Ian McKenna

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Ian McKenna last won the day on September 22 2015

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  1. Established in Sydney in 2013 and now also operating in the US and Europe, Practifi aims to deliver a new form of technology platform for advice businesses to run the whole organisation, not just part of it. This is a business management system that extends across an enterprise. Leveraging Salesforce as a platform for infrastructure and security, they have added 115 customer objects which can be deployed to meet a range of customer needs. The service is designed to accommodate multi-disciplinary practices that include estate planning and tax advice in addition to financial planning. The system can display a wide range of dashboards and provide a full perspective of all interactions an organisation is having with a client, a family, another extended group of related individuals or entities. It can also identify where multiple clients are supported by the same external third-parties. Wherever possible extensive summaries of key information are contained within a single screen but they can be viewed from multiple different perspectives. This is an end to end business management platform, it does not provide product speciality systems, such as portfolio management or financial planning, or for accountants an accounting platform, but delivers clients the ability to run every workflow across multiple different third party systems all in a single view. This is particularly beneficial for multi-disciplinary firms needed to use individual specialist systems. They can use Salesforce communities to build client portals for individual clients, but do not produce an off the shelf tool. The ideal client is a growth orientated firm who have either complex business themselves, supporting multiple disciplines, very complex processes where they need to bring together several third party systems, or complex clients such as those needed by a ultra high net worth or multi-family office. I am coming across an increasing number of situations where there is a need to connect different professional specialities within larger organisation works, in the second stances this may have much to offer. (written by Ian McKenna) Founded in 2010, the company have 700 clients live on their platform with close to $2 trillion in assets from firms with under $50 billion in assets, i.e. excluding some of their largest clients who include global banks and asset managers. InvestCloud have created over 300 different apps which can be combined to create a wide range of content, either as end-to-end solutions or as gap filling components to supply features and functionality which an organisation may not have in their native technology proposition. They will deliver as much or as little as a customer needs. You don’t have to take the full suite of their services. Prioritising design as a core competence means propositions can support different personas from the very digitally savvy to traditional analogue customers. Services range from client portals, adviser portals, digital on-boarding, financial planning and a wide range of other functions. It is worth looking at their periodic table of financial apps at investcloud.com to get a feel for the full range of options. If you look at the table it highlights InvestCloud expertise in Experience (InvestCloud Blue), Management (InvestCloud Orange) Analytics InvestCloud Black and Processing InvestCloud Green. All services are fully mobile optimised and tablet-enabled. This summer they acquired the rplan business set up by former Cofunds tech guru Andy Creak, who will be well known to anyone in the UK investment industry. This demo really only scratched the surface of what can be offered by the firm who are becoming and increasingly significant player. (written by Ian McKenna) Founded in 2016, Clearnomics is a report writing tool to provide advisers and wealth managers with detailed market and economic insights for their clients via desktop, mobile and tablet devices. Using a series of pre-programmed online questions, with bespoke customisation available, the adviser is able to select specific data items such as stock market and investment performance, which is of particular interest to the client, over a desired timeframe. This will automatically create a ‘chart book’ using a combination of their Intelligent Assistant and API feeds, which can be adviser-branded and saved to the client record for use as part of the advice process in order to save the adviser time in conducting their own lengthy research documents. (Written by Jason Green) Smartleaf is an automated rebalancing platform tool to improve efficiency and compliance for advisers. The company was founded in 1999 originally as a D2C offering many years before the term ‘robo’ was coined. In 2003 they gained their first Bank Trust client and the proposition seen today was developed. Smartleaf provides highly automated tax management, at scale, for any sized portfolio ranging from $100,000,000, open architecture UMA accounts, to $5 robo equity investments which in turn can save more in taxes on average than what is paid in fees. Distributing via three product channels, the service is used by over 1,000 advisers, TAMPs (Turn Key Asset Platforms) and robo clients. The number of end users has not been disclosed. Everyday each account is rebalanced using a series of filters and queries which select various accounts and trades. These filters are all set by the client so that Smartleaf can trade the required accounts when necessary. The system understands which accounts need to be traded and which don’t (such as unknown securities). This produces tax savings and reduces tracking errors in the portfolio and makes it more aligned to the client’s desired asset allocation and goals. Each trade which is suggested by Smartleaf is assigned a cost benefit score. This identifies the commissions and taxes (cost) and how much closer this trade will get the client to their chosen goal or targets (benefits). Portfolio health check reports for advisers are also produced to give to clients which demonstrate the savings made via the tax optimisation. The average taxes saved for accounts managed on Smartleaf last year was 1.60% of portfolio value, which is more than most adviser fees. (Written by Jason Green)
  2. At the first main session of the opening day of Invest West 2018, Suleman Din, technology editor of Financial Planning magazine had a fireside chat with Personal Capital CEO Jay Shah on how the company is progressing. This provided a fascinating snapshot of perhaps the most successful hybrid advice firm operating today. Shah highlighted that the firm has been a hybrid adviser from the start. Beginning in San Francisco, where I remember my first meeting with Shah and Personal Capital founder Bill Harris back in 2012, in an office that was still being built around us while we talked. Since then the firm has reported +50% growth every year and now has in excess of $8 billion assets under advice. The business is growing in multiple locations, with hubs in Dallas and Atlanta having recently been added to the Denver base which opened in 2013. Shah says while they deliver virtually, the strategy is based on being in customers different time zones, not building a bricks and mortar network, which he identifies as a significant unnecessary cost that would ultimately be passed on to the customer. The new locations have been selected as areas where they have found a rich pool of adviser talent. Typically they communicate with their clients by video, using screen sharing, rather than in-person meetings, which the firm finds their clients would rather avoid. This strategy has seen a 130% increase in assets since the start of 2017. Theirs is a mass affluent service to support consumers who have a compelling need for advice. The vast majority of the company’s relationships are advisory, although consumers can still access their free app and use it themselves to aggregate their finances and take their own decisions. The software can build a cash-flow for households and help them identify their savings and investment goals. The average client is in the mid $400,000 range. This is right in the middle of the mass affluent asset space, which Shah described as $100,000 to $5,000,000 investable assets representing 28% of American consumers and totaling 60% of investable assets in the US. Shah is clearly proud of the 90% retention rate the firm has achieved, pointing out that consumers vote with their wallets if they believe your story, and their feet if they do not. Having moved from 0 to $8 billion assets in just six years Personal Capital must represent one of, if not the, most successful hybrid advice models in the market.
