First Wealth boss on refining ‘evidence-based advice’

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First Wealth boss on refining ‘evidence-based advice’
Anthony Villis, First Wealth's managing director and co-founder

First Wealth is building an “evidence-based” financial planning service, driven primarily by data and probability.

Anthony Villis, the firm’s managing director and co-founder, believes advisers carry a “cognitive bias” which mathematical models can avoid.

“It’s very difficult to argue with evidence-based data and I think people like straight talking,” Villis told FTAdviser.

“We’re not saying the adviser is redundant. They can sense check the data and talk through it with the client. Their role comes later down the line, to talk about the options rather than build them.

“If you could remove cognitive bias around loss aversion, everyone would be invested in everything. But humans are flawed investors. So you have to overlay the data with the reality of what the client is comfortable with.”

Villis’ argument is that if there is evidence-based investing, then there should also be evidence-based financial planning.

“Financial planning should be driven by data based on probability. There’s so much subjectivity in our current advice industry due to a cognitive bias advisers have. But mathematical models can avoid this,” he explained.

The problem at the moment is some advisers have blind spots.Anthony Villis

What robo-advice services have done well, according to Villis, is create an evidence-based financial planning experience based on data and analysis of other people, giving advice based on numbers and probability of success.

This, the First Wealth boss said, is the direction of travel because of the scale it can allow firms to grow to.

Villis’ 35-person advice business, an appointed representative of Best Practice IFA Group, focuses its efforts on advising London-based high-night-worth individuals.

“Our sweet spot is younger high-net-worth individuals in their 30s to 50s who might have sold a business but who aren’t engaging with the traditional asset manager,” said Villis.

Getting the tech right

First Wealth started its evidence-based advice journey by tackling the onboarding process, which Villis said was “horribly disjointed and ugly” when he first looked at it.

The firm has now brought this process onto one platform, through a mixture of self-built technology through its sister firm Open Advice and external links with providers such as Yoti for security checks, and DocuSign for the service charter.

The next stage is integrating services such as categorised monthly expenditure via open banking.

“Once we built the onboarding, we said ‘what else can we do with it?’” said Villis. “And then the idea was - could we lead from onboarding to a platform, and use open banking to add some cash flow modelling as well?”

Open banking is the way business will be done. If you're not into it, you’re just redundant.Anthony Villis

This, according to Villis, starts to form the basis for a “proper” digital financial advice process. The firm wants to reach a point where it can upload most of the client data itself, pull it together, and analyse it.

“So rather than a month of going back and forward with clients, hopefully in a very short period of time, we should have a screen that will enable us to have a conversation with a new client.”

As open banking adoption grows, Villis and his team are wary they need to keep up with the latest developments or risk becoming “redundant” and unable to communicate efficiently with clients.

“I just think open banking is the way business will be done. If you're not into it, you’re just redundant,” said the First Wealth boss.

“The problem at the moment is some advisers have blind spots. They might say ‘I've done this for years’, ‘most of my clients want to come in, have a cup of tea and bring in a suitcase of paperwork and that's what my client likes’.

“That’s fine for the clients you currently look after, but that’s not the future. If you're building a business over the next five to 10 years, unless you're into this stuff you're going to be outdated very, very quickly.

"Not to say you're going to go out of business, but you're not going to be able to speak to and engage financially and efficiently with the sort of clients that are going to be coming through.”

Villis said this applied to high net worth clients as well as younger clients.

“When you see what's available digitally outside of financial services, I mean look at Amazon. Like or loathe it, they’ve got it right - that ease of use. So why is financial services so pathetically disorganised and poor?”

Part of a bigger web

First Wealth is connected to two other companies. One is Open Advice, a non-regulated digital advice service set up by Villis and First Wealth’s other co-founder Robert Caplan using Seccl technology and open banking. 

Villis and Caplan, along with the two other of its four employees, are all shareholders in the business, meaning they own a lot of the technology which FirstWealth is also currently using.

The process is the same in terms of getting the data and analysing it, no matter the amount of money the client has.Anthony Villis

The plan is to licence this technology to other advice firms, and eventually develop an evidence-based financial planning model which relies on data to nudge people.

The second is Lets Talk About Money, currently a free educational service which sits on Instagram. Villis and his team are looking to build this into paid-for subscription, creating a community of users which they would then point to the Open Advice platform.

“Our long-term view would be to make this a regulated, digital financial advice model,” said Villis, highlighting that this digital service would likely attract less affluent clients compared to First Wealth’s clientele.

“But the process is the same in terms of getting the data and analysing it, no matter the amount of money the client has,” Villis explained.

ruby.hinchliffe@ft.com