Recent tech deals show a major trend in the evolution of advice market

Transact‘s parent Integrafin’s purchase of Time4Advice and Royal London’s acquisition of Wealth Wizards are smart deals which will leave their peers regretting they did not take the same opportunities.

Each transaction is a genuine win for the new owners and the adviser market.  

By buying Time4Advice Integrafin get a well established, independent practice management system that can now be taken to a mass-market scale.  

It was widely recognised that Time4Advice had been going through growing pains and the loss of St James’s Place, their largest customer, to Salesforce raised obvious questions that are now fully answered by the new ownership.

Their customers can be confident the business now has a parent with the financial resources to fund far greater development than the company would have been able to afford organically.  

Provided Integrafin allows Time4Advice to continue to grow as an independent software business, something chief executive Jonathan Gumby assures me is the case, the software supplier’s adviser users should be very pleased with this deal. 

By buying Time4Advice Integrafin get a well established, independent practice management system that can now be taken to a mass-market scale.  

Time4Advice has always focused on firms of a certain size.  The current client base is slightly less than 70 advice firms, but these are typically good size advice businesses with an average of 10 or more advisers rather than one and two person adviser practices, i.e. the part of the market that everyone really wants. 

It may be that the new ownership would allow Time4Advice to support smaller firms, perhaps focusing on those that have an active relationship with Transact. 

With this deal Integrafin has acquired a business that will give them vast insights into the practical operational challenges faced by Transact customers on a day-to-day basis.

Among other things this will be used to help Transact work through the practical challenges of deep integration between an adviser software system and an investment platform, knowledge which can then be reused by the company to build deeper integrations into other practice management software providers.

It could be argued that even other software suppliers can benefit from this deal. 

Royal London deal

At the beginning of March Royal London acquired Wealth Wizards.

Unlike the vast majority of so called “robo advisers”, who don’t actually use any robots or give advice, Wealth Wizards is a genuine automated advice supplier using artificial intelligence and related technologies to deliver sophisticated financial advice and guidance at a cost not achievable when the work is carried out by highly qualified advisers. 

While their capabilities could certainly be used in the individual wealth market the obvious opportunity for this service is to support Royal London’s considerable workplace pension business which overwhelmingly operates via adviser firms. 

Royal London may choose to detune some of the more sophisticated capabilities which can automate full regulated advice, so that they only offer guidance to members and signpost them to regulated advice when they really need it, or they may choose to deploy these in a white label format via regulated financial advisers. Both strategies could sit well side-by-side. 

It is a simple economic reality that most of the UK population cannot afford to pay for traditional highly regulated advice when it is all carried out by highly qualified humans. The answer must be to deploy advice automation to help make this process economic. 

Wealth Wizards is a genuine automated advice supplier using artificial intelligence and related technologies to deliver sophisticated financial advice and guidance at a cost not achievable when the work is carried out by highly qualified advisers. 

The advisers may find the idea of buying this sort of technology from an insurer as somewhat alien and I have reservations over the independence of the solution.

This will need to be addressed. An obvious way and one which would make this proposition truly compelling, would be an open finance aggregation capability to make it much easier to bring together the value of a client’s other retirement savings as part of the process. 

Although numbers have not been disclosed for either transaction, Royal London has arguably acquired and even scarcer resource then Transact.

While accumulation robo-advisers abound the really tough challenge is delivering genuine automated decumulation advice.

The only alternative system that has been fully demonstrated to me to be able to match or exceed Wealth Wizards capabilities is Destination Retirement from Hub Financial Solutions, so the mutual insurer has bagged itself a rare diamond whatever the cost. 

The above deals show a major trend in the evolution of the adviser tech market. Increasingly financial institutions will become the owners of advice tech firms allowing them to achieve scalable growth.

While accumulation robo-advisers abound the really tough challenge is delivering genuine automated decumulation advice.

This will usher in an era where platforms and insurers provide chargeable technology services to advisers.

Indirect benefit rules mean these cannot be free, but they can be fair. 

This should be seen as a positive development that is facilitating deeper collaboration which will bring real customer benefits. 

Ian McKenna is the founder of Financial Technology Research Centre and AdviserSoftware.com