As I write this, we are 11 days into 2016, so let’s recap on the year so far. The safe booze limit has been cut to something most Scots would recognise best as a pre-game ‘sharpener’; Lemmy has been stuck under the turf; everywhere is soaking; and David Bowie died today.
All in all, I think I’ll have 2015 back, if it’s all the same to you.
But I can’t, of course I can’t, so let’s plough forward with reckless abandon into the dense haar (a thick sea fog that delays your flights into and out of Edinburgh) that is 2016 and try to work out what technology might have in store for us all.
It is certainly true that financial technology, or fintech, is having a moment, and many bearded types in Shoreditch are shuttering their cereal cafes, pausing on the pulled pork and turning instead to artisan-made fintech startups. It is all very fascinating, but as I have suggested in previous issues, little of it is directly relevant to the life of an adviser. New payment systems, crypto-currencies, microinsurance and money transfer protocols are great, but tough to fit into a suitability letter.
Nonetheless, at the risk of looking (even more of) a tosser at the end of this year, I suspect we will see a few interesting advances. Some of the componentry developed by the start-ups may make it into real life – particularly around data integration and identity verification. None of these will change the world, but anything that reduces the need for Typing Stuff In is good.
Touting for business
You will find more providers touting for your business in the clumsily titled ‘Business To Business To Customer’ (B2B2C) space. In a nutshell, this will see platform providers hacking their online journeys about to allow you to offer either a branded simplified advice or execution-only service to your clients, which includes an income stream for you. The undisputed king of this is Parmenion, now owned by Aberdeen, which powers Fiver-a-day, Wealth Horizon and others.
Old Mutual also has an offering, which was quietly launched last year; it is mainly an in-house thing at the moment but could certainly be retooled to take on Parmenion. We know of three other providers who are in various stages of build with similar propositions, and there will be more besides.
All of these will get lots of airtime, and be very satisfying to the companies that run them as they get to play with new brands, bright colours, Helvetica logos and all that kind of thing. In time some may even grow to a size where they provide a decent income stream and a kindergarten for clients who may want Proper Financial Planning at some point. Most will not, and on aggregate I suspect all the adviser-fronted robos put together won’t even tickle the bunions of a modestly sized platform any time soon.
Top tips
If you are tempted to look at one of these propostions – and they can be good fun and put the entrepreneurial spark back into life – then here are Mark’s six top tips on how to do it right and give yourself the best chance of getting something that works.
1. Don’t start with what the firms offer. Start with the client profile you want to serve. Are they 25? 35? 45? Investing for the first time, or consolidating? Savvy or naïve? And so on.
2. Write a pen portrait of your target client. Not a range, not lots of different ones. One only. That’s your audience. Think about what they want, or better still, ask them.
3. Use that to create – on paper in your office – a journey you think will work for them.
4. Only then can you start to work out what will be appropriate from what you are offered. Try to get providers to make it as much like your client as you can.
5. Spend the money on the front end of the website. Let people play and learn. Ease them in. Get good content; buy it in if you can’t write it yourself. Keep it fresh; keep investing. Don’t rush people. Read a book by Gary Vaynerchuk called ‘Jab, Jab, Jab, Right Hook’, if you like business books. It’s about social media, but works fine in this context too.
6. If you want to have something to sell when exiting your business beyond a multiple of adviser charging income, you need to create intellectual property that you own. If you have a big idea, try to keep some ownership, any way you can. There is no way of doing this without investing your own money, time, blood and sweat. You never know, you might build the next Airbnb. But probably not.
Appetite for wealth
I am mildly concerned – and I do mean very mildly, it has not stopping me eating or anything – about the number of companies big and small targeting what the FCA calls the ‘building wealth’ lifestage. The logic goes that they’ve got some wedge, they’re happy with online so they’re cheap to serve, they’ll be with you for ages, and you don’t have to mess around with pension transfers too much. So crack into those and Robert will be a close relative.
The problem is that demographics are against this segment – with house ownership, marriage and primigravidity all pushing well into people’s fourth decades, and interest rates set to rise, it is far from clear that there is a big pool to tap into. We may need to wait for 2017, but I suspect we may find some propositions in search of a market here.
What else? This will be the year when some of the shine comes off peer-to-peer and alternative investments. Right now it is impossible for clients to sort the good from the bad; this is natural given most of these firms have not weathered a complete economic cycle. There will be tears before bedtime, but that is what’s meant to happen and bad experiences may encourager les autres to remember the basics and ask the dude with all the qualifications what proper investing is all about.
The Financial Advice Market Review (FAMR) will be big news. Several tech projects we’re working on are trying to press ahead with ‘no regrets’ type stuff while awaiting both its findings and any bombshells on pensions tax treatment in Ozzy’s second budget of this parliament. A modest flutter on a carve-out for simplified advice delivered on non-toxic areas with a minimum of discretion for the adviser (who may be able to be QCF Level 3, and to take some form of commission) feels towards the not-daft end of the daftness scale. Expect a flurry of new tech to look at in the months following FAMR’s publication.
And the rest of the industry will do what it does – constantly layer on new batches of functionality to try to win your favour, your software spend and your clients’ assets.
The Thin White Duke famously lived on “red peppers, cocaine and milk”, and avoided bloat quite successfully. I am not advocating proscribed pharmaceuticals, but a fair few platforms and adviser software suites could do with losing a few pounds.
As, of course, could I. We’ll see how all that goes.
Mark Polson is principal of platform and specialist consultancy the lang cat
