Want some help with your money? Planning your future, with Ruth Handcock OBE, CEO at Octopus Money.

0:06Ruth Handcock OBE:We talk a lot about financial education, rightly. I don't think we talk anything like enough about the power of a personalised plan and therefore making different decisions early in your career. Welcome to Curious Customer, the consumer podcast. This show is for anyone curious about the world of consumer. From insights, trends, companies, brands and design, we'll uncover the hidden stories from the people at the forefront of consumer industries. The show has a wide range of guests from marketing leaders to startup founders. So whether you're in the world of brand building or the startup ecosystem or simply curious about the world around us, then this podcast is for you.

0:44My name is Matt. I hope you enjoy the show. Ruth, thank you so much for joining today. So you are CEO, actually, sorry, let me correct myself. Ruth OBE, congratulations on that. You are CEO of Octopus Money. Why don't we just start with what the business is, who you're serving, and to the extent you can share, any numbers on scale.

1:07Ruth Handcock OBE:So Octopus Money is here to help people get to grips with their money. I, having spent a bit of time in financial services, realised there's this big gap in the market, which is if you're already wealthy, you can get help to build a plan and improve your financial situation. And if you're not yet wealthy, there's lots of businesses out there that will help you invest or they'll help you access banking services. There aren't really any that help you get a plan together. And there's some brilliant research that says that the factor beyond age that's most correlated with creating wealth, so putting aside a little bit of extra to allow you to meet your long-term goals, is having a plan.

1:49Ruth Handcock OBE:Sort of that simple. So Octopus Money is here to help anyone, regardless of how much money they have, to have a plan and then start to save towards goals that are really meaningful for them and their family. We've been going as a brand just over two and a half years. We've helped 39 ,000 people build plans. So I think we're just scratching the surface. But I've realised that it's a huge unmet need and the emotional impact on people when they understand what they're doing and feel like they're taking the right action is incredible. And you talk on the website about financial planning and wealth management.

2:25It'd be interesting just to dive into how those differ. And equally, when you're going through that, why did you choose to reflect the same terminology that the industry currently uses, which is the very industry that you're trying to replace or change or make more innovative?

2:38Ruth Handcock OBE:It is a great question. When I'm talking about the business, I often talk about money help before I talk about financial plans or wealth management, because lots of people, if you say to them, do you want some help with your money? They'll say yes. They say, do you want a wealth manager? They'll say, no, that's not for people like me. So money help is a phrase that I tend to find myself using a lot. What you then find though, that people, when you're helping them with something as important as money, also want a bit of reassurance that you're an expert and you know what you're doing. So you're constantly trying to balance those two worlds of I know what I'm doing.

3:15Ruth Handcock OBE:The help and advice I can give you is grounded in understanding the industry and understanding the market. But really what you're doing to start with is you're having a chat about your money. You're having a chat about your hopes and dreams. So it really depends. People think very differently about their money and we use terms interchangeably quite deliberately so that regardless of where you're starting, you'll find something that resonates with the way you're thinking about it. Some people are really looking for safe and secure. Some people are looking for something much more approachable. And whichever you are, actually, I think throughout our journeys, you find reassurance on both fronts.

3:50You mentioned hopes and dreams. I think that's interesting. How many people are talking to you about hopes and dreams, which feels more ambitious rather than financial security, which feels like perhaps more realistic in today's environment?

4:02Ruth Handcock OBE:It's a great question. We normally try and start the conversation with hopes and dreams because if you zoom straight into the practicalities of day to day then people tend to feel more dragged down by having to make tough decisions than inspired that actually if you take action consistently it's very rare that we find someone that can't meaningfully change their long-term outcomes if they have a plan and they stick to it that doesn't mean everyone's going to be wealthy but everyone can get closer to their goals if they make a long-term plan and stick to it. But I think we've created a bit of an industry around money where people are worried about engaging with propositions because they worry someone's going to tell them off for buying too many coffees.

4:44Ruth Handcock OBE:No one wants to be told off for buying too many coffees. Life is too short to feel like you don't have any pleasure, you don't have anything to look forward to. So starting with hopes and dreams is really important because that's why we live our lives. We want to be able to do the things in life that we want to be able to do. And then you have to move back towards how do we get there and what practical steps do we need to take along the way. It's really important to start with aspiration, I think. And even when people feel like they only just have enough money to get through to the end of the month, starting with aspiration will often unlock a different way of thinking about the short term that you wouldn't get to if you zoomed straight into that short term problem.