  3. How should an advisor with a fiduciary duty to their clients’ address client’s who no longer fit within the optimal client profile of the advisor firm? Facet Wealth has created a novel way to help advisor firms with clients who are no longer in their core customer segment by buying part of a firm’s book so the vendor can focus on growing their core target audience. Facet was established early 2016 when co-founder Anders Jones was motivated to find a solution to help the 8 million households who would potentially lose their advisor had the DOL rule proceeded. Using proprietary technology including artificial intelligence the firm aims to reduce costs and make advisors more efficient. They targeting mass affluent customers rather than high net worth. Advisors working for Facet are not asked to sell but their bonus is based on client satisfaction and similar measures. The firm currently have nine advisors and expect to be at twelve by the end of the year. They have low hundreds of clients who have fully transitioned and around another 1,000 in process of transition. The firm does not have a bricks and mortar presence but works virtually. Fidato Wealth are an example of a firm who have transferred clients to Facet. During the last year Fidato identified that their ideal client is an individual who is not retired yet, in the 50-60 year bracket with a net wealth of over $1,000,000, and business owners within three years of an exit event. In assessing their optimal clients’, the firm also recognised that as a fiduciary they had a duty to identify to clients when they were no longer the right advisor for them. They have migrated two groups of clients away over the last year. The first were moved across to a retail branch of TD Ameritrade as they had not yet come across Facet at that time. Fidato recognised that each advisor can only handle so many households, they also looked at if they should create an in-house robo but felt that would take away and dilute the brand. The second group of clients they transitioned away they moved to Facet, a dedicated CFP who will provide them with a full financial plan. The latter group of clients who were transitioned away actually saved money on their fees. Facet see their target audience as the 33-million mass affluent households in the US, defined as $100,000 to $1,000,000 investable assets, excluding home equity. They have also identified that there are approximately 8 million households in the US who have a relationship with an advisor where that relationship is not profitable for the advisor. If a client grows above $1,000,000 Facet will send them back to the firm they came from. Facet use Pershing, Schwab and TD as custodians and are adding Fidelity. Fidato found their clients were happier that, while moving away, they were able to stay with the same custodian. Facet have already entered into about 20 partnerships and raised $33 million of funding in September. While an advisor who hold physical meetings typically have 75 clients, Facet advisors look after 300 each. The philosophy is to use technology including AI to reduce the three hours of admin an advisor typically undertakes for every one hour they spend with clients down to virtually zero through the use of their proprietary technology. This form of part-sale partnership is certainly a fascinating model and would appear a far better option than simply turning away unprofitable clients.
  4. 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.
