This time around we interviewed Julia Groves, CEO of TrillionFund, on financial marketing, market disruption, crowd-funding and a lot more.
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Jon: Welcome to Positive Chats. Today we have Julia Groves, CEO of Trillion Fund. I guess the first question would be exactly what does Trillion Fund do?
Julia: Trillion Fund raises money from ordinary investors like you and me, and gets them to move it out of the dirty stuff into the clean stuff. So we’re trying to give everyone a chance to profit from renewable energy and accelerate the switch towards a low carbon, decentralised energy future Jon. That’s what we do.
Jon: How disruptive would you think companies such as Trillion Fund are to the existing situation?
Julia: For whatever nutty reason, we are trying to radically change both the energy market and the financial market. It started off being about the fact that we’re all paying fairly silly prices for electricity, and that these big companies who are making beautiful returns from that aren’t reinvesting it in longer term sustainable solutions, and I happen to think there might be a slight climate issue.
The name Trillion came from the amount of money that we have to raise and invest in renewables to stop the planet going more than two degrees above where it is. That’s where it all came from. But what became clear very quickly is that we couldn’t actually crowd fund renewables, which is what we want to do, unless we changed the financial regulations at the same time.
So it’s double disruptive. We’re trying to decentralise energy and we’re trying to democratise finance. It’s possibly slightly ambitious, except that will never get in my way; you know that, and so a lot of the work over the last year has been about fundamentally changing the regulations and the tax conditions in financial services to remove the barriers to innovation coming through.
So we’re getting some retaliation. I think that’s always a good sign of disruption.
Jon: So for the people investing in projects, what is their main reason for doing it? Is it the possibility of better returns or is it they’re shaping the world in a way that they like?
Julia: This is my third renewable business. I did a vertical access wind turbine company, I did a solar business; I’ve been working in it for over 10 years. I’ve tried everything to try and get people to move their money, and the only motivation which really works is profit. There’s just not enough people out there who can afford to pay more for things because they’re low carbon, or will compromise returns because it’s the right thing to do.
So trading is using profit as motivation, and it’s about getting the most decent return you can for your money, and I think the issue in renewable energy and in fintech to some extent is that you have to have £10,000 to get to the table, and that rules out the vast majority of people, including me, because if you work in a start-up you don’t have 10 grand to throw around, otherwise you’d put it into the business.
So it’s absolutely about profit as the motivation, and the reality is all of our projects offer between six and a half to seven and a half percent return against existing performing assets, and it’s just that much more than you can get in the bank, and therefore it’s worth taking a bit of a risk to get access to those returns.
Jon: So you’ve got a bit of an advantage because the banks don’t have the best, rosiest reputation since 2008 or ever – but since then especially, but they also do have the benefit of inertia.
Our last guest, Rory Sutherland is very much into behavioural economics. How do you change people’s behaviour, both on the investor side and on the project side, into understanding this new situation that you’re trying to create?
Julia: So, I mean very simplistically I would always look at the opportunity for change and look for the usual three things. One, is there sufficient dissatisfaction with the status quo? Are people really, really not happy with where they are?
On the other end of the spectrum, are there real alternatives coming through? That means scale and quality, alternative places to put your money. And then the third element is simply; what is the level of pain involved in switching from one to the other?
So since 2008 the level of trust in the banks is very, very low, but also from a policy and governmental perspective, they’ve really realised that unless they can introduce some diversity into financial services, we’re always going to have five banks that are too big to fail and too big to jail.
So actually that diversification is not just about more choice for people for where to put their money. It also underpins financial stability going forward. So that’s why Osborne is all over alternative finance.
There’s also a view that the economic recovery is going to be led by smaller companies, and those are the ones who can’t get the money because the banks can’t lend because they’re restricted about the ratio of how much they have to have in savings and how much they can lend out.
So I think there’s a combination of a huge wave of innovation in fintech coming through, 85 funding platforms. We’ve also been much more successful than the Americans in negotiating the regulations. We’ve been at that relentlessly for two years. I mean eventually people just give up, you know, just get her out of the room, just give her what she wants and make her leave.