5:24Are people able to see that? Are people able to clearly articulate their aspiration where they want to be in 5, 10, 15, 20 years from now. And I guess that's your starting point from which you build a plan against. And second point to that is why are people really struggling with building a plan? You mentioned that sort of that's why people are coming to you and that's what solves everything if you have a plan. Why is that so hard?

5:47Ruth Handcock OBE:Yeah, so if I take your first question first, we don't always start 20 years away. Some people will start and say, I'm worried about having enough money in retirement. And that's a conversation that with most of our customers we'll get to eventually. For other people, it's, I'd love in the next few years to be able to move out of my really small flat into a slightly bigger flat. Or I'm thinking at some point I'd love to start a family and I need to figure out whether I can afford to take time off for that. So hopes and dreams isn't necessarily about I want to go to the moon. It's a map of what are the things I want to be able to achieve in my life.

6:20Ruth Handcock OBE:And that might be next year, it might be 20 years from now, but everyone will have a different articulation of that. And any version of that is fine, actually. I think the reason people don't plan is twofold. One is that we've created a financial services industry that's quite complicated. So while you might be able to articulate these are the things I'd like to achieve in life, people find it quite hard to figure out what practical steps they should take to get there. because financial services tends to exist in product verticals, not holistic plans out. And our money, while we as an industry might have created product verticals, it's not how people live their lives.

6:58Ruth Handcock OBE:So that translation job can be quite complicated for people. I think the second reason, though, which is often more powerful, is the same with any long-term decisions. It's the same with, say, preventative health care. If something is long-term, we'll tend to put it off till tomorrow. We're sort of born procrastinators. So creating the space for someone to think long term in a place where they feel like there's a beginning, middle and end is quite powerful. And that in all aspects of human's life, many people experience it in their work. It's really hard to think about what do I want my job, my business to look like five years from now.

7:33Ruth Handcock OBE:You've got to really force yourself to carve out space for that. So having someone there to hold your hand through that is quite powerful because we'll often avoid doing it. If not, because there's always something more urgent to worry about. Do you think people's relationship with money in this country is a taboo topic? And the reason I ask that is a random example. I was oddly at a stag do on the weekend and there was American and people from the UK. The American folks were talking openly about their salaries. The UK folks, one of which being me, found that totally alien. It kind of made me feel a bit sick.

8:09How are you seeing people's relationship with money in this country today? And how is that evolving?

8:14Ruth Handcock OBE:I think there are without doubt cultural differences. And the European-US one, it tends to be the one people zoom into because even investing pattern, the extent to which people are investing versus saving is so different between the two markets. You see a gigantic array of how people feel about their money. I think the trends I see are versus some other aspects of life. There's a cliche that if you say to someone, are you better than average as a driver, way more than half people will say yes. I think the opposite is true of money. I think if you say, are you better than average at money, most people would say no.

8:49Ruth Handcock OBE:So we definitely carry, money carries weight for us and we think we're losing. We think we're doing the wrong thing. We think there's some hidden code that no one's told us and we should know. So that tends to be true of many people. But then beyond that, there's huge differences that are created through the background you have, through the jobs you do, through your exposure. You hear everything from people's backgrounds being, oh, my dad bought a slightly better Volvo and he parked it around the corner because he was embarrassed about being wealthy. When you hear stories like that, or you hear stories of when I was growing up, my family went through this trauma and therefore I'm really worried about not having enough money.

9:26Ruth Handcock OBE:And so I need a safety net. You hear other people saying, when I got my first job, I thought, gosh, this is so freeing. I can actually spend money. And I feel quite frivolous with money. So the important thing is, and it's why I think humans are important in our journey, is we have to meet someone where they are, both emotionally and practically. And you can't build a service, I don't think, in money that is too homogenous because everyone has such a different emotional relationship with money. That might be cultural. And, you know, we will have many customers who have families in different markets as well who may have different cultural references.

10:02Ruth Handcock OBE:But you've got to be able to adapt to that. The theme, I think, though, is most people find it a bit scary, which is crazy when it's something we all do every single day. And yet, we all find it a bit scary. And like, we're probably making mistakes. And probably if people really looked at what we were doing, they'd think we were doing stupid things. But that's a tough thing to carry around. The counter argument to that is in particularly younger generations that are doing a lot of DIY investing, you can see this in the share price of Robin Hood. And that's That's really interesting. I don't understand the psychology there and why that's gaining so much momentum.

10:36And perhaps it's backed up by a lot of robo and AI advice. What's your take on, I appreciate that that's just one segment of broader wealth management, your stocks and shares, but what's your take on that trend? And then how are you looking at integrating those types of tools and solutions? And what I mean by that is AI, is robo advice, is the human plus software proponent?