  5. 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”
  6. This week I am in New York for the opportunity to see the very latest wealth technology innovations and to hear from several of the industry leaders who are transforming the way Americans access financial advice. Now in its third year, the In|Vest conference provides a heady mix of powerful tech demonstrations and exceptional thought leadership. For me the big message on day one of the show was machine learning and artificial intelligence is now part of the emerging landscape. In what follows I will highlight some of the early leaders. The volume of these offerings on display makes me feel the US may again be pulling ahead of the UK in FinTech and especially WealthTech. After a brief opening where Salesforce highlighted that their forthcoming 2017 Connected Investor research will identify that 47% of investors would be happy for artificial intelligence to used by their wealth management firm the day began with a whirlwind of demos of disruptive technologies. The videos of these will be up on the In|Vest website at http://conference.financial-planning.com/conferences/invest/ in a few weeks but in the meantime here are my highlights. First up was Salesforce with their Financial Services Cloud providing great visualisation of relationships, interactions and delivering insight. It is clear from the number of integrations Financial Services has in the US that the American proposition is a long way ahead of their UK offering but this does give an indication of where Salesforce may be in the UK in a couple of years. That said while the system can offer some awesome integration of consumer data I wonder how much of this would be allowed in Europe post the introduction of GDPR next May. This makes me wonder if the European Union and Fintech are on a collision course. I am increasingly worried that the excesses of GDPR and the EU’s inability to produce timely regulation could seriously damage the EU Fintech industry. Robert Stanich of IBM Watson showed how machine learning can identify clients at risk of leaving and how using artificial intelligence can transform client segmentation all beyond recognition. The service can also predict real life events and related product opportunities before your clients realise they have these needs. Watson has the potential to transform lead management so your existing data becomes your primary source of new business opportunities. Oranj showed a great onboarding experience with held-away data and risk profiling but fell foul of the eight-minute rule so ran out of time to show their full services. Comarch showed a very cool voice-controlled interactive artificial intelligence chatbot called Devra. Advicent showed great life protection tools they have built which makes me wonder why the cool omnichannel protection service they built for Scottish Widows never saw the light of day. An opportunity missed. MX then arrived to show why they do aggregation, categorisation and user interfaces for Personal Financial Management better than anyone else in the world. It is a great shame they don’t want to come to the UK as they have so much business in the States. Circle Black, a company that is entirely new to me, showed a stunning client facing tool set with API integration into Redtail, MoneyGuidePro, Riskalyze and many more. Fidelity owned eMoneyAdvisor showed new marketing tools advisers can adopt to transform the way they use and manage social media and then onboard the resulting new clients. I continue to believe there would be huge benefits in Fidelity bringing their offerings to the UK. InvestCloud showed some of the over 200 Apps their adviser clients can use. I love the vast amount of data they are making easily available to their users and the virtually endless look, feel and design features advisers can adapt. They are featured in the next update of F&TRC’s Adviser Software Insights study and have just set up an innovation centre in London so I will probably be looking at them in far more detail soon. Riskalyze describe their role as protecting consumers against their worst decisions. I am a big fan of how they present risk to clients. To me it is so much better than stochastic pods. This is all about talking to clients in ways they understand. Their Autopilot approach with its One-Click Fiduciary makes a great case for the FCA reviewing the UK client money rules as it can offer better consumer outcomes at significantly lower cost. One of the biggest moments of the day for me was Hello Wallet founder Matt Fellowes, the man who transformed financial wellness presenting his United Income business which aims to transform retirement income. This makes it beautifully simple to understand how clients are doing then build and achieve financial life goals. It is great to see United Income building plans taking consumers to +100 years stretching savings to match increased longevity. I was also impressed by DataRobot who are delivering a quick way to benefit from artificial intelligence, something I believe advisers can make huge gains by embracing Onist were one of my favourites from Finovate Spring and it is great to see them at In|Vest with their Family Office for the masses. I would love to see some of the artificial intelligence tools shown here added to Onist. The afternoon session was opened by one of the most compelling speakers in the US advice market, United Capital ‘s Joe Duran. Outlining why advice firms need to be both extremely human and extremely digital, whilst insisting that the planning process can be fully digitized, he argued humans need to do to things machines cannot i.e. provide empathy, understand human behavior and provide expertise and judgment to help with complex decisions. Charles Schwab CTO Timothy Heier pointed out we are no longer in mobile first phase, now it must be artificial intelligence first. This shows the era of AI in financial advice is now upon us. Mark Goines from Personal Capital highlighted that 65% of people who ever linked an account are still connected to them because they give them constant updates of good insights. He was followed by Bill Crager of Envestnet, who own Yodlee, who believes that a key component of building advice relationships with clients in the future is about giving consumers an integrated financial plan updated every day. This will actually provide a very gamified experience and I can see how it would have a similar effect to social media, we all want our regular fix of information and can’t resist looking at it regularly. These will bring together consumers short term and long term financial lives with information they want to access regularly. Crager sees artificial intelligence delivering answers to financial questions based on the data the adviser will have aggregated via these services. These last two issues are very relevant to the challenges that will emerge as banks re-enter the financial advice market which I will be exploring in my Money Marketing column next week. Through an invigorating and exhausting day the consistent message was we now need to start complimenting traditional advice services with unparalleled data and artificial intelligence to deliver a superior customer experience. This has been a quick canter through my highlights of day one of In|Vest I will try and add more detail from my notes over the next week or so, so please revisit this page for an updated view. I will report on the second day of the event soon.
