Ah, the new tax year! A time of undreamt-of possibilities! A future as yet unwritten! The glorious time of year when financial marketeers change their adverts from ‘10 reasons to use your Isa allowance before it’s too late!’ to ‘10 reasons to act early to use your Isa allowance!’
Actually, this year’s Isa season/tax year end has been monumentally dull and – yes – I am grading on a curve here. I guess Investment Association stats will tell us whether the last minute rush did happen or not, but judging by the dearth of marketing activity, special offers and all that, I am guessing no-one was holding out much hope.
Innovations
To be absolutely honest – as opposed to partially honest, which serves neither you nor me – it has been a while since I saw any new developments from platforms that did anything for me.
Anything that has come out is either decoupled from the main architecture of the platform because it is too hard to plumb it in properly, or is just a bought-in, stand-alone tool. These are fine in themselves, but a world away from what we were meant to be doing. And maybe that is why the neophiliac marketeers in platform-land (both direct and intermediates) have been sadface at the moment.
Then again, maybe everyone has been working on longer-term, more exciting stuff. Such a one may be Lisa, our new friend with an eye for the younger among us – don’t get tempted, middle-aged squares! Lisa will swipe left on you if you’re over 40.
A whole new product to play with – especially one which comes with a raft of restrictive regulation – is always something the product nerds are happy about. Lisa, though, is not only phenomenally complex to administer (‘Mr Client, are you really, really sure your house purchase is for £399,999?’) but will also have to run at a low cost with very low premiums and no transfers. It might also cannibalise pensions a bit. There are product management directors all over the industry with no belts and no laces in their shoes, weeping into their single-estate coffees as we speak.
Maybe providers are planning to wise up and start offering decent cash management facilities, for the crucial part of everyone’s portfolio that holistic management services seem to conveniently ignore. Which means they would be better described as ‘not holistic’, but there you go.
Such a one is Hargreaves Lansdown, which may actually win the financial industry’s never-ending game of Risk by offering what looks like a very smart cash service. Get the money in to a rate that is better than the high street, let people (finally) see all their savings and investments in one place, and then plague them to death (or, as we call it, ‘market’) until they invest some of it.
Will HL manage to capture the flag? You would be mad to bet against it (I am not sure if you capture a flag in Risk or not; I last played it 20-something years ago while completely sloshed at Hogmanay in a youth hostel in Wooler, but it sounds like the sort of thing that you would do).
It is worth remembering that while everyone else was running around bleating about robos, disruption, #fintech and trying to learn about blockchain, HL was quietly adding nearly 50,000 new clients in H2 2015. Just saying.
Product-shifting machines
Speaking of robos, we have some new contenders out there, popping up at approximately the rate of one a month. The latest is Wealthify, which isn’t yet another Parmenion Interact implementation. Instead it is built off a mix of Winterflood and IRESS kit. So it’ll be interesting to watch that one.
I have been thinking a lot more critically about robos over the last wee while. Our analysis at the lang cat, which is mainly to do with counting things, reckons that the total value of the total holdings of all the robos in the UK is well shy of £150m. If you delete Nutmeg from that, it’s a lot less.
The last platform due diligence request for proposal we did for one adviser firm was £200m. And HL added a couple of billion or so in H2 2015. Again, just saying.
From where I am sitting, pretty much every robo, whether they have advice inside or not, looks exactly the same – a product-shifting machine that aims to establish whether one of the baskets of ETFs (or passive mutual funds, but mainly ETFs) they have as a model portfolio is suitable. We will be charitable and say that they genuinely do want to ensure suitability as far as they can, depending which side of the advice line they go.
In this regard, I can’t help thinking that the robo/digital advice/online investment market is a bit like the pre-RDR, commission-based, meatsack advice market. Lots of well-meaning folk, working out which of the products on their list was the most suitable for the client and trying to do some good, or at least no harm, along the way.
Robo is unashamedly product-centric; it is an online way to try to funnel people into a vanilla tax wrapper and a basket of cheap funds and to make them feel that they are doing something daring while they are doing it. So far there is no evidence that it is working, beyond thousands of olumns like this one talking about it. But there is always hope.
So the tech development front appears to be a bit dull from the provider perspective, which is why it was so good last month to see new offerings from Voyant and 7IM.
Popeye versus the robos
Instead of banging on, I’m going to relay a story from one of the great marketeers and ad-men of our age – Dave Trott. You can follow him (and should) at @davetrott on Twitter, and he tells a great story about Popeye, spinach and algorithms in a blog called ‘Fun beats data’ for Campaign magazine.
Basically, Popeye ate spinach because it was the best natural source of iron you could get. That was proved in 1870 by Erich von Wolf, who showed it had 35mg of iron per 100g. That’s 10 times the amount in steak.
Except that is not what his research showed – it actually showed it was 3.5mg per 100g; the same as steak. It took more than 60 years for that mistake to be corrected. In that time, and ever since, generations of kids have been persuaded to eat spinach because it’s what Popeye eats, he’s strong, and kids are stupid (except yours, obviously).
Dave then relates this to a question he had seen asked in another industry, which is, “Can algorithms make humans redundant?”
I will quote from him now: “An algorithm can relay scientific facts and information [about spinach]. An algorithm can make sure it gets those facts in front of every pair of eyeballs in the [spinach] target market. But an algorithm can’t make people read it...an algorithm can’t come up with Popeye.”
Robos – if you let them – will position human advisers as stuffy, boring, overpriced and inefficient. They will try to be edgy and as fun as they can be (some are already crossing into wacky territory, saints defend us). But what’s on the menu on a robo will always be spinach. It will never be Popeye.
It will never be properly engaging, or fun. In our industry, at least until the robots come to kill us all, we need a human for that.
Mark Polson is principal of platform and specialist consultancy, the lang cat