10:57Ruth Handcock OBE:So I think there's two things there. One is the extent to which people feel confident enough to make some decisions on their own. And I think in every generation you look at, there are areas of money where people have felt confident enough to act on their own. Historically, people might have participated in share offers and bought a single stock because they felt passionately about that company. Now people might think about crypto, they might think about stock trading. That is a preference that people have. And there will often be a space in people's money to be able to do that. What I think the difference between that and a plan is, is a plan is an I want to get here and therefore I need to act consistently to get there versus where people tend to day trade or where they tend to buy very volatile assets is actually I want something quite different is I want some really quick returns or I want to experiment with is this something I have a particular skill in?

11:52Ruth Handcock OBE:And I think it's actually quite a different category from the one that we find ourselves playing in. We play in, I've got a hope and I want to figure out how to get there. I think crypto and short-term trading sits in a different space, which is more about enjoyment than reaching goals for many people. How do we incorporate some of that? So our solution, actually, while it's human-led, the whole reason that we can deliver advice at much lower cost than the rest of the industry is because all of our advice is algorithmic. So all of the suitability recommendations to an individual and all the execution is completely led online digitally.

12:29Ruth Handcock OBE:And someone can play around with the software and create scenarios in their planning much more easily than they would be able to do with a more traditional financial planner. So that actually, for many people, hits that desire of, I don't just want someone to tell me what to do. I want to understand why. I want to be able to experiment myself. And that gives me even more confidence to take action at the end. AI is a really interesting one, which the industry talks about all the time. So we use AI in the background to make our operational processes more seamless. But where I think we are from a regulatory perspective at the moment is it's quite hard under consumer duty, which is a bit of regulation that says you need to think about what the customer outcome is.

13:14Ruth Handcock OBE:And to an extent, you need to ensure that for the same set of inputs, you deliver the same set of outcomes to a customer. It's not yet clear how AI advice would fit into that. I think there are ways in which AI can be deployed to make better recommendations, but certainly our way of building our proposition at the moment is algorithmic rather than AI. And then we use AI around the edges to make things more seamless. Where will that evolve to? I think it's going to be really interesting to see. And our North Star has always been, how do you make this affordable so that it's available to everyone?

13:50Ruth Handcock OBE:And machine learning, AI, technology, digital engagement is just going to make that better. But you've just got to figure out where is the tipping point where if you take the human out, our procrastination kicks back in. And that's where I think robo models have struggled because you get about half a percent conversion through a robo-advice funnel. I think because people by the end of it don't yet quite trust their action, don't quite trust their instinct to press invest. Where what we find is we get 30 % of people who plan investing because by the time they get to the point where they press invest, they know what they're doing, they know why they're doing it, and they feel confident enough to do it.

14:28Ruth Handcock OBE:So how you get to that with a digital journey, I haven't seen anything that converts at the sort of rate that a human-led service would. But gosh, who knows, in the last two years, things have changed enough. Goodness knows what the next few will hold. So you educate a lot on the way. Maybe this is a good time just to step through the product. So just to give you an example. So somebody's coming onto the platform, they're 35 years old, they've got£100 ,000 in their ices sloshing around. They don't really know what they're doing with it. They have their income to their salary. And their objective is within the next five years, they would like to buy their first flat, their first home.

15:06What do they actually do? What are the next steps? So they've come to you with that situation. What then happens?

15:11Ruth Handcock OBE:So the first thing they would do is book a chat with a person, a coach. So they are a non-regulated but very well-trained coach who will have a conversation with you about what do you want to achieve in life. And so for this individual, it might be, well, I want to buy a flat. And there might be other things as well that they're worried about or they're excited about. That conversation is really important for two reasons. It allows someone to get all of their worries and questions out on the table. So often in that first session, people might say things like, well, I've got a pension, but I don't really know how much is in it or don't really actually know what a pension is.

15:47Ruth Handcock OBE:And I've got stocks and shares ice, but I don't really understand the tax benefit I get from that. So there's an education piece. And then there's also a data gathering piece that the coach is doing in understanding what you're aiming for and what you've got at the moment. So that's session one. The coach will then go away and in about 15 minutes, they can build a cashflow model that shows that person's life over the next 20 or 30 years. And they'll then have a second session with the individual and talk them through that. Literally, this is what happens if you keep doing what you're doing. And this is what could happen if you were to take different financial decisions.

16:21Ruth Handcock OBE:So it might be for this person that actually, I think you could buy a flat after three years if you did these things. Or actually, you said you wanted to retire at 60, I think you could probably retire at 55 if you put a bit more in your pension and you do this differently. And that advice, those examples you've just given, is that coach providing that or what happens behind the scenes once they've had that initial conversation such that that coach can provide that advice with real conviction? Yeah, so the coach will enter the data into a cash flow modelling tool. And what the cash flow modelling tool is not giving advice is it's showing what would happen if you made different decisions with your money.

