The regulatory push to increase transparency to aid comparison choice for clients will continue and is likely to focus on fees, charges and performance reporting.
Before the industry ultimately wins the argument over the value of advice, price sensitivity within the minds of customers will actually increase. Therefore, the key to survival and prosperity is the ability to serve more clients, more efficiently, more quickly and more compliantly.
And this is where technology comes in. We have already seen the hugely positive impact the introduction of platform technology has had on advisers and their clients. This has seen the value of assets held on adviser platforms grow to more than £300bn.
The big platforms were hugely innovative a decade ago, but technology has developed at an amazing rate since then. Some newer entrants to the platform space are arguably more nimble in the further development of their technological infrastructure and its integration.
Financial platforms will evolve from the ‘supermarket’ model to simpler and more personalised facilities. These thoughts were echoed by the FinTech50 panel, which recently scoured Europe in an attempt to find the 50 hottest innovators in financial technology.
Consultancy firm The Platforum also expects to see shifts in platform use this year as advisers continue to restructure their propositions to achieve greater efficiencies.
Successful integration of platform technology with the investment portfolio is revolutionary and has the power to significantly improve efficiencies for not only advisers and their clients but also for the platforms themselves.
There will be no shortage of clients as they value the reassurance that comes with professional investment management expertise and regulated financial advice. It gives them the confidence to invest and the composure to stay with the plan when they hit a complication.
More and more people will seek advice, particularly from April when the new pension freedoms come in to force. There will also be a need for greater flexibility in how investments are managed.
The market estimates that the value of the platform self-invested personal pension market may double to £300bn in the next two years. Investors using direct platforms already combine do-it-yourself investment management with some advice, but only about 25 per cent are happy doing things that way. The opportunities from technological integration and development are huge.
The World Wealth Report 2014 states that globally, 65 per cent of high-net-worth individuals (HNWIs) expect to run most or all of their wealth relationships digitally within five years. The report also dispelled several myths and stated that digital is not just favoured by younger HNWIs, but also by those in lower wealth bands and by investors who direct their own portfolios.
The future of both advice and the delivery of investment management expertise depend upon technology. This has overhauled goods and services in every other sector, yet within the wealth management sector the transformative power of technology lies largely untapped.
During the next few years, the real growth in the fund management sector will come through innovation, particularly in client service. At the heart of this is technology.
There are now roughly 50 DFMs available across 20 platforms. However, in most cases the platform is just the technology and the DFM is just that.
For platforms that can fully maximise the platform and DFM dualism through the successful integration of both elements, the result is a DFM delivered through technology. This also puts the adviser right back at the heart of the client relationship.
Forward-looking platform technology does not just host the investment solutions, it manages them, and the solutions become more flexible and sophisticated than simple model portfolio services. With a sufficiently wide range of options, advisers can avoid shoehorning clients and win trust for efficiency and value.
Client loyalty is preserved within the adviser firm, so crucially this structure enables proper ownership of the adviser’s business value. Advisers can build value into their own brand rather than simply making client introductions to DFMs, distributing fund models or selling insured products.
Nicola Robinson is corporate manager at Parmenion
The FinTech50 2015 list
More than 750 companies were considered for inclusion in the FinTech50 list for 2015, with the chosen companies selected for their potential to “become a game-changer in financial services technology, or the competitive staying power to continue being one”.
The FinTech50 list is comprised of four key areas:
• Banking and financial
• Big data and analytics
• Payments
• Platforms
Companies on the list:
27 The number of UK companies featured on the FinTech50 list
30% Percentage of the list comprised of FinTech companies from the Netherlands, Germany and Sweden
10 The number of companies the panel marked as ‘ones to watch’ on top of the FinTech50 list
World Wealth Report 2014
The annual report from Capgemini and RBC Wealth Management states: “Our research offers an unparalleled look into the demand by HNWIs for digital interaction and the disruptive force that digital technology is bringing upon firms, wealth managers and the overall client experience.”
Report findings include:
56.7% Percentage of HNWIs globally that claim all or most of their wealth management relationship is already conducted digitally
65.3% Percentage of HNWIs globally that would consider leaving their wealth management firm if an integrated and consistent client experience across all channels was not provided
49.4% Percentage of advice-seeking HNWIs globally that consider their wealth management relationship to be all or mostly digital
Source: World Wealth Report 2014
