The Save platform provides a similar profile to market-linked certificates of deposit with portfolios offering a deposit and a market investment via tracker funds.

Following the launch of Save - a first-of-a-kind savings advisor tech-driven platform to help savers earn potentially higher yields with the Federal Deposit Insurance Company (FDIC) deposit insurance earlier this year - SRP spoke to Michael Nelskyla (pictured), the firm’s CEO and former head of investor solutions and structured derivatives for the Americas at UBS, about leveraging his structured products background to get the start-up off the ground and the platform’s offering.

In just over one month, the fintech start-up has onboarded thousands of customers with an average account size of over US$25,000 and growing.

What are the differences of Save’s platform approach compared to other robo advisory platforms?

In our portfolio construction, we combine many of the parts that you see in the structured products market, but we are doing it differently. Through our close partnership with FDIC-insured banks, the customer gets protection, which is key, and they get the return of the portfolio over a period of time. We have removed complexity, fees and we are removing the typical shackles product delivery has had historically. We are delivering something unique and value-add to the customer. But we operate on the buy-side as an investment adviser - that’s where the key difference lies.

In many ways, the Save platform offers a similar profile to market-linked certificates of deposit [CDs]. If you open up our portfolios you see two key elements: a deposit and a market investment. What we have done is to de-couple the two and put them in the investor’s portfolio independently. What you get are better return characteristics than the equivalent market-linked CD, but without the regulatory complexity and structural hurdles that may hurt the investor's return.

How does the platform allocate portfolios? Do you have a preferred supplier of ETFs?

We consider ourselves a digital advisory platform with a focus on savings. We let the client choose between three categories of risk: conservative, moderate and growth. As a fiduciary, we don’t have a preferred supplier, but we work with the best FDIC-insured banks for deposits, and with leading investment banks and custodians to source our ETF returns from the market. Currently, our portfolios consist of 30 ETFs, one of the broadest sets of portfolios of any digital adviser. When you invest with us, your money goes into a deposit and your interest rate goes into the investment of any of the ETFs according to your risk profile.

Are there any suitability issues with this kind of platform? Can the wrong investment end up in the wrong hands? 

Reputational risk is often associated with structured products because you have commissions linked to a sales process. Customer expectations may vary significantly from the product being proposed, and there may be a disconnect between the actual risk profile of the customer and what the product or indeed the market delivers. That ends up creating reputational risk for the distributor and the issuer.

Save is not a product, it’s a discretionary advisory platform, where the customer will elect their risk profile up front and the platform will allocate the customers funds into the corresponding risk bucket. The system assesses risk profiles algorithmically: for example, if you indicate you are very risk averse, you will be allocated to the conservative portfolio. Unlike the structured products market, there is no selling, no human intervention or associated distribution governance risk. Also, because we only charge an annual management fee and no commissions or sales fees, there is no selling risk component. Our fees are also only charged when the returns are positive, which is an industry first and reflects the fairness we want to deliver to our customers.

What’s your take on US structured products platforms?

Halo and Simon are taking the traditional structured products business and making it more efficient. They are centralising and streamlining all these processes, and they are managing some components of the documentation risk, around education and the governance process around it. But in its core the product is unchanged - it is still the same buffered note offered via a more efficient platform – with limited direct click-and-trade capabilities for the consumer. From a product choice perspective, the US still lags behind the rest of the world. Halo has taken a more international approach with a wider product range including structured ETFs and AI-driven portfolio tools.

Is there room for a click-and-trade set up in your platform?

We don’t do click-and-trade because we are a digital advisor focusing on savings. Instead it's closer to click-and-save. But we do have ways for the customer to actively enhance their returns without adding more risk. We have a referral programme where if you introduce friends, we will increase the potential of your returns. We add more investment for you and your friends and you each keep the returns. If you want to increase your returns even further, you spend on your Save debit card which gives you a dollar in investments for every dollar you spend, which will additionally increase your returns.

We are tackling all these concerns investors have today about risk and returns by constantly minimising risk and maximising the opportunity for returns.

How about outcome defined/buffered ETFs? Would they fit within the platform’s offering?

Outcome defined products like buffered ETFs which have a defined payout are a new product. They have brought a high degree of innovation to the market. I think those structures have growth potential - a key element of these products is that they take the payoff from the structured note and place it into an ETF. What happens there is that they put the option payout itself in a less complex regulatory structure - an ETF - which is more transparent with no credit risk and daily liquidity for better delivery and access.

In a way it is similar to what we have done. We created a new category: the first ultraconservative wealth manager or a savetech platform that doesn’t risk investors’ money, because investors' initial capital is always FDIC insured. We are also the first to combine market exposure with a savings account. The other innovative component of our offering is our fee structure - we only charge a fee when the investor makes a return. That is a big difference from these other products that charge a fee no matter what. If for any reason the product did not perform, or the market did not perform, you will not be charged. With Save, there is no fee unless the investor makes money.

Those are significant differences. We have created a new financial category. You can call it a product, I call it a delivery mechanism or a platform, but the components are almost identical.