17:03Ruth Handcock OBE:So you might be not putting any money in your pension and saving in a cash savings account. And it will say, actually, if you put that money in your pension, this is what would happen. So it's really scenario testing. It's not saying you should do anything, saying these are some of the implications of what would happen if you took different decisions. And the coach will talk that through with the individual and they'll say, oh God, actually, when I think about it, I really want to optimize for buying that flat. I'm a bit less worried about retirement outcome. The coach will put that data in the tool.

17:33Ruth Handcock OBE:And then once they've had that second session, the coach will say to the customer, this is what I think your locked down plan should be. So this is what you've got, and this is what you care most about. And at that point, the tool provides a set of advice recommendations. And in financial services, there's a big difference between guidance and advice from the perspective of the regulator. And the point at which it gives recommendations, that's a regulated process that is advice, and it will say something as specific as you can afford to put an extra£49 every month into your pension, and you will still have enough money for your short-term needs.

18:13Ruth Handcock OBE:So it gets that specific. And then it says if you're starting a An investment ISA, your risk appetite is this, so you should invest it in a fund with a risk rating of seven. So it gets really specific. The critical thing that allows the whole journey to work in a way that's both compliant and with a lower cost to serve than the rest of the industry is that the coach gives guidance, the technology gives advice. So once you get to the recommendation, that's a digital process that the customer engages with and understands. because they've had the conversation they understand why that's the recommendation but it's up to them to then execute against it and go away and open that ISA or put a bit more money in their pension and that's what allows us to provide an end-to-end service at a cost that's very different from the rest of the industry it's really by understanding the regulation and dividing up the bits of the journey and making sure that you're optimizing for a great customer experience, but only using the regulated bits of advice when they're going to have most impact on the customer.

19:18So it's that technological proponent on the advice, which is enabling you to offer this service at a fraction of the cost from traditional wealth management and therefore to people with less capital.

19:30Ruth Handcock OBE:That's exactly it. And we actually wrote a white paper last summer that said, this is how we give advice. And it goes through step by step. And you can think of it as a waterfall. And it will go through steps like, well, if you need money in the next five years, you shouldn't invest it. It's probably best to keep it liquid. Everyone should think about having a certain amount of money in an emergency fund in case something happens. Actually, if you then don't need money for five years and you've got excess, you can think about whether you should put that in your pension or your ISA. So actually, when you read through that waterfall, it's a logical set of steps that if someone were confident with their money, they could absolutely go through on their own.

20:10Ruth Handcock OBE:But what we find is because they're often decisions and products that people are unfamiliar with, it gets quite complicated going through it on your own because there's quite a lot of three-dimensional things to feed together. So what we found so powerful is that through those conversations and through a cash flow model, you're able to piece that into a really clear set of actions, but someone understands why those actions are right for them rather than them just being conjured out of the bloom. Yeah. And the advice, how granular do you get there? Are you actually suggesting specific stock picks, for example, or do you stop before that?

20:44Ruth Handcock OBE:So we suggest portfolios, but all of our portfolios in our core proposition are globally diversified passive funds built out of the biggest passive managers in the world. So they are designed to be diversified and rated according to someone's risk appetite, but also really low cost. Because for many people, actually, a low cost passive global tracker, if you're a mass market investor, is usually, usually the right answer. Okay. Can we talk about the mindset shifts that you're hoping to create by building this business? What are you really trying to achieve in the near term? And then let's talk about the 10-year, much bigger vision.

21:25Ruth Handcock OBE:Yeah. So in the near term, I'm trying to prove that it's commercially viable to deliver fully holistic financial advice to people in the mass market. And I think if you ask many people in the financial advice industry five years ago, they'd have said, no, it's just not possible. Most advisors won't take on a customer unless you've already got a quarter of a million pounds in investable assets. So I'm trying to prove that. And I think it's really critical that you prove that it's commercially viable, because if you don't, no one will do it sustainably. Financial planners are great people. They really want to help people in the mass market.

22:00Ruth Handcock OBE:They just can't figure out a commercial model to do it. Because I think if you crack that, if you show that you can give someone holistic help, and I do really believe in personalization, I think it's what AI is so brilliant at, actually. And I think increasingly, humans will expect personalization rather than cohorted solutions or most people like you do this. I think technology now allows us to personalize en masse. So if you show that you can personalize en masse, which is exactly what the definition of financial advice is, and deliver it at a cost to serve that makes it affordable in the mass market, that to me is category creating.