  7. For me the outstanding demonstrations of the second day came from companies who were really throwing down the gauntlet to challenge conventional thinking and showing services that could transform major parts of the financial services industry in a very few years. These almost all focused on making more use of non-traditional forms of data to improve customer services, outcomes and achieve greater profitability. When considering these in this context it is important to recognise that Finovate rules preclude firms showing vapourware service that are not yet built. While many offerings presented are still in their early stages slides and videos are prohibited, you have to show real software. From the perspective of most traditional financial advisors the session from Hedgeable AI will be the proposition they will consider most controversial. Co-founder Matt Kane predicted that we will not need financial advisors for most of their current tasks within a few years. While presenting his artificial intelligence bot Katana he said he believes this will be capable of doing anything a financial advisor can do. As part of the presentation Kane referenced a recent study identifying that as many as 61% of all jobs in the US financial service industry could be replaced by bots. Speaking to CTO Sid Sharma after the show he suggests you don't need advisors to do most of what they do right now, but accepts they are needed for more complicated stuff, “not for things like to checking to see if you are on target to meet your goals or selecting portfolios”. He identifies that “trust needs to be established but who said it had to be by a human”. At this point I suspect that there will be some readers of this blog on the verge of cardiac arrest. My own perspective is that while eventually I do see financial planning and advice as services that within a couple of decades will be fully automated, and indeed virtually invisible I believe that point is at least a decade and a half away. However, when you see what Hedgeable have achieved the timeline does become questionable. In the demo Hedgeable showed the bot identifying the maximum level of contribution a person could make to an IRA and the sources from which funds can be taken to pay such contribution. It could also present information to consumers to alleviate customer concerns if the market turns downwards. Perhaps the most sophisticated solution they showed was the ability of Katana to use personal financial management aggregation to examine an individual’s monthly expenditure and identify savings they could achieve in order to have money they could invest. It might be tempting to dismiss Kane’s views, but having spent a couple of hours with his Co-founder and brother Mike together with Sid Sharma in London recently looking at their technology stack, Kane deserves to be listened to. Using the experience they have gathered over the last six years involving tens of thousands of web chats and combining them with artificial intelligence the company can understand customer behaviour in ways most advisors and financial institutions can only dream of. They can provide a far better understanding of on-boarding, customer retention and support needs. By understanding how much money people will bring with them companies can improve the targeting of offers relating to what customers want. Equally they can identify the behaviour that might mean a customer might be likely to leave and how much support they will need to keep them happy. This can enable organisations to plan resources for more effectively and where practical take cost out of call centres and other functions. Another hugely impressive presentation came from Brian Lay the CEO of Alpha Rank who created social graphs to help businesses understand the key influencers of their customers. This involves the data that is considered to be the most valuable element of social media services like Facebook Twitter and LinkedIn. Apparently until 2012 Facebook disclosed this information with third parties however it has subsequently been decided to be too valuable to share. Understanding these social graphics can enable businesses to predict when customers might be likely to leave and take preventative action. The same techniques have been used highly successfully in the mobile phone industry with T-Mobile reducing its attrition rates by 50% in a single quarter. In financial services the company will take 2 to 3 years of banking data, analyse it and provide maps back to their clients’ so they can understand who the crucial influencers are who drives behaviour amongst other customers. The service focuses on off-line word of mouth recommendations which account for 93% of such conversations. By definition being off-line these are the hardest to measure but Ley identifies them as the most valuable form of endorsement. The service does not yet currently use social media data but this is seen as a natural further development. One company already making very creative use of social media data Neener Analytics primarily focused on the lending industry and improving their underwriting decisions the service can also be used to improve insurance risk decisions. In each instance services are intended to compliment rather than replace processes. The service is currently built around the data that can be extracted by consumers’ giving permission to access their Facebook, Linkedin and Twitter accounts and can be particularly valuable when trying to assess people who have a poor credit score simply because they have not previously used much credit. One major attraction is that the customer only has to give a single click consent to access this data and the service conducts the rest of the analysis. While the company are prioritising credit and insurance risk talking to founder and CEO Jeff LoCastro I couldn’t help but be drawn to question how much such a service could be used to conduct attitude to risk assessments. This might be particularly useful in areas such as auto enrolment where savers will have had little experience or risk profiling and may find a single click approach more appealing as a process. Current risk profiling techniques do leave much to be desired and are an area where an improved customer experience might be very valuable. Finally I want to give a mention to Horizn who really impressed me with their gamification of training services that can be used with either internal staff or customers to encourage them to learn how to get the best out of new technology services. The platform provides training content with badges and reward points offered to users’ who complete brief online courses on how to use digital services. Failure of staff to engage with and embrace technology training is one of the primary reasons that projects fail to deliver their intended return on investment. Providing reward through this platform could easily become a self funding proposition by increasing the successful adoption of technology. Although initially designed for internal staff one major bank has recently made the service available to 16 million of its customers. I can immediately think of several ways in which this could be used within the life and pensions industry to help staff make more use of technology provided but also to provide valuable additional support to customers. Notably, and I would say very deservedly, both Hedgeable AI and Alpha Rank won prestigious "best in show" awards. Arguably the biggest story from this Finovate event are the changes being made to their future shows. From the September show in New York Finovate is now a four-day event with the initial two days of seventy plus seven minute demos supplemented by two days for detailed meetings and analysis. In addition elements of the shows will now be streamed so that it will be possible to focus on specific areas of interest. Both of these are really worthwhile changes. Having personally attended some 14 Finovate shows around the world I have always found them time well spent but these additional changes will make them even more valuable.