So we’ve changed the regulations. We’ve got rid of the minimum investment. There’s no requirement to have a certain amount of money to do crowd funding, hashtag wealth is not a skillset, and we’ve really, with ISAs coming through now, this announcement that you can use your ISA to lend to businesses from next year, it’s really becoming a much more mainstream proposition.
So I take your point about inertia. I think we’ve got a challenge to build trust quickly in the industry; that’s why regulation’s so important, but there’s been so little innovation for so long, and the banks can’t take any risks whatsoever, and they’re burdened with a huge amount of hefty regulation which we don’t have.
So we think we’re nimbler. We think we’re more customer focused. We think we are facilitators, not institutions, and as the demand is there, the alternatives are coming through. So the next two to five years, it’s just about moving all those barriers and making it easy for people to switch from one to the other.
Jon: I’ve seen you in the FT talking about the issue of banks and competition. Now what’s the story there?
Julia: Do you want the politically correct answer or the…?
Julia: Okay. I mean they’ve really had their fingers burnt right. I mean there have been some shocking examples of mis-selling, things that have gone on, and they’ve been fined to high heaven, and they’re all on real warnings now, not just in the UK but in the US, and they genuinely, I guess, can’t take any risks at the minute.
And I went to see each of the heads of all the banks and said “hello, I’m crowd funding, this is how it works, this is great, I’m sure you’ve got some misconceptions, let me just explain, it’s regulated, we do money laundering, it’s all fine. We don’t seem to be able to open bank accounts, you seem to be closing down the bank accounts for people who use crowd funding, and you’ve just stopped me from taking debit card payments. I’m sure there’s some mistake, let’s work this out together”.
And the private response is; you’re too high risk, you’re not of any commercial interest to us whatsoever, and we’re not going to do it until they make us. So do I have to go the FT and cry like a baby? Yeah, go to the FT and cry like a baby.
We had a really good session though with Treasury and the FCA and everyone last Tuesday, which is the first time we all got round a table. We were well-behaved for at least the first 10 minutes.
But there’s always a difference, you can’t tar them all with the same brush. Some of them are just planning to get to retirement without ever having to deal with this whatsoever. Others can completely see the potential, and I think whoever bites the bullet and decides that they will get behind this really fast growing, exciting industry, it was 1.75 billion last year was alternative finance; it’s going to be 4.4 billion in 2015 if it just carries on at the same rate.
So it’s a really worthwhile, fast growing industry that is now regulated, and one or more of the banks is going to become the bank of choice for alternative finance.
So we have, it’s all being done on Twitter, it’s hysterical, so we’ve all just been DM-ing and tweeting between the guys that were there. Unfortunately the banks aren’t really on Twitter so they might have missed some of the invites, I will email them, though we have an unofficial show and tell session the week before Christmas, which Silicon Valley Bank are hosting, where we’re just going to go right, this is who we are, this is how it works, did you realise this and that and they can do the same for us.
And if at the end of that they look at us and we look at them and say “this is completely incompatible, we can’t work together”, fine, we’ll go back to the government, but I bet you most of it is just a perception which is inaccurate and we can work round.
Jon: Is there anyone in private that talks to you from the big banks that’s actually in support of it, but in public isn’t, like in meetings isn’t or…?
Julia: It really just depends. I mean they all have heads of innovation and customer service people, and they all have compliance, and I can see genuinely why there isn’t so much innovation in financial services.
All the ideas you have, er compliance says “no”, and I had to go and pass my exams to become an approved person with the FCA, which involved not cycling to work in the morning anymore, but getting on the bus and sitting on the pad listening to the video cast of all the stuff I had to know. I mean I can’t believe I’m doing exams at 44. My MBA is 25 years old!
But now I understand both worlds, so it’s really good to have this experience, even for a couple of years of being the marketeer and being the compliance officer, to try and work out what you can actually say and what you can actually do.
And everyone just is really cautious. You’ve see the size of those prospectuses right? Those are arse covering prospectuses. Nobody reads those, but they’re okay because it contains all the words it has to contain, and I just fundamentally disagree that a 150 word prospectus is okay and a three minute video isn’t.
So we’re going to try and do it in videos and graphics and animations, and voice and other things that people will actually listen to and actually understand.
Jon: That actually brings me onto bringing it back to marketing. There’s very little innovation in financial marketing. Regulation is probably one of the reasons why. How are you combatting that? Because social media content seems to be perfectly positioned for a disruptive business such as yours, but tempered by regulation. How are you managing that?
