Attracting clients outside of the traditional wealth audience is exceptionally difficult. Jargon is a major barrier. Product literature, full of esoteric financial references, is alienating new demographic segments. If we, as an industry, are committed to the democratisation of investing, we need a shift toward simpler language and more intuitive interfaces.
A second challenge the industry faces is the ‘advice gap,’ which is impeding access. Recently the FCA found that more than 85 per cent of investors were not willing to pay more than £200 for online advice. At the same time, advisers are unwilling to advise those with limited assets – 69 per cent reporting they had turned away potential clients in the past year. BlackRock calculate 26 million Britons have fallen into the advice gap.
This is a crisis for Britain as a saving and investing nation. Fortunately, a wave of technological advances is set to revolutionise wealth management and advice by improving access, choice and knowledge. Below, I outline the most important of these tech trends, from biodata to blockchain.
Biodata to enhance the customer journey
We are going to see huge improvements to the client journey. Biodata lies at the centre of this change. It is the information we hold online over various sites, from Facebook to Snapchat, and includes relevant data points from gender to religion to personal pursuits. The harnessing of this data will help to personalise advice, not only at the beginning of an investment flight plan, but as clients move through their lives.
Harvesting data will create privacy issues that need to be hurdled, but enhanced client knowledge will develop more tailored and intuitive investment propositions synchronised to an individual’s life path.
The dawn of artificial intelligence
The assessment of ‘attitude to risk’ will have far greater sophistication. Artificial intelligence will be able to assess client’s biodata and tailor questions related to their profiles. While more distant in the horizon, artificial emotional intelligence will be able to understand client’s reactions to questions by reading facial expressions, which will then be utilised to determine assessment questions.
Client onboarding has already adopted artificial intelligence, to continuously improve accuracy, limit fraud and reduce manual intervention. VChain are using a distributive ledger system to provide a digital verification of passenger data for airlines, which is unhackable and has no data exposure. This technology is likely to make an entrance in finance.
The Tax Incentivised Savings Association (TISA) is in the development stages of creating a framework for a digital passport that could deliver significant benefits to consumers in the control, monitoring and streamlining of their savings and investments. The initial focus of the passport will be to provide a secure central store of basic client identification information that will satisfy the ‘know-your-customer’ and anti-money laundering checks, which are required by UK regulation to open a new savings account and to transfer assets in an existing account to a new provider.
Robos to accelerate choice
We are now also seeing robo solutions providing more choice. Biodata is going to help to drill down into specific biases, such as thematic, religious and ethical, and investment options will be tailored to bespoke client needs. We have already started to see a proliferation of ETFs as more investors require greater choice and granularity. Existing robo solutions will pivot from the model portfolio of limited ETFs, to a more expansive universe of passive choice that collaborates with individuals unique customer journeys.
Machine learning will improve the responsiveness of real-time portfolio management over time. New platforms and applications will drive the granularity of tailored choice. For example, Dabbl, which will be launching imminently, will allow clients to invest in companies they interact with, via their mobile devices. For example, you will be able to scan a bar code of an item, such as a bottle of shampoo and be provided with the respective company data.
To facilitate micro investing into individual stocks, the cost of investing and processing needs to come down, as well as the time it takes to process those trades. This is the race to zero and it is technology that will facilitate this. Only increased efficiency of asset servicing will remove this friction point.
Get ready for blockchain
Blockchain is still in its nascent phase. Prior to mass adoption, the industry must attain high levels of automation and machine learning to improve operational resilience. The mutual funds market remains a sector challenged by operational inefficiencies often resulting in an inability to meet evolving customer demands. The current requirement to replicate and reconcile records across the value chain creates an unnecessary overhead.
Fund dealing will eventually become instantaneous dramatically reducing cost. Already, we have seen Calastone successfully completing their first phase of blockchain market infrastructure for the global funds industry. That means the proof of concept for blockchain trading and settlement of funds is a success and they anticipate moving to this system by 2019. Further work needs to be completed before this can be expanded to equities and a set of common rules will need to be agreed.
Collaboration can unlock millennial audience
Companies will become much smarter at acquiring clients. We will see fintech companies collaborate to acquire clients and build more value into their propositions. The UK round-up company Moneybox have teamed up with Starling Bank. Meanwhile, Aviva is supporting Wealthify to create a wider reach for its simple, low-cost and transparent digital investment service. Wealthify will sit alongside other Aviva services via Aviva’s digital platform, MyAviva. We predict more collaboration between robos and employers, financial advisers and other conduits that marry up client acquisition and product.
One of the problems with targeting millennials is that they haven’t had a chance to build up any real savings in an era of low rates. A month of over indulgence leaves them in a position where they are forced to cash in their investments. A collaboration between bank and robo provides more information to enable client monitoring of spending and provide nudges to better support millennials. This will avoid unnecessary processing and monetary loss due to market movements.
The popularity of companies like Monzo and Revolut, who have attracted clients through low FX rates and money management tools, show the direction of travel for collaborations. Now new synergistic investment solutions will help to tackle the client acquisition conundrum, but also change where clients go to for products.
Thomas Lowe is head of product at Winterflood Business Services.
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