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  3. Today’s purchase by Aviva of a majority stake in Wealthify has significant implications for the whole UK robo advice community and wider personal savings market. This move by the world's 12th largest insurer and a major asset manager is far more significant than the previous investment by LV= in Wealth Wizards and other UK robo deals. Aviva have a far greater degree of scale and partnerships that can be leveraged to the advantage of both businesses. Aviva have been a real leader in the digital revolution with the London digital garage having set the trend now being followed by many of their peers. While the deal keeps Wealthify as an independent business located in Wales it provides Aviva with an opportunity to open many doors for the company and harness a slick platform designed to appeal to a constituency that thinks and behaves in very different ways to previous generations. From the Wealthify perspective they no longer have the constant worry about access to capital to grow, no small benefit. Aviva already have a Direct to Consumer platform, built on FNZ technology for investors who are looking to go the DIY route to invest in a diverse range of funds. What they did not have up until now was a simple solution for those customers who do not want to spend large amounts of time managing their finances, but are seeking an easy way to invest for their future. It would be natural to expect Wealthify to move into pensions and Aviva’s knowledge in this area should be a major benefit. Whilst they would be wise to let Wealthify develop their own pension product, using Wealthify technology to support their substantial workplace pension and auto enrolment proposition would also be a smart move. As I have identified elsewhere this week (a link to the column will appear here on Monday) there is a compelling argument for focusing the Pensions Dashboard project around millennial auto enrolment customers in the short term. Adding the sort of execution capability Wealthify have to an Aviva Dashboard could deliver a powerful and compelling proposition to young savers. I am not at all surprised by this move; the US market typically runs two to three years ahead of the UK in the digital wealth arena. With this deal Aviva are emulating BlackRock’s 2015 move for Future Advisor and Invesco’s 2016 Jemstep buy by acquiring robo firms early rather than build their own in order that they could quickly partner with other financial institutions and distribution businesses. We have recently seen Blackrock make a substantial investment in Scalable Capital, the Anglo German robo firm, so Aviva are right to secure one of the more attractive firms available. There has been much debate of late around the cost of customer acquisition for start-ups with perhaps too much focus on the amount of money burned by Nutmeg who really had to break entirely new ground as the very first player of its type in the UK. If you happen to have 9,000,000 consumers, as there are on My Aviva, you do not actually have to hit too high a conversion rate to start achieving some very worthwhile numbers This move will cause Aviva’s peers to question if they are now at a commercial disadvantage particularly when trying to build partnerships with building societies and other savings institutions. It could also have a substantial impact on the asset management community. Do Aviva Investors have a significant advantage over their peers with an innovative new route to market? In my view the UK asset management community is for the most part failing to recognise the opportunity to leverage simple robo solutions which whilst a tiny percentage of the market today will have obvious appeal to the next generation of savers. There are unlikely to be enough robo advisers to supply demand from all the institutions who will wish to acquire one so they can maintain their competitive position. Primary players in this market will not want to be reliant on robos owned by competitors or others who may not always priorities their development agendas when it matters most. Unambiguous ownership will always settle such issues. Personally I can still see room for some Robo 3.0 start-ups emerging over the next year. Buyers will however need to have a clear understanding of what represents the good, the bad and the ugly in this sector if they are to spend their cash wisely. There are some that are very attractive targets and a few I would not want to go anywhere near. This deal may also provide significant opportunities for Aviva to deliver other products such as life and personal lines insurance to the attractive Generation X and Millennial demographics targeted by Wealthify. While the deal opens many opportunities the hard work is yet to be done and it will be at least 2 to 3 years before we can see the benefits reflected in Aviva results.