  8. The first day of this year’s Finovate Spring left me thinking I had witnessed a real lesson in how technology can extend financial inclusion to a level many traditional advice firms may consider inconceivable. The west coast Finovate show is always the one where you see the wackiest ideas, but it is also the event that stretches creative thinking the most, making it well worth traveling eight time zones. In one day I witnessed technology that can make profitable lending practical to people who might normally be declined based on all normal credit assessments. Into the bargain I had sight of the sort of service that could replace traditional investment platforms delivering a far more personalised service to consumers at a fraction of the cost in just a few years. To cap it all I saw how services usually reserved for those who can afford to spend $1,000,000 a year or more on their financial advice and private office fees can be accessible to mere high net worth families. Ironically one of the presenters are actually based at Euston Tower on the Euston Road, about two miles from F&TRC’s offices in Islington. AccountScore are a British start-up spun out of Safety Net Credit. Five years ago Safety Net started taking banking data extracted using a Yodlee aggregation feed and enhanced the categorisation of the data to provide detailed insights into the ability of borrowers to meet credit obligations. The service is not intended to replace traditional credit references but to compliment them. It provides a far more personal analysis of the individual’s ability to pay. The new business is now providing this service to other lenders. Their service is designed to enhance underwriting decisions for debt management, high-cost short-term credit, guarantor, and second charge lending as well as traditional first charge mortgage lending. This can include both loans to SMEs as well as private individuals. The key element of Accounts Score’s process is that they take the last 90 days banking data and categorise it in far greater detail than from a standard Yodlee fee. This enables them to clearly identify specific behaviours such as possible loss of income e.g. if the salary has not arrived on a regular date, missed financial transactions and returned direct debits. In addition the company can identify where job seekers allowance or similar benefits are being claimed and even if there is an online gambling habit. This not only enhances new loan underwriting, but can be used as a technique to monitor the financial health of existing customers. It can enable lenders to make offers when they might decline and help them recognise when granting further credit is not in the borrower’s interest. Given the current regulatory focus on forgiveness it can provide crucial insights into borrowers’ on the verge of serious difficulties. AccountScore launched in the UK last September, have opened an office in India and were launching their US operation at Finovate yesterday. Overall their proposition is designed to enhance affordability assessment, improve credit decisions, enable better customer management and account repairment management whilst at the same time identifying vulnerable or distressed consumers where forbearance may be appropriate. It is easy to see how this approach could deliver huge benefits to consumers and lenders as well as addressing an area that the FCA are very focused on currently. Hedg are a really interesting example of what may be the shape of the sort of services that will replace platforms in a few years’ time. Not everyone agrees with me that the UK platform model is terminally broken, but with the real consumer value increasingly being recognised as in financial planning, rather than asset management or product wrappers serious price compression is about to take its toll on each of these elements so it’s the organisations who can help advisors add value to client relationships who will come to the fore. That Hedg provide highly personalised investment solutions for just 25 bps helps demonstrate the further downwards pressure such services will put on platform pricing. Company founder Bob Rutherford is particularly scathing of most robo advisors suggesting they do not provide adequate personalisation and tend to bundle too many clients together by using only a small range of portfolios. The Hedg answer to this has been to build a business which is designed to create opportunities for established financial advisors to identify new, younger clients and deliver ways in which they can interact with those clients at low cost digitally before they are viable for a traditional face to face service. This digital advice service is specifically targeted at traditional advisors who want to reach Generation X and millennials. In their on-boarding process Hedg capture far greater details of personal preferences around investment styles, ethical constraints and other personal tastes designed to support service where advisors can build specific investment structures using the Hedg platform to buy into markets for indices but with specific investment types removed. The advisor firms put content on the Hedg platform outlining their specialist areas of operation and experience giving potential clients the opportunity to select the advisors they feel the greatest affinity for. Advisors pay for putting content on the Hedg platform and a success fee when they attract a client. Hedg are now partnering with US advice software suppliers to reach a wide range of advisors. This a very different approach to the way Unbiased and VouchedFor work in the UK. Not all of the elements of this platform could be easily adapted to the UK regulatory environment nonetheless I find it a very refreshing approach particularly the split economic model where part of the charges are paid by consumers but these are supplemented by payments from advisors looking to attract new clients. Onist Technologies showed how there are still plenty of ways in which the Personal Financial Management concept can be extended demonstrating a multi-disciplinary virtual private office service that can allow a wide range of professional advisors to collaborate to support clients through a virtual private office service where wealth advisors, insurance specialists, tax and legal professionals could all share information and deliver a range of solutions via a single service. Typically this level of integrated advice is usually the preserve of families whose wealth can be measured in many tens of millions. Their service however could be deployed so typical IFA clients might benefit. I could see such an arrangement working really well in towns where a range of local professionals frequently serve the same clients. This provides the client with an enhanced portal service where different members of the family can access information and could be a very effective way for advisors to protect against the loss of assets which so frequently occurs when wealth is transferred across generations. Various studies suggest that between 80% and 95% of children aim too fire their parent’s advisors and there are similar numbers involved when husbands die and wives take over. Onist is available either as a direct to consumer proposition or via professional firms who host the software. To accommodate such firms the company are in the process of building a range of API integrations with more traditional advice software. I see this as a critical success factor. This highlights how APIs can facilitate levels of integration that would have been unthinkable just a few years ago. The services are also targeted at financial institutions who wish to offer a private office type service to clients for whom it would not normally be economically viable to. Although in the UK Personal Financial Management has not been as widely adopted as in the US it's rare to see true innovation in this space. Onist deserve considerable credit for creating an environment that will enable diverse
