This week, Heather Hopkins (@heatherahopkins), the Research Director for Platforum, talks about vertical integration and digital engagement.
With less than a week until our annual conference on October 1st, we are dutifully preparing our remarks, double-checking our data and most importantly, selecting the walk-on music for our esteemed speakers. (Just how many times can attendees get Up Town Funk You Up-ed?)
The day will kick off with a discussion on how people access and engage with retail investments. I asked a colleague today who she’d trust more to manage and grow her money: Lloyds Bank, JP Morgan, Google or Apple. Margo (the millennial) answered definitively: Google. I asked someone towards the end of the continuum to retirement. His definitive answer as to who he’d trust most: “myself”.
People are used to dealing with firms that offer a one-click purchase experience. Google introduced click-to-buy in May so that I don’t even need to visit the retailer’s site to buy a new frock. Compare that with the investment industry.
As part of our usual roadtesting activities (and to get ready for next week’sawards), we have been putting the platforms through their paces. To do this we need to open accounts with all of the direct platforms. One platform (that shall remain nameless – sorry!) has requested each of us to mail in a photocopy of our passports. I have been unable to fund my account with another provider as I am told my address doesn’t match up to my bank statement. Trust me, it does.
This isn’t the kind of frictionless experience we ought to be delivering as an industry. Advisers complain to us all the time about out-dated technology and clunky websites. Yes, the costs to upgrade are enormous. That’s understood. But there does need to be a better focus on customer experience and customer engagement. In that respect, it will be fascinating to track the experience that Vanguard will deliver: it has launched a slick and successful proposition in the US and is reported to be launching a D2C offering in the UK.
What role will digital play in the future of financial advice in Britain? Again, in my straw poll among colleagues — half (of the robust sample of four) said they trust an algorithm more than a human to manage their money. They were both millennials. Whilst this is an easy and bold statement to make at the water cooler, it may be harder to follow through in reality. In the US, where robo-advice is far more prevalent, we have seen blended models take off, such as that offered by Schwab. At the same time, pure-play digital models have struggled to reach scale.
So what advice do investors want from financial advisers? Our research suggests that they don’t want advice on which products to buy. That decision comes at the end of the conversation. Rather, investors want to know more basic and personal answers: when they can retire, how to minimise tax liabilities, how much they need to save to be comfortable in retirement, etc.
Advisers have these sorts of meaningful conversations with clients every day. So to stay relevant in an age of big-data algorithms, advisers should begin to rely more heavily on technology to support them in giving good advice in an efficient way. It’s not so much AI (artificial intelligence) but IA (intelligence augmentation).
At the same time, we believe that pressure is building on the fees charged by the various parts of the value chain. We expect investors to scrutinise more closely the fees they pay to their adviser, discretionary fund manager, fund manager and platform. Paying handsomely when markets are buoyant is one thing but faced with mediocre to flat returns (as many predict is the new norm) investors will no doubt begin to question why they are paying so much to so many people.
How to respond to such choppy changes in our industry? Join us next week at the conference to learn the answers. We’re close to sold-out. But I’ll give the last of our VIP passes to the first ten financial advisers to email me – in exchange for some industry scuttlebutt.
In the meantime, post any suggestions for walk-on music below. And we look forward to Up Town Funking You Up next week!