UK warms to robo as client data nervousness wanes

InvestCloud was established in the US in 2010, and in January took the leap into the UK market after spending about 12 months building its British business model.

It provides trading and client communication portals for IFAs, wealth managers and fund houses, building technology platforms which give firms the ability to plug certain InvestCloud components - known as “Applets” - into their businesses.

Andrew Lewis, senior vice president of the firm’s European business, said: “When we first came to the UK, we felt there was a lot of nervousness from firms about giving us client data, particularly compared to the US.

“I think that has changed in the past year, and some of the larger UK firms are now very comfortable about giving data to us,” he said, adding companies are becoming more trusting of the digital space and realising a specialist tech firm can hold data more securely than internal databases.

Mr Lewis said the US tends to adopt new technology faster than the UK, suggesting InvestCloud would not have grown so rapidly had they started up on this side of the Atlantic.

While he said “fintech” is a hot topic in the UK, the majority of fresh digital products are direct-to-consumer, arguing there is a lack of B2B offerings which help with client management and communication, with some firms still using “outdated” reporting systems.

However, Mr Lewis said the UK is ahead of the US in terms of incorporating a broader digital experience, where systems can be accessed and used on mobile phones for example.

Despite the US adopting the investment robo-advice model earlier than the UK, he said larger players in the States have realised they can expand this to offer a more holistic service, which UK businesses have been introducing over recent years.

“The challenge for these overseas robo-advisers will be adapting their propositions to meet regulatory demands.” David Stevens, LV

InvestCloud has taken on 650 US-based investment and advice firms as clients over the past three years, but its group chief executive believes the B2B gap in the British market, and an increasing openness to digital offerings, means this type of growth can be achieved even quicker in the UK.

Mr Lewis said, unlike InvestCloud, a lot of digital firms in both the UK and the US have not modelled products on the entire financial services industry.

He said: “A lot of these asset management firms have large legacy systems, which they don’t want to turn off because they have a lot of data and history they don’t want to lose.

“We are not asking firms to disrupt their current systems, but we incorporate an overlay approach instead and map the data into our own system.”

Mr Lewis also said InvestCloud clients “only pay for what they need”, with fees starting at $30,000 (£21,200) a year for the use of its service.

In August last year, LV bought a majority stake in robo-advice developer Wealth Wizards, confirming it would launch an automated service on an algorithm-based platform.

Since January it has been in discussions with advice firms and insurance companies over sharing its new robo-advice system.

David Stevens, head of automated advice strategy at LV, disputed whether concerns over client data had declined. “The importance of customer security in automated advice propositions is understandably high on customers agenda and in the UK we’ve seen no signs whatsoever that this has eased.”

He stated LV “fully anticipates” that some of the growth in the UK robo-advice market will come from overseas players.

“We believe the material challenge for these overseas robo-advisers will be adapting their propositions to meet the specific regulatory demands in providing regulated advice.”

Colin Low, managing director and IFA of Kingsfleet Wealth, added: “If anything, I am more nervous about passing over client data than ever before.

“As far as our job is concerned, surely the data we hold is the greatest value to us and the highest potential risk if it was compromised?”

katherine.denham@ft.com