Fintech on Friday: 2017 to be a big year for digital decision making

Having had a few years of “tech tourism” – whereby asset and wealth managers watched on from the sidelines to see how digital strategies worked – 2017 could well be the year major decisions are taken, according to panellists and delegates at the TSAM London summit.

“We have had an era of regulation and we are now entering an era of digitalisation,” said Joe Parkin, head of wealth and retail UK at iShares. Speaking on a panel discussing the impact of robo-advisers, he believes these online platforms are a positive development, and are very much here to stay.

“This is about solving a problem. Traditional wealth managers only serve the top 10 per cent. Then there is a huge advice gap. People are living longer and need advice, and robo brings that to the masses.”

Although many fintech players are small, nimble start-ups, Mr Parkin believes it will be the big names which make a success of robo-advice going forward, at least in the UK. He lists the likes of the retail banks, insurance companies and even supermarket chains who could be tempted into this space. He doubts, however, that the likes of Amazon, Google or Apple would want to enter such a highly regulated sector.

Online wealth management platform Nutmeg, which launched six years ago, is one firm which started from scratch and has managed to build up 30,000 customers within the UK market, more than 50 per cent of whom are first time investors. But Nutmeg benefitted from being a pioneer in the sector, and head of user experience Jono Hey admits it would not be easy to launch the service now given the competition a new brand would face.

There will always be room for specialists within wealth management, he believes, but predicts that robo-advice will go further than many people think. “Look at online shopping. That is just how people shop now. It was said that customers would never by shoes online because you have to try them on first, but that clearly isn’t the case.”

With the launch of its UBS SmartWealth platform in the UK, UBS is one major player to recently enter this arena, though with a minimum investment of £15,000 as opposed to Nutmeg’s £500, these are two firms targeting different types of client. Being a source of genuine advice was always part of the UBS SmartWealth blueprint, said co-head Shane Williams, claiming that many robo-advisers simply offer guidance.

Most people need simplicity in their financial affairs, he believes, but as wealth increases, needs become more complex. Part of the thinking behind UBS SmartWealth is to attract clients that the firm would not have served in the past, the idea being that as their wealth grows they will eventually graduate to other services offered by the wealth manager.

“Advisers are there for these more complex needs. UBS now brings that nice transition whereby clients do not need to look elsewhere.”

It was essential for UBS SmartWealth to be entirely digital, said Mr Williams, because the plan is to roll the service out into other jurisdictions. The platform was built in-house, although external partners were used in some parts of development. And the investment into the platform is bearing fruit in other ways, he claims.

“The technology we are developing is already being used across UBS. It is improving things for all our clients.”

Asset and wealth managers who do not develop digital platforms will be missing out on potential sales channels, warns Mr Parkin at iShares. Wealth managers in particular should be targeting the huge segment of individuals who are lacking advice, although he believes the impact at the top end will be much less. Tech here is more likely to be used for efficiency saving or onboarding clients rather than replacing traditional relationship managers, he believes.

But firms should not fall into the trap of merely using these digital platforms to push their own products. “That would be a mistake,” he warns.