“Traditional robo-advisors in the U.S. like Ellevest offer goal-based accounts and their AuM is north of $635 million. This proves the market for goal-based investment strategies.”
So said Khurram Agha, founder and CEO of new U.S.-based Islamic investing robo-advisor Aghaz Investments.
Goal-based investing is an approach that allows individuals to meet their personal or life goals instead of focusing on generating highest possible returns or beating markets. “Those [goals] are highly personal, like buying a car, going for hajj. We provide some template goals, but you can create your own,” Agha told Salaam Gateway.
Aghaz will allow users to create up to ten goals, each of which will be separately managed as independent accounts with their own portfolios.
“You can set up recurring deposits etc. for each goal separately. We provide you with calculators and suggestions on what the optimal deposits should be,” said the former Microsoft software development leader of 16 years.
Goal-based investment platforms like Ellevest are well-known in the U.S. but Aghaz Investments will be the first full Shariah-compliant option. This sets the platform apart from Wahed Invest, which is the U.S.’s first-mover Shariah-compliant robo-advisor. Since its launch in 2016, Wahed has expanded into other jurisdictions, including Malaysia and the UK, and says it has passed the 100,000-user mark.
Unfazed by Wahed’s success, Agha believes the five million Muslims in the U.S. are under-served, with limited options to manage their finances according to their values and beliefs.
He’s not alone thinking this, having raised $400,000 in pre-seed funding from a mix of friends, family and angel investors.
GOING TO MARKET
The fintech is currently in sandbox testing with a group of beta users and says it will be ready for the U.S. market very soon.
“We expect to move to private launch (about 200 customers in waiting list) in two weeks,” Agha told Salaam Gateway on Wednesday (Oct 7).
“We expect to be publicly available by early November.”
Aghaz will set a minimum investment size of $1,000. Its fee structure is 0.49% annually and $2 per month for all users.
It does not have any other AuM-based tiers. “We intentionally chose to do this to keep things simple and transparent,” said Agha. “The ancillary tools/additional goals calculators and management etc. is included in the overall fee.”
The rationale for the fees stem from customer interviews and research. Both Agha and his CIO Khadija Khartit, who has over 25 years of investment experience, are registered as Investment Advisor Representatives (IAR).
“We discovered that this minimum balance is required to provide an optimal investment experience for the multiple goal-based strategies that we offer,” said the CEO. “We will waive this requirement for private minimum viable product (MVP) launch and potentially consider lowering our minimum in the future.”
In order to meet users’ goals, Aghaz will collect personal information about them, something that is also required for regulatory compliance. The platform is SEC-registered as an investment adviser and works with DriveWealth as its broker dealer/custodian.
Aghaz will invest in Shariah-compliant asset classes such as Real Estate Investment Trusts (REITs), precious metals and gold, Islamic ETFs, as well as fixed income like sukuk.
In addition to Shariah compliance, the platform also plans to support “customised values-based strategies” after its MVP launch. This means that it will design investment portfolios according to what users want in alignment with their beliefs, for example environmental consciousness or equal rights, said Agha.
It’s aiming to support retirement accounts in the U.S. (IRA, 401(k)) in early 2021.
Portfolios on Aghaz will offer different levels of risk tolerance and be aligned with IdealRatings and AAOIFI guidelines. Amanah Advisors, a UK-based Shariah advisory firm headed by Mufti Faraz Adam, is providing Shariah governance and advisory.
Users can also securely evaluate their current portfolios on Islamic compliance using a third party vendor (Plaid).
The company does not have immediate plans to raise any more money.
“After our pre-seed round in September 2020, we are not planning to raise any additional funds for eight to nine months,” Agha said. “Our next round of $1-2 million is anticipated in 2021.”
That’s when he hopes to break even. For now, Aghaz Investments is looking for full-time and part-time staff to support the work of the four-strong development team in Pakistan that is managed by Agha’s brother Hassan.
The new Islamic fintech CEO believes his company’s brand values will play an important role in leveraging the gap in the market it’s targeting.
“Aghaz in Urdu means the beginning or commencement,” said Agha. “We are branding ourselves for people beginning their journey of saving and investing money based on their values.”
(Reporting by Hassan Jivraj; Editing by Emmy Abdul Alim [email protected])
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