Julia: So the key additional change I guess in financial services from a retail point of view, retail being us, like normal people, is this thing called the Retail Distribution Review, and basically that was when the regulations changed for financial advisors.
So a lot of us used to have financial advisors and we kind of thought they were free, but actually they were getting paid by the people whose money you put into their funds and their pensions etc, which meant they weren’t really quite as independent as we thought they were, and since the rules have changed, there’s now a requirement for you and me to pay for that advice, and for that advisor to do a fairly significant piece of work, called a suitability test, to see what our conditions are and therefore what risks we should take.
And what that means is it’s created this pool of what are called orphans, five and a half million people in the UK who have savings and who have investments, who don’t have advice.
So in every other aspect of our lives where we don’t have that advice, that intermediary, we go on comparison sites and we ask our mates right. So peers are now a big part of a huge number of decisions that we make. It just hasn’t really come into financial services yet.
So, since January this year there’s now this pretty significant number of people who have to work it out for themselves, and this is where social media marketing comes in right.
So the same regulations apply no matter what you’re doing, but we are a lot better at interpreting those than the regulators are, and they are trying to keep up and we’re trying to collaborate, but the time it takes for them just to think something through and put out a consultation and consider the constitution and turn it into whatever, the rules have changed.
So I know we’re doing things day by day on hover-overs and active pixels that they actually wouldn’t even understand or have no idea that we’re doing. So we’re trying to engage a lot more and they’ve got this project Innovate thing coming along, but in reality I think that they’re going to really struggle. Unless they actually adopt the technology themselves, I don’t see how they can regulate fintech companies.
Jon: So how social is money?
Julia: I think that we’re already seeing, and things like mortgages and insurance and different areas like that, I think you can already see that peer reviews and social media recommendations are having more of an influence than traditional advertising in different areas.
So, social media is a core element of trading strategy. What we primarily want to do is create really compelling, engaging, fun content that educates, unfortunately that’s always expensive, and engages the audience, because they’re just scared of their money, and to have that confidence and that trust to go okay, I’m really going to do something about this now, I’m going to take the money that’s sitting in the bank and earning less than inflation, and I’m going to put it to work doing something useful, making a return for me and making a difference for somebody else.
The amount of money that is sitting in bank accounts in the UK, either in banks or in cash ISAs, is £1.12 trillion, and most of that is not keeping up with inflation, so it’s losing money in real terms. So there’s this huge opportunity I guess to socialise and to recognise that’s individual people’s money, and because they’re leaving it sitting in the banks, the banks are going off and doing what they want to do.
But it’s your money. Do you know what the banks have done with it? Are you happy with what they’ve done with it? Are you happy with the share of return that you’re getting and if not, get off your backside and move it or just shut up. We’re going to move all the barriers out of the way, we’re going to create all the opportunities, and if you still don’t move it John; that’s not my fault, I give up.
Jon: At some point are the banks going to get worried if you do become extremely successful? When do you think they’ll start?
Julia: There’s some signs of retaliation already, but inherently we are addressing a market that they can’t really address. I think there’s potentially an impact of savings moving en masse, but they really have neither the will nor the way to do the lending to SMEs that we’re doing. They’ve got rid of all of their high street business lenders, and we are much more efficient. The whole thing is done through technology.
We’re aggregating a lot of people with a smaller amount of money, and people with a smaller amount of money have lower expectations of return, so whenever we raise a million, it’s from 10,000 people, not from one individual, so it means that we’ve got access to almost a US asset class of money.
And how will the banks respond? We’ll wait and see. Some of them are doing partnerships, but in general I don’t think they really see us as a threat. I think they’re kind of like, brilliant, you’ve addressed that market we don’t want anyway because there’s not enough money in it, and we can say that we’re not discouraging competition, hurrah.
Jon: So what is the utopia if you had the click your fingers, the dream vision for Trillion Fund in two, five, 10 years? What would it be?
Julia: So Trillion began as a business focused on renewable energy. We recently merged with Buzzbank, which was the UK’s biggest social crowd funding platform. We’re just sitting so far with 14,000 members, so still quite cute and adorable at this stage. Raised about two and a half, £3 million.