  9. After the frantic pace of day one, T3 became more reflective during its second day. A range of key industry thought leaders provided challenge and analysis that put many of the previous day's announcements in suitable context. What follows is a summary of just a few of the key messages and insights shared. The tone was set by industry veteran Bob Veres www.bobveres.com @Bobveres. Clearly unafraid of challenging conventional wisdom Veres began by pointing out that growth in the investment industry is stalling as planners are failing to build models and services that are attractive to millennials. He highlighted that frequently those who were most innovative in the 1980s and 90s have become the main constraint on change in their businesses today, particularly by failing to listen to young people within their firms. Older advisors were encouraged not to try and design services for younger consumers themselves, but to give their young colleagues the challenge of building solutions for their own generation of customers. Returning to what has become a recurring theme at T3 he compared traditional client on-boarding procedures to a root canal operation and highlighted the importance of adapting customer interaction to align with changing day-to-day behaviour, for example replacing a quarterly one hour face-to-face meeting with more regular five-minute Skype conversations. Later in the day Ian Sheridan from Vestigo Ventures www.vestigoventures.com @VestigoVentures and Andy Putterman from 1812 Park @1812Park ran a similarly challenging session looking at issues firms need to consider if they are to be successful in servicing customers in 2025. Sheridan highlighting his considerable experience with preference algorithms and big data, explained how by monitoring vast amounts of data (4 billion lines of code 20 million interactions and 720 million profiles a day) customer behaviour can be accurately predicted and so facilitate the design of highly personalised solutions. Putterman challenged advisors who may be tempted to ignore millennials as clients today, because of their lack of investable assets, to find different operating models as by the time young customers have accumulated the assets advisors seek, millennials will also have found other advisors. Delegates were encouraged to build relationships with customers while they have debt, to build loyalty for the future when they will have accumulated savings. During the day I also had a chance to take in a number of demonstrations. Tolerisk www.tolerisk.com @tolerisk presented a standalone risk profile link proposition that includes capacity for loss analysis; something which usually needs to be addressed by a separate cash flow analysis. They are a relatively new player but well worth a look. I spent some time with Steve Ambuul of Asset-Map www.asset-map.com @AssetMapLLC who have an attractively simple interface for helping focus clients around key decisions they need to take. Good stuff. Similarly Edward Dressel www.asktrak.com @ask_TRAK of Trust Builders provided me with an overview of their 401k and 403b illustration tools which are also worth exploring. The standout presentation of the day for me came from Jason Gordo of FinLife Partners www.finlifepartners.com the standalone white label software solution that is part of United Capital www.unitedcp.com @United_Capital. I’ve known Jason since his days at Flexscore (www.flexscore.com) and always found him to be a true innovator when it comes to creating simple solutions which help customers address key decisions. In this session he suggested that in the future firms will be valued by “information under management” rather than assets. Finlife’s software which can be found at www.findyourmoneymind.com is a delightful gamification tool. It aims to build an “Honest Conversation” with the customer and encourages clients to focus on their real priorities and particularly identify where couples may have different priorities. Gordo says it aims to be “At the intersection where life and money meet. Enabling customers to have clarity confidence and control over their financial life.” This is really all about building an understanding of consumers real priorities, delivering financial advice as something that touches their day-to-day lives in a way clients' understand and are comfortable with, rather than talking at consumers using a language they don’t understand. In my experience all too often financial advisors become so bound up in what they consider fascinating, it’s all too easy to leave the client confused. Honest Conversations takes financial advice back to basics and is clearly a very powerful tool for building trust. Although just one part of the FinLife Partners offering it is well worth a detailed look. So those are the highlights of my second day of T3 2017; I hope they are helpful.
  10. The first full morning of T3 2017 saw a cacophony of announcements worthy of the opening 30 minutes of Saving Private Ryan. The morning seemed to encompass an endless stream of outstanding product innovation and stunning research conclusions, making a clear case for a very different future for how financial advice is delivered. Many of these warrant extensive analysis in their own right but I'll try and keep this summary concise and readable and focus on the highlights. First up Riskalyse presented their new Premier product with a whole range of additional features including Client Dashboards, Retirement Plans, Account Opening and Data Sharing. If US advisors are anything like their British counterparts some may bulk at the $245 per advisor per month charge for a system that will still need to be complemented by several other external components, however, when one looks at the level of automation that Riskalyse Premier can offer it should be possible to recoup the monthly cost from the time-saving in managing just a couple of clients. To me this begs the question what should a realistic budget be for an advisor on a monthly basis to fully address their technology needs. Given the significant evidence presented in Joel Bruckenstein and Mark Bruno’s presentation the day before and various other sources, such as Fidelity, that eAdvisors achieve higher AUM, profitability and perhaps most importantly job satisfaction such additional expenditure should probably be considered money well spent. CEO Aaron Klein then proceeded to sets out his vision for the future of advice being driven by automated account platforms providing advisers with the opportunity to deliver high levels of automation and personalisation. The Riskalyse solution to this issue is their new automated account platform with one click fiduciary technology embedded within the process. This will be delivered