This week Jeremy Fawcett (@jfawcett), Head of Direct, reflects on the Platforum D2C Conference which took place at the Jumeirah Carlton Tower Hotel on 24th June 2015.
At our D2C shindig this week, you’d have seen that despite all the talk of robo advice, this crowd hasn’t settled on the jacket and jeans Fintech dress code. Perhaps it’s because what is one of the hottest areas of financial services is drawing interest from a hugely disparate range of companies – incumbents and outsiders – across the full spectrum of long term savings.
If there are £3 trillion of pension assets that may be up for grabs in the future, why would pension companies, with decades of experience of dealing with retirees not have a good crack at providing D2C retirement income? Why would retail banks that can reach millions of savers with a single promo on their online banking not attempt to attract investors when customer acquisition is one of the trickiest challenges for everyone else? Why would fund groups, whose star managers are revered by long term investors, not want to get closer to the end consumer?
The answer is that they do and they are doing. As Birthstar’s Henry Cobbe said: “everyone is experimenting in everyone else’s patch.”
So I propose a new dress code for D2C – lab coats and safety specs. It could get messy and already is. Mitch Tuchman, the founder of the original US robo adviser, Market Riders, back in 2008, realised that his friends were holding “a yard sale of funds and fees”, and were collectively underperforming the market… badly. For those not-looking to outperform, an automated process, in his view, would provide more reliable outcomes. He thinks this continues to be relevant because the pension freedoms that started in the US in 1975 have produced a “disaster” for individuals’ retirement incomes.
While the pension holding aristocracy may use their SIPP entirely as an inheritance vehicle, this leaves the rest reliant on drawdown income in the world were no consensus exists among professional advisers about asset allocation in drawdown or cash flow planning. What hope is there for DIY-ers to get this right? Even the old adage about taking 4% natural income is dicey. Robin Johnson of Morningstar says the chances of achieving a sustainable level of withdrawals of 4% a year from a pension fund are currently only a little over 50%.
So the biggest opportunity in D2C is an area we’ve only just begun to experiment. Alan Higham of Fidelity describes this in terms of enabling the pension to replace the individual’s financial centre of gravity, which, pre-retirement, is their salary.
Tech is a part of that and the likes of eValue and SEI are enabling more customer focused delivery with implementation specialists, Altus, pointing out that that there are pros and cons for both the tech buying and building routes.
There are many moving parts here and while some say D2C is coming of age, it is perhaps just the start of an experimental age. No one has the single correct solution and won’t have any time soon. Quod erat demonstrandum.
For any financial advisers out there… we’d love to hear you views on the platforms you use. Make your feelings known via our Q2 Platform and Distribution Review survey: http://www.surveygizmo.com/s3/2171495/Adviser-survey