  4. New PFM techniques demonstrated at Finovate have the potential to facilitate totally new ways to help consumers get the savings habitat Last week’s new expanded format Finovate shone, as always, a spotlight on a diverse wealth of exciting ways to use technology to enhance the financial services industry. One of the challenges of attending the show is there is so much to take in. Rather than try and address multiple areas in a single summary I’m going to break down my review of the show to look at different areas. In a separate blogs I will consider the solution that for me was the overall highlight of the show, presenting quite simply the best US automated advice service I have ever seen and in a further summary I will look at the other presentations which fall outside my normal focus of WealthTech but provided stimulating ideas which I intend to progress separately. In this blog however I want to focus on a subject which is increasingly important to the UK market in the run-up to the launch of Open Banking next January. This is what has historically been known as Personal Financial Management tools, however increasingly the technology suppliers offering solutions in this market are trying to rebrand the services into different definitions. For me PFM works very well however it appears these organisations want to be seen as delivering more than just aggregated information. There were three different presentations from organisations in this field which really stood out to me at Finovate Fall, each was exceptional in its own right. I have long been a huge fan of MX, indeed I would go so far as to say in my opinion they are the best in the world at Personal Financial Management and aggregation. Rather than display their latest innovations as they frequently do at Finovate their team focused on hard numbers that make a compelling case for embracing these services. If non-customers who adopt a bank’s PFM are three times as likely to open a current account within a year and typically deposit four times as much money does this not make a strong case for delivering similar services to pensions and savings customers? MX have reputation for achieving adoption rates way beyond their competition and attribute much of this to the breadth, depth and quality of aggregation data cleansing and enhancement. This should be a key factor for UK PFMs to consider. Another key point they raised was the importance of high app ratings to get people to download and use them. Apps with 2 stars will typically only achieve a 15% download rate and 3 stars only 46% download compared with a 96% download rate for 4-star apps. This translated to a six-fold increase in use where business switched from low-scoring apps to higher rated ones. Clearly getting positive app reviews should be at the centre of any roll-out strategy. Moven are a highly respected name in PFM who have quietly entered the UK. After launching with TD Bank in Canada and Westpac in New Zealand they opened on these shores in February. I believe Moven’s service can provide huge benefits to the pension industry. In my view few pension providers fully recognise the potential impact of the pending rises in auto enrolment contributions will have on customers on national average earnings. At this level of income it is not that people don’t want to save but that they are under such financial pressure that they can’t afford to save unless we can help them find economies. Moven users are typically able to reduce their discretionary spending by between 4% - 8% per month. In addition, the service enables users to identify things they want and save towards them. It helps them track multiple goals and prioritise them recognising that users won't be able to achieve everything they want. Nudges are provided to encourage positive savings behaviour and recognise when reductions in discretionary spend have been achieved. The service will also identify further economies a user can make and it’s really easy for them to set personal spending targets. Looking at the practical impact their new “stash” Service has actually resulted in 25% of customers opening savings accounts even though no interest was offered! To me that seems to be exactly the sort of services pension providers should be deploying to help auto enrolment customers adjust to the increased contribution levels coming in the near future. As there are interactions directly at the operating system level within mobile devices we are able to provide far more intuitive and instant notifications. Currently Moven haven’t deployed all their capability to the UK but based on their ability to deliver rapid deployment and recognition of the use of such services in a long-term savings environment I see them as an organisation who should be on any supplier shortlist for potential institutional delivery of PFM. Yodlee’s Finovate presentation was strongly focused towards the savings, financial wellness and wealth management industries. The influence of parent company Envestnet is clear to see. From my own conversations with Envestnet I know they saw Yodlee as the silver bullet to complement their impressive range of technology solutions for institutions and advisers. At the show they demonstrated a Financial Coach powered by Artificial Intelligence. Big data sets are invaluable when building AI so Yodlee being able to base their analysis on over 23 million users, accounting for $20 trillion spending, income and investment data provides a strong foundation. The financial coach monitors an individual’s spending, saving, borrowing and planning, and provides suitable guidance. The process begins by looking at an individual’s spending/income ratio and timeliness of bill payment. In the context of savings the service considers an individual’s provision for emergency funds and also their long-term savings plans. A traffic lights approach is taken to identifying situations where additional guidance would be beneficial based on mining the 70 billion transactions in their records. People like you analytics, geolocation, and discount offers can be used to identify potential savings. To me these are potentially powerful tools that could be used to build significant trust with customers, my only question is to what extent will they have been localised for UK use. If you are interested in understanding more about how Personal Financial Management can transform customer relationships in pensions, savings and wealth management see our new insight study, “Personal Financial Management- How to fix the UK’s Broken Relationship with Savings”
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