as the next part of the next generation of their autopilot service. A series of partners will be available in an Autopilot store including Blackrock, SEI and Morningstar. The service will include powerful capability for advisors to white label third-party investment strategies and if they wish modify them to suit their own preferred recommendations. Clients’ portfolios can then be reviewed and automatically rebalanced in only a few minutes with a full audit trail. The new autopilot service will be available from May with pricing starting from 15 bps, but reducing to 10 bps for most advisors. Next up Advicent presented their latest enhancements to Naviplan including a new Plan Analysis Synopsis client report and a range of enhanced integrations including Quovo custodian feeds. Product manager George Fisher stressed the importance of using full financial aggregation to deliver a comprehensive customer experience. This was a recurring theme from many speakers and it appears that the American advice industry has recognised how powerful such services can be as a consumer engagement tool at a time when so many in the UK is still struggle with this concept. MoneyGuide Pro’s Kevin Krull opened his presentation by putting forward research which seriously challenges much of the conventional wisdom in the financial advice market. Having conducted biometric testing with real consumers the company identified that clients in the 50 to 70 year age group actually prefer virtual meetings with advisors over in person discussions. Full results from this research are to be published in the near future but earlier messages identified a range of reasons why consumers actually responded more positively to virtual advice sessions resulting in significantly larger levels of asset capture by advisors. This obviously supports the actions of the 83% of advisors who it had been identified the previous day now use video conferencing as part of their internal or client communications. Compelling case studies were also presented for the myMoneyGuide service where advisors can offer clients the opportunity to visit the myMoneyGuide lab, complete an online fact find and receive and interim financial planning report which they are encouraged to review with that advisor. One firm succeeded in guiding 123 into the lab process from a single newsletter in just four days creating new investment opportunities worth over $100 million. In a slightly longer campaign over 18 days another firm attracted 321 clients representing investment opportunities totalling $265 million with an average account size of $913,000. There will be many financial advisors who will be horrified by even the suggestion that rather than conduct their initial fact-finding in person with the client they should guide them towards an online service to supply their initial information, never mind an initial analysis being automatically generated, however the scope of such opportunities is clearly significant. In the UK context I can see significant regulatory challenges arising from the type of auto rebalancing advocated by the Riskalyse and MyMoneyGuide Pro approach to fact-finding and initial analysis. That said, it’s not hard to see how there are considerable consumer benefits to such an approach with enormous potential to drive down the cost of advice. When one also considers the scientific evidence that consumers prefer this approach perhaps it is time to revisit the status quo. Such services would appear ideal for being considered by the FCA’s advice unit where firms are invited to work with the regulator to test if new processes deliver significant consumer benefit and warrant regulatory change. Given the demand for advice services in the UK is now seen as exceeding supply there may be compelling arguments for considering regulatory change in the interests of consumers. eMoney Advisor began their presentation by highlighting that RIAs who have integrated technology within their businesses typically achieve a 20% higher income, spent 32% less time on operational processes and 29% more time on client management as well as serving 15% more clients overall. They also highlighted that younger Americans are far more likely to be willing to pay for advice with 79% of those between 30 and 39 being willing to do so compared with only 44% of over 50s. The company then went on to present not only an exceptional set of tools to improve customer acquisition processes as well as machine and data analytics capability to enable advisors to validate the quality of the data from a compliance perspective. eMoney Advisor really pushed the boundaries of demonstrating what could be achieved using leading edge technology including a prototype of Amazon Alexa to obtain information from a financial advisor. They also outlined their plans to add virtual reality tools to the next generation of their software. I subsequently had the opportunity to experience the prototype service which delivers a stunning experience. Imagine receiving financial advice on the holodeck of the Starship Enterprise and you won’t be too far away. This service really needs to be experienced to be understood. Since 2014 Fidelity have been conducting extensive research to identify differences between advisors who have embraced technology and other firms. SVP Product Management Tom McCarthy presented an updated view of this research based on a further round in 2016. Overall so-called e-advisors have 42% higher AUM, 34% higher AUAM per client and earn 23% more. 80% of the advisors believe their online strategy is more important than other firm initiatives. The company highlighted their extensive additional commitment to enhancing their own technology to support advisors and improve on-boarding experiences for their Wealthscape service. All of this is great from the perspective of American advisors but I can’t help feeling that Fidelity’s UK operation is seriously letting down UK IFAs by any sensible comparison. In the afternoon Dave Welling Co-General Manager of SS&C Advent highlighted changing consumer behaviour especially amongst wealthier clients which is driving them more towards digital advisors. Whilst more traditional firms are embracing robo advice this appears to still not be keeping up with wealthy consumer appetite for such services. He highlighted analysis identifying that investment clients are far more likely to leave advisors because of the lack of timely contact than the performance of investments. Welling also provided a very practical demonstration of the inefficiencies of face-to-face advice highlighting the extent of travel time necessary for an in-person meeting which can be entirely avoidable through screen sharing. Consistently through the day each of the above companies has demonstrated powerful technology to support advisors and liberate them to spend more time focusing on engaging with customers. It was impossible not to be impressed by the commitment of each firm to deliver to their clients the capability to transform financial advice processes, improve customer services and meet increasingly demanding compliance processes. Overall the day convinced me that with the right use of technology it is possible to enable traditional advice firms to support far more customers with the help and advice they need at far lower cost whilst at the same time increasing profits.
