A sea change for transparency and trust

In some industries, there is a radical disconnect between what clients think they need, what they actually require and what their suppliers are prepared to give them.

Over the past decade, providers of financial services have been prepared to give clients what they think they need. Clients have accepted it and perhaps thought too little of what they truly required. The result in some quarters has been overselling, mis-selling, recrimination and chaos.

Some would argue the industry needs tub-thumping hell-raisers, outspoken demagogues who can deliver radical reform. In contrast, one group of entrepreneurs that is trying to lead us out of this mess is mildly spoken and self-effacing. They talk constantly of clients’ needs, rather than their own profits or outperformance. They try to listen to clients, and help clients listen to themselves. Their service model and the FSA’s TCF initiative are almost indistinguishable.

Ben Goss, founder and chief executive of fund software provider Distribution Technology, is one such stealthy adventurer. When you ask many businesspeople the challenges they faced when entering an industry, they recall sleepless nights, boardroom arguments, pressure from financiers, competition and unexpected emergencies. Mr Goss just presents a clean-cut, unsentimental CV.

The journey to founding Distribution Technology, he says, started at Coopers & Lybrand, where he worked as a strategy and marketing consultant. In 1998, he left to set up his own firm and sold it at the height of the dotcom boom to MPower, a major provider of asset allocation software in the US. Mr Goss ended up running MPower Europe, but despite his senior role he was not completely content in his new workplace.

“They had some very sophisticated models, but it was very clear they weren’t right for the UK. I wanted to create something advisers could use,” he says.

In 2003, Mr Goss left to do just that, and Distribution Technology was the result. One of the firm’s key aims was to distribute a definitive fund software solution for advisers. In a single package, advisers could assess clients’ goals in investing, their tolerance for risk and which assets would be most helpful in achieving those targets for them.

On the technical side, the software uses stochastic modelling to demonstrate the range of different outcomes from an asset class and the probability they will occur. Asset classes are assessed over 30 years of data, which is revised quarterly. The model also considers possible, as well as historical, outcomes. “Current market conditions fall within the bounds of what we expect,” Mr Goss says.

Despite some early resistance, he observes that advisers have come round to the idea. “At the turn of the century, only a few IFAs were using risk profiling tools. Now, more than 50 per cent use them. Over the past five years, we’ve seen a sea change in the way advisers analyse risk.”