How was your summer? No, mine neither. Actually, now you mention it, I’m not all that interested, no. Let’s crack on.
This post-holiday period is traditionally one of the busiest of the year in terms of new proposition developments kicking off. In development terms, if you don’t get it on the slates in September, you won’t be seeing it go live for at least a year.
Therefore we’re used to proposition types getting pretty puffed up at this time of year, with a lot of ‘ooh, wait until you see what we are building. No one will be able to resist – we’ll be rich! Rich, I tell you!’ and all that. Sadly, though, this year we won’t be seeing quite as much of the fun stuff, as two big must-do projects are likely to be taking the lion’s share of attention and development.
A long time coming
First up is Mifid II, which is like Mifid, but with a thinner plotline and bigger special effects budget. There is much to concern advisers in its pages, but perhaps core to the technological end of things is how platforms, providers, asset managers and advisers communicate to clients.
As you will have probably heard by now, one of the most fun parts of Mifid II is that clients have to be informed in writing if their portfolio drops by 10 per cent or more in a quarter. Now, for everyone’s best, well-drilled clients that won’t be an issue. But for everyone else, who fancies fielding phone calls the next time the markets get the collywobbles?
Quite apart from the potential concern to clients, there’s the issue of who does the writing out to clients. Do you, as an adviser, want that administrative burden? Or do you want to trust it to the automated document production facilities of your chosen platform or platforms? Both of these routes have drawbacks.
The requirement to keep a formal record of client meetings is also being entertained. For a while, this looked like it was all going to be about audio recordings (which many firms do anyway), but now you will really only have to record calls that are about executing orders and make analogous notes about everything else.
I can imagine how that might go:
Adviser: Hi, Mr Polson, how are you?
Me: Fine, thanks.
Adviser: How can I help you?
Me: Oh, I’m thinking of taking a few grand out of my pension.
Adviser: Oh, hang on, I’ve got to record this. A recording device is switched on. So what brings this on?
Me: Oh, I need to complete that deal. You know, the one we talked about when you mentioned that off-plan investment in Tierra Del Fuego (Argentina). I’m still not sure that …
Adviser: I don’t know you! Prank caller! Prank caller!
And so on. The key point is that all of the detail around Mifid II is going to take up a lot of time over the next two quarters, and will seriously constrain the ability of many firms to do much of the fun stuff. Which is probably for the best.
Data protection
The other big theme to watch is new data protection regulation. Be warned, this is going to reach down inside your customer relationship management system and do unpleasant things. We don’t have space here to go into everything it does, but suffice it to say it will need to be very clear with individuals about what data you hold on them, what purposes you use it for, and check that they are OK with it.
I know both of these sound dull – and dear Lord, they are – but if you’re running an adviser business there are bumps in the road that you will have to get your head around; if indeed you can get your head round a bump in the road. Such are the perils of figurative language.
And with that, let’s talk about my holidays.
The robo rat race
This year, I got to go and speak at some conferences in South Africa (courtesy of Allan Gray, the business magnate) and Australia (courtesy of Money Management. The bill is in the post). While I was there, I took the time to dig about what’s happening with fintech and robo advice to see if there was anything that might inform the UK landscape.
I’m interested in this partly just because it’s interesting, but also because the market for robo advice in the UK seems to me to be tightening very quickly. We have a surfeit of providers – I opened new accounts with five last week, and I’m not even kidding – with little differentiation.
After looking at the developed southern hemisphere markets, and the US of course, it’s fascinating to see just how similar most digital disruptors are.
It’s also instructive to see what counts as disruption in these markets (the answer, in case you were wondering, is slider bars that allow users to tweak their financial preferences. Saints defend us.)
In every space I look, the idea of online financial planning appears to me to be solving a question that no one is asking. There was a fascinating piece of work done earlier this year by the Social Market Foundation, which suggested that the propensity for people to pay for advice diminished with age, and that remote advice was not even remotely appealing.
It strikes me that our industry – in a desire, no doubt, to curry favour with advisers – fetishises advice, or at least financial planning, and I’ll leave the argument as to what each of these means to the cultists.
However, consumers who are outside of the financial planning target audience don’t. The elusive concept of advice isn’t one that really gives them much pause. Some of them would like some help in working out what to do with their money from time to time, and that’s where there is an opportunity for robos in most developed markets. For my money, the most successful participants will be those who cut to the chase and let people do what they want as safely as they can.
In the UK, that means players like Nutmeg and Scalable Capital. In Australia, it’s probably Stockspot and Ignition Wealth, and in the US we already know that Vanguard, Schwab and, to a lesser extent, Betterment, are doing the do. All of these propositions stress the ease of sorting an investment out rather than locating the service in some kind of half-a-loaf online version of financial planning.
Three commonalities
The truth is, all robos have three elements:
l Online information gathering and goal-setting.
l Risk profiling and mapping to portfolios.
l Investment in portfolios and tracking.
The editor won’t give me space for lots of screenshots, but if he did I would show you near-identical journeys for propositions on four continents. It’s uncanny.
What does all this mean? I’m not sure to be honest, but if I were a betting cat I’d suggest that soon you will start to see robo-style functionality as a core part of the systems that you use. I think you’ll see much better self-serve fact-finding tools, goal setting and tracking capabilities, which are still sadly lacking on almost all platforms, and much better client reporting.
These won’t be called robos anymore. It’ll just be another tool-set that is baked into your processes. But it’s going to take a while. In much the same way as you can’t have your dessert until you have eaten your vegetables, you can’t have radically better client experiences until you’ve had your Mifids. We’ll see where we are, then, in 2018.
And I have one tiny final thing to say. As you read this, the lang cat will just have celebrated its seventh birthday. No-one, least of all me, thought we’d get here, and I just want to offer up a small paean of thanks to all of our clients, friends, readers, colleagues and everyone who has helped us along the way.
Right, go away. See you next month.
Mark Polson is principal of platform and specialist consultancy the lang cat