  11. This week's Technology Tools for Today conference in Orange County California got off to a great start yesterday afternoon with outstanding presentations from conference host and all round US advisor tech guru Joel Bruckenstein and Investment News associate publisher Mark Bruno each presenting key findings from recent research on the use of technology by American advisors. Bruno kicked off the session with a summary of key findings from the Investment News 2017 advisor technology survey. This is the latest iteration of the biannual study which the company has been conducting since 2011 giving them the ability to provide useful comparisons with previous years, indicate trends, and areas of growth or decline. Nearly 300 firms responded to what is an exhaustive questionnaire taking nearly an hour to complete. It even goes into the firm's financials so gives a good indication of what successful firms are doing. Typically respondents benefit from higher than average revenues and margins. Overall the report identifies that whilst advisor technology spending continues to increase it may be beginning to level out or perhaps reaching a point of maturity. Whilst the amount advisors spent year on year on software has significantly increased, hardware spending has hardly altered over the last few years. There is however an increased willingness for advisors to pay for external third-party support to successfully implement technology. I find this a stark contrast to the UK perhaps indicating why US advisors are more advanced in their IT adoption. The main growth areas Identified in the latest study are compliance and document management services, this is understandable against the background of the US Department of Labour Fiduciary which was due to take effect from April, although there are indications that the Trump administration may push this back. Similar to the pre-RDR mood in the UK most US advisors are resistant to the change however it’s notable that many more forward thinking independent RIA see the higher professional standards as an opportunity to differentiate themselves to clients. Generally these firms have seen their role as acting in the client's interest so the proposed changes are seen by many as less of a challenge. For the first time the latest study includes the use of risk management tools which just over a third of firms surveyed are now using. Although current regulatory requirements in the US are nowhere near as stringent as the FCA Suitability requirements, it’s clear there is an increasing focus on risk profilIng with some very impressive solutions being demonstrated by some suppliers at T3. The main driver for firms making IT investment is identified as catalysing new and emerging technologies. A strong focus on workflow is recognised which may also be influenced by the move towards higher regulatory obligations. When assessing their investment a firm’s most important measure is seen as the extent to which systems free up professionals time to focus on other activities. 78% of the firms surveyed have now deployed client portals and 60% of their clients typically visit these services once or more per month. This is a powerful indicator of the appetite amongst consumers for personalised online financial information. Advisors see the main two benefits of client portals as providing portfolio performance reporting and account aggregation, which allows the reporting of assets not managed by their firms. No fewer than 83% of those surveyed to use video conferencing software to communicate internally or with clients on a regular basis. Although still limited 7% of these advice firms now offer Robo advice type services with a further 19% planning to roll them out in the next 6 to 12 months. The primary motivation for such development, cited by 70% of firms is a desire to attract new types of customers with the implication being that these would be lower value accounts who would be uneconomic for full-service traditional advice. The sources firms are turning to in order to offer Robo technology are fairly evenly split, third-party software suppliers (32%) are most popular. Broker-dealers and custodians or both are the source for 24% of firms with 18% seeking to build in- house. This seems a high figure given creating technology is unlikely to be a specialist skill for most firms. Only 2% of advisors will source their Robo solution from asset managers demonstrating the increasing risk that asset firms will be locked out of the digital future. Joel Bruckenstein’s presentation of research he had conducted began by highlighting the stark risks around data, particularly that the client is the weakest link. Only 11% of consumers were identified as “very aware” of the risks associated with data security. Chillingly Bruckenstein pointed out that only 2.9% of advice firms believe they have suffered a successful security attack in the last year; some cyber experts believe 100% of firms will have been victims of successful attacks. There is a stark contrast here with the UK. At least in America these issues are being actively discussed by advisors, in the UK such conversations are virtually non-existent. It must only be a matter of time before the FCA acts to enforce data security standards on firms. I hope our industry can start addressing such issues urgently otherwise the consequences for firms could be grave. On a positive note it was identified that technology decisions are increasingly being taken by younger people within advice firms, a trend seen as encouraging as these will be technology natives with greater understanding of the potential of such investment. Financial planning software is clearly seen as the technology that delivers the greatest return on investment for advisors. Just over 20% of firms identified this as the most profitable technology investment, increasing to nearly 25% for independent RIAs. CRM systems are the next most popular for delivering a positive return. A residual 12½% of firms are still not using CRM. The survey also asked the percentage of firms about clients who are 40 or younger. In nearly 2/3 of firms this is less than 25%. Joel Bruckenstein warned that firms who are not growing their younger customers are in fact dying. The two presentations provided a great backdrop for the coming days' demonstrations, lessons and key points from which will appear on this site soon. You can follow Joel on Twitter @FinTechie and Mark @brunz99 The Investment News Adviser Technology study can be ordered from: https://home.investmentnews.com/clickshare/selectItems.do?CSCategory=rpts17&utm_source=marketing&utm_medium=display&utm_campaign=inmktg-techstudy20170214-presale-email&CSPTrack=inmktg-techstudy20170214-presale-email&utm_visit=317113 A link to Joel Bruckenstein’s research will appear here soon so please check back. I’m at T3 until Friday evening looking for subjects for Money Marketing, Corporate Advisor and of course DigitalWealthInsights.com. If you are a Technology Supplier with a great story to tell, an advisor with a view on technology or you want to learn more about how the Digital Wealth and Adviser Software markets are evolving in the UK feel free to message me via the T3 app or LinkedIn You can follow me on Twitter @ianmckennaftrc