🦉 Why robo-advisor MoneyOwl failed in Singapore

Hey Founders,

Welcome to The Runway Ventures, a weekly newsletter where I deep dive into startup mistakes and lessons learned to help you become a better founder.

Let’s get to it! 🚀

☠️ 1 Failed Startup: MoneyOwl

🚀 The Rise of MoneyOwl

Founded in 2018, MoneyOwl (backed by NTUC) was a financial advisory and fund management company licensed by the Monetary Authority of Singapore (MAS) in Singapore to help Singaporeans make wise financial decisions.

• The Problem — Ordinary working families in Singapore were underserved as they often received conflicted or biased financial advice for their financial planning, resulting in poor financial decisions.

• The Solution — MoneyOwl was Singapore's first bionic financial adviser serving clients with comprehensive, competent and conflict-free financial advice to live their best possible lives. This was done through 2 elements:

  • 🧑🏻‍💼 Advisory — MoneyOwl’s advisers discuss, and explain investments, and financial planning to help clients understand trade-offs in investments and make the best financial decisions.

  • 🤖 Investment — Clients will be matched to one of five portfolios with different combinations of global equities and global bonds, based on their ability, willingness and need to take risks.

💰 How MoneyOwl made money

As MoneyOwl was part of the social venture by NTUC Enterprise, MoneyOwl wanted to make low-cost and fit-for-purpose financial solutions accessible to the mass market. Because of that, MoneyOwl’s business model was to:

• Only charge a low advisory or wrap fee of 0.65% p.a. of assets under management with a 3rd-party custody/platform fee of <0.2%.

• The all-in cost was less than half of what an investor might otherwise pay if investing in an actively managed fund with advice.

• Unlike other actively managed funds with advice, MoneyOwl also:

  • Never charged upfront sales charge

  • Never received annual trailer commissions from Dimensional (the company that managed MoneyOwl’s portfolios)

  • Never took commissions to pay their advisers as all of their advisers were fully salaried.

📉 The Fall of MoneyOwl

However, after 5 years, MoneyOwl decided to cease operations in 2018 for 2 reasons:

1. The business was concluded to be not commercially viable after the joint review by MoneyOwl and NTUC Enterprise (its shareholder).

2. Resources could be redeployed to other areas where NTUC Enterprise can deliver greater social impact.

📜 In particular, according to MoneyOwl’s official statement:

• While MoneyOwl’s clients understood the importance of financial planning, most clients didn’t take further action and far fewer were inclined to pay planning fees or purchase investment or insurance products through which MoneyOwl earned revenue.

• MoneyOwl’s financial solutions were designed with low fees to benefit mass-market clients.

  • Coupled with the fact that MoneyOwl had to stay true to its social mission, MoneyOwl needed a huge market where clients were willing to pay low fees to use their products.

• 💸 On top of the low revenue generation, MoneyOwl also struggled with high operating costs, including client acquisition, technology development, and a fully salaried workforce.

In short, while MoneyOwl was solving a problem for clients in terms of financial planning, the problem wasn’t painful and big enough such that many clients were willing to pay for it.

Finally, on 31 August 2023, MoneyOwl announced the decision to wind down its financial advisory business and to transfer its investment insurance and insurance services to iFAST (which has been completed), and thereafter cease all commercial activities by 31 December 2023.

🦉 So what will happen to MoneyOwl?

Fortunately, on 28 November 2023, MoneyOwl announced that Temasek Trust had signed an Expression of Interest with NTUC Enterprise to acquire MoneyOwl. The proposed acquisition is subject to regulatory approval.

MoneyOwl under Temasek Trust will move away from direct retail sale of commercial insurance and investments, and focus on developing targeted financial planning solutions with like-minded partners, as well as delivering programmes through companies and unions.  

Want to learn more about MoneyOwl’s downfall?

• NTUC social enterprise launches low-cost, evidence-based investing solutions for the mass market

• MoneyOwl to Wind Down Financial Advisory Business by End-2023

• Robo advisory firm MoneyOwl to wind up, in shock announcement

• Temasek Trust to acquire MoneyOwl to enhance financial well-being of communities

⚠️ 2 Mistakes

Mistake 1: The business model wasn’t commercially viable

MoneyOwl only gained revenue from taking low fees from clients when they purchased investments or insurance products. For the business to be sustainable, the market had to be big enough and many clients were willing to purchase investments or insurance products through MoneyOwl — which is not the case.

🤝🏻 Unlike many traditional financial advisory firms, MoneyOwl’s financial advisers took full-time salaries instead of commissions, hence aligning the interest between financial advisers and clients.

However, in my opinion, this might also mean that financial advisers were not motivated or incentivised to sell investments or insurance products to clients (which was the only revenue stream for MoneyOwl back then), causing the low revenue generation.

Mistake 2: Lack of product-market fit

While the core social mission of MoneyOwl was to help underserved clients with financial planning, it failed to gain traction in the mass market after 5 years.

🧩 One of the potential reasons could be due to the lack of product-market fit. Many MoneyOwl’s clients understood the importance of financial planning, yet they didn’t take further action, pay planning fees, purchase investments or insurance products.

Could an incentive mechanism help onboard more paying clients? I’m not sure.

But one thing is for sure — the product didn’t solve a painful and big problem in the market.

🧠 3 Lessons Learned

Lesson 1: A good business model is commercially viable

Unless a startup has raised tons of money from investors with enough runway to grow at all costs and slowly fine-tune its business model at a later stage towards the path of profitability, it’s almost impossible for a startup to survive without a commercially viable business model.

🛣️ It’s also normal for a business model to change throughout the course of a startup, hence the speed of iteration to pivot the business model is key before running out of cash.

Lesson 2: Cost management is important

💵 MoneyOwl struggled with high operating costs, including client acquisition, technology development, and a fully salaried workforce.

Therefore, managing costs efficiently is essential to make sure a company is financially healthy to survive and thrive. If costs are consistently high with low revenue generation, a business would not be able to survive in the long-term due to the high burn rate (which is what happened to MoneyOwl).

Lesson 3: Know when to pull the plug

🔌 Probably one of the hardest things for a business (or founder) is to know when to pull the plug, exit, and move on.

While some may think that closing down MoneyOwl might be deemed a failure. Yet, knowing when to pull the plug is actually a wiser decision as opposed to having the business continue burning cash without maximising its social impact.

Knowing when to pull the plug requires the courage to:

• Tell employees that things didn’t work out the way it was intended.

• Admit that we made mistakes, we’re aware of the mistakes, and we learned from the mistakes.

It’s not easy. But it’s probably one of the best decisions you can make as a founder instead of spending years on something that might not work out as much as you wish.

That's all for today

Thanks for reading. I hope you enjoyed today's issue. More than that, I hope it has helped you in some ways and brought you some peace of mind.

You can always write to me by simply replying to this newsletter and we can chat.

See you again next week.

- Admond

Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.