Your IndustryJun 24 2016

Tech spotlight: Glide path

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As Litha, the Summer Solstice, arrives, and we light balefires and make protective amulets that we can photograph and put on Instagram, I find myself contemplating the mix of old and new in our industry.

We are always being told that the way people transact different goods and services is changing. Cash is dying in favour of pay-by-bonk with your card, phone or watch.

New web ecommerce services, which remove all trace of human contact, are decimating sad old meatspace offerings.

High streets resemble an Old West-style tumbleweed strewn… actually, hang on. The US Census Bureau puts the percentage of consumer spending conducted via e-commerce at 7.8 per cent of the total at end of the first quarter of 2016. It is growing fast, but bricks-and-mortar still has a place for many years to come.

You may have attended seminars with titles as: ‘Are you ready for the Uberisation of financial services?’ or ‘What will be financial services’ Uber moment?’ and “Why does no one come to my seminars any more?’

The truth is, in our industry, there is already no shortage of ways for people to save and invest online – and this has been the case for years. Yet, in Q1 2016, we saw one of the worst retail investment quarters in recent memory. Why?

Self-directed investors

The answer, I suspect, is not Brexit fears, or stock market wobbles, or concerns about rising interest rates. It is simply that the value pool of self-directed investors is tapped out. If you are interested in investment you have never had it so good.

But if you are not, you are no further forward. You’ve got plenty of websites that want to educate you on investment – a subject in which you have already proved you have no interest – and a new cohort of services which make a presumption that what you really want is to be advised by a nice person in a suit, but that you can’t afford one, so you are happy for a nice computer to do the same thing.

This is heroic in its ambition, but reality just does not bear it out. The truth seems to be that savers and investors are incredibly fickle. It is true that, all bar the most motivated investors seem to want some recourse to real human beings at some point in the process, but it is not clear at what part that is.

It is far from certain, for example, that individuals need an adviser or a client service representative to get them across the line in transacting.

Many people find transacting finance deeply personal and embarrassing, but might like some information and guidance in the abstract before they personalise it to their own situation and pull the trigger themselves.

Cyborg propositions

This is behind the cyborg propositions we see doing well in the US, in particular Vanguard and Charles Schwab. It is the marrying of tech space and meatspace that seems to unlock the asset flow. Firms like EQ Investors and others over here are also looking to tap that trend, and even Nutmeg is thinking about getting advice permissions.

The advice/guidance line is a tough one to navigate and there is a long way to go post-Financial Advice Market Review before we have any certainty that lighter-touch advice propositions will find their feet and their regulatory protective clothing.

In the meantime, I have a suspicion that, taken in the round, people are not daft and can tell a hawk from a handsaw.

Although to be honest, anyone who can’t needs a refresher in biology – one is a predatory bird and the other is a common tool for cutting through wood.

Sheepdog close

What I mean is that people can see very well that all of the help, guidance, cool sliders and radio buttons on websites being offered to them are all there to make them transact.

It’s a funnel process, or a ‘sheepdog close’ – the journey carries on and on, and the longer it goes on the more times you say yes, and then you’re invested in the process, and when it is time to put your bank details in you are in a torrid, bug-eyed, sweating frenzy of orgasmic purchase intent.

Then there comes the money shot – quite literally. There follows a period of regret and self-loathing (also known as post-sale disclosure). And then – well, it’s time to tell the wife.

A glide path to retirement

But enough of that. This meeting of the online and offline world was in my mind recently as I had a demo of Columbia Threadneedle’s new TriGlide app. Now, those of you wondering why a global fund manager is heading into shaving or personal lubricant products (depending on where your mind goes first) are forgiven. But that’s not what this is.

It is an app for advisers that aims to help you create a ‘glide path’ to and through retirement. The basis of this is that people have three main drivers in retirement: preservation of capital, real return and income. These three needs play off against each other, and in so doing can drive an asset allocation model.

In Columbia Threadneedle’s world, the constituents of this model are their Global Opportunities Bond Fund, their Dynamic Real Return fund, and their Global Multi Asset Income fund. The app allows you, as the adviser (although anyone can download it) to put in basic client details, play with these needs on sliders, and then drill through to the resulting asset allocation and basic cash flow forecasting (driven by Moody’s).

There are some interactive fund factsheets provided by Instinct Studios.

The look and feel of the thing is nice and modern, and not a million miles away from 7Imagine, which I have praised in this column before. If you have an iPad, it is worth downloading and having a play.

Lets do it together

But what struck me about it wasn’t the user interface, stochastic analytics, or even the factsheets. It was the do-it-together nature of the tool. Most retirement forecasting planners I have seen have been pretty complex because they are trying to do the sheepdog thing for the adviser right down to a template suitability report. In my experience that rarely works these days.

Advisers are – rightly – entirely resistant to capture of their suitability process by providers. But tools, which are interesting and even a bit fun to use, have a place as long as they don’t drive you beyond the point of no return, as it were.

TriGlide would like you to use Columbia Threadneedle funds, but of course it doesn’t mandate it and there is no transactional element inside it.

TriGlide is a very smart bit of kit, possibly in ways beyond which its inventors intended. Providing this kind of functionality without expecting immediate reward involves being brave, which I hope (and deliberately without having looked at the relative quality of the funds) leads to some kind of commercial outcome.

Other providers building yet another robo-style journey that leads you to the same-old-same-old basket of exchange traded funds, presented as some breakthrough modern miracle of modern investment science, would do well to take a look.

There has to be a confidence in allowing the human element – as unpredictable and imperfect as it may be – to guide and interact with the online process, which might prove to be the most modern element of all.

Mark Polson is principal of platform and specialist consultancy, the lang cat