Michael Katchen first tasted investing at age 12 when he won a stockpicking contest. Since then, the 30-year-old Canadian technology entrepreneur who runs WealthSimple has taken a keen interest in managing his personal portfolio of stocks, mutual funds and exchange traded funds.

He recognises, however, that for his generation this is a niche hobby.

Mr Katchen worked at 1000memories — a website that let people organise, share and discover old photos — when it was sold to Ancestry.com in 2012. He and his co-workers made money from the deal and several asked Mr Katchen how to invest it. He realised the need for a service to introduce millennials — people in their 20s and 30s — to investing.

“Traditionally unless you had a lot of money, you couldn’t get access to great financial tools and advice,” he says. “This meant that a lot of people, younger people in particular, were largely ignored by the financial services industry.”

Mr Katchen is one of several entrepreneurs trying to create an industry by solving a big asset management problem: how to attract young investors.

Many new services employ the technology that millennials use as second nature — smartphone apps and chatbots powered by artificial intelligence — and they are intended to create a savings habit.

They have attracted millions of users. While initial investments made by younger people are small compared with older savers, the start-ups’ growth trajectory and the economic power of millennials is posing a significant threat to the traditional sales strategies of large asset managers.

“These tools had been dismissed by some asset managers based on the belief that once the investor has ‘real’ money they will seek out a full-service relationship, so existing distribution arrangements will come back into play,” says Gabriel Altbach, founder of Asset Management Insights, an investment industry consultancy.

“That assumption underestimates both the comfort that digital natives have with technology as well as how far the tech has advanced and will continue to do so.”

One feature used by several fintech companies to encourage millennials to save is “round-ups”. These round up the payments that users make and put the difference into an investment or savings product. For example, when a user buys a cup of coffee for ￡2.20, an additional 80p is automatically deposited into their investment portfolio, taking their total outlay to ￡3.

So often are cups of coffee used to illustrate this mechanism that one provider, Moneybox of the UK, uses the image to market its app. Charlie Mortimer, co-founder of Moneybox, says younger consumers have mostly been ignored by traditional financial institutions, but round-ups ease them into investing regularly.

“A whole generation was growing up without the tools and information they need to build their financial future,” says Mr Mortimer. “Wealth managers tend to help people with wealth to manage, while banks try to sell products like mortgages but don’t help young people build up their deposits. Younger people often feel alienated.”

He says: “Our research shows that round-ups resonate with younger people. It’s a good way to break that inertia.”

Moneybox has more than 125,000 investors on its platform, who typically put away ￡1,000 a year each. The average age is 31. The app offers three products: a Vanguard global equities fund, a Janus Henderson money market fund and an iShares global property equity fund, which charge 0.22 per cent to 0.24 per cent. Moneybox has a 0.45 per cent platform fee plus a ￡1-a-month subscription after three months.

Mr Mortimer says the focus has been on finding cheap options with low tracking error, meaning they closely follow their benchmark index. He says Moneybox is reassessing its investment options and expects to offer cheaper funds in the coming weeks, as well as providing an ethical product.

Ben Stanway, Mr Mortimer’s co-founder, began his career at Fidelity International, while Daniel Godfrey, who ruffled industry feathers when he was chief executive of the Investment Association, is a non-executive director.