Agerd to reflect on how, in his view, Europe’s wealth sector falls short.

“It was notable how basic the client experience still is in the European multi-family office space. I met with a $1.2 billion (AuM) MFO in Madrid last week. It has international offices in US and Latin America. It is trying to use technology to streamline its operations, but it comes at a cost. It has changed five IT systems that do consolidated reporting for client assets and is still spending a lot of time and effort on putting it right.

“For example, the firm is asking relationship managers to check their client investment reports manually line by line against the bank statements and the IT system they use to consolidate. It takes less time and labour than doing consolidation by hand in Excel. However, it is far from what digitisation in wealth management aims to deliver,” he said. 

It’s not all about the UK.

“We’re exploring potential partnerships with multi-family offices in the UK, Spain and Saudi Arabia to solidify our competitive advantage and expand our geographical reach through joint ventures,” Agerd said.
 
He sees more wealth sector consolidation via M&A in the UK. In the past decade, deals have taken place such as the Rathbones merger with the Investec wealth and investment business in the UK, the RBC Wealth Management combination with Brewin Dolphin, the transaction between Schroders and Cazenove Capital, and the combination of firms producing what is now called Evelyn Partners. There is also the “shotgun wedding” last year uniting the UK part of Silicon Valley Bank and HSBC in the UK, not to mention the even bigger such union of UBS and Credit Suisse. These developments, particularly in the more stressed examples of SVB and Credit Suisse, also encourage HNW clients to review how and where they get their banking and wealth needs met. 

Regional growth opportunities
Agerd is upbeat about specific parts of the world and where wealth is rising.

“We are seeing faster growth in assets under management (AuM) from the Middle East, Asia, the former Soviet Union and the Latin America region. Such clients tend to be first or second-generation entrepreneurs and prefer to be international in their financial dealings,” he said.

Agerd and Clift are understandably pleased that they were recognised by the publisher of this news service as “Most Promising Newcomer” and for “Innovative Use of AI”; the firm was also included on the 2024 WealthTech 100 List of firms. 

While Welrex does not directly target mass-affluent clients (its segmentation is for high net worth individuals with £1 million ($1.24 million) to £50 million of investable assets), Agerd thinks the wider financial industry has a challenge on its hands.

“From what we hear in the industry it seems that a lot of traditional wealth firms are finding this very difficult,” he said. “Looking at the global market, in 2022 total industry AuM fell by about 4.5 per cent; profit margins have been squeezed, and inflationary pressures have been an issue for firms. So, it’s a race to the bottom for wealth managers’ fees and profitability.

“That said, there is a lot of money out there that is just not being served. For some firms, it seems, even those individuals with $5 to $10 million aren’t an interesting market anymore for Tier 1 private banks – some incumbents just don’t want to serve them,” Agerd said. 

His colleague, Joe Clift added that some “legacy firms” are not, or don’t want to be, agile enough to serve mass-affluent clients.

Agerd wrapped up on what one of the challenges has been since the firm was launched: “We’ve been working very hard to keep the Financial Conduct Authority satisfied. It is a challenge to convince your licence provider that you are doing the right things when you are in a startup mode. The regulatory environment is complex, and the degree of complexity only increases.” 

There’s a philosophy of the business that Agerd likes to set out.

“The evolving `Welrex Way’ is all about independent choice, hyper customisation and relentless focus on minimal fees and absolute returns for the end client,” Agerd concluded.