What we see happening in 2015 is just a very rapid expansion leading up to the ISAs at the tail end of the year in secondary market, and off it goes.
The absolute utopia for me is that as many people as possible feel like their money is doing what they want it to do, that they can see where it is, that they’re happy with how it’s being used by other people, that they’re getting a very fair share of the return, and that we’re all kind of just a bit more engaged and involved and doing things together.
It’s about a wee balance of power between individuals and institutions. That’s all. Competition is a very, very good and essential thing.
So I’m expecting many more crowd funding businesses to emerge, others to consolidate, some to fold, it’s happening already, but really what we’re talking about is a democratisation of finance, and that is very exciting in terms of getting those five and a half million people, getting that 1.12 trillion and putting it to work, boosting the economy and boosting returns for us all.
And in my case, once I know I’ve got my 7%, I’m all over the social benefits. I just think we have to start with the returns first of all and then think about measuring and tracking the social impacts as well.
Jon: Well, some more light-hearted questions. It doesn’t have to be financial services, because then the answer would be very boring. Favourite…
Jon: Well, when talking about advertising I guess. What would be your favourite advertising campaign of all time, or favourite marketing campaign?
Julia: Ooh, you didn’t tell me that one was coming. I really like the Honda one, the TV campaign. I absolutely adored that. That was a big one. And I think it was just so un-Honda it was inconceivable. That was really wicked. And I think, I’m really not keen on print, I’m totally so over print.
And in terms of the online stuff, the other one I really like is the Nudge? Have you seen the Nudge, which is just a weekly email of places to go in London, so I don’t know if you count that or not, but it’s so irreverent. The tone is just absolutely brilliant.
They very, very carefully choose one place in London, and it’s always something cool like, you know, it’s all hidden behind the door of a wardrobe or the cocktails are amazing or it’s scavenger based, or whatever else it is. It’s mostly restaurants and bars, but they have got me completely nailed in terms of I think that’s who I am. It’s totally not who I am, but I think that’s who I am, so it’s really aspirational. So I guess that’d be my favourite online.
Jon: So, what is your favourite brand of all time?
Julia: I’m going to say Vivienne Westwood right. So clearly just to express my complete, so she is our major investor but she was a bit of a hero long before then.
The main reason why I like the product is it looks like nothing on a hanger, and you put it on and it hides all kinds of sins, not things you need to worry about, there’s no sins here, but were I to have any bumps and bits in the place they shouldn’t be there, totally incredible clothes and I get complimented all the time. That’s a Vivienne.
But she is the last remaining punk. She does not care what anyone thinks about anything, and she completely, uncompromisingly does whatever she wants to do. Please may I get to that point somewhere in life, and we’ve marched with her, she shaved her head against fracking, and we marched with her on several occasions, and we talked about the regulation and she was just like, sod it, let’s go to jail, and I’m like, maybe not, I have children.
But I think it’s just anything that uncompromising and totally true to itself is absolutely fantastic.
Jon: So I’d like to ask a few quick-fire questions. Mac or PC?
Jon: Coke or Pepsi?
Julia: Coke. Both offensive. I’m offended by the question.
Jon: Bill and Ted, or Wayne and Garth?
Julia: Not much of a difference between the two. Bill and Ted.
Jon: And finally, Knight Rider or Batmobile?
Julia: Knight Rider.
Jon: Excellent. Julia, thank you very much for your time. You’ve earned 60 seconds to be as completely self-promotional as possible, go right ahead.
Julia: Brilliant. So Trillion Fund is already the UK’s biggest social crowd funding platform and we plan to be huge. Think Wonga for good or Facebook meets funding circle, because there are five and a half million members in the UK who have some savings and investments, maybe not a huge amount, and we’re deciding for ourselves where to put our money, and that money amounts to £1.12 trillion, sitting in the bank earning less than the rate of inflation.
We’d like to get you to move your money and make a profit while making a difference. Trillion Fund is going to create the opportunities to make a decent return and give a little bit of something back to society at the same time.
We’re raising £500,000, and we’d love it if you’d look at the campaign, think about putting in £10 and 10 minutes, and being part of the new social finance crowd, because your money doesn’t have to be the root of all evil. It just depends where you plant it.
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