Fintech on Friday: Clients crave comfort of human touch in volatile times
Mouhammed Choukeir, Kleinwort Hambros
Even robo-advisers have recognised that clients need an element of human interaction when it comes to managing their wealth
Online investment platforms have undoubtedly shaken up the wealth management landscape, but are gradually adapting the services they offer to clients, moving away from a purely digital approach to something offering an element of human interaction.
The return of volatility to financial markets over the course of 2018 has reinforced the importance of a human adviser to wealthy individuals, believes Mouhammed Choukeir, chief investment officer at Kleinwort Hambros.
“There have been a number of studies asking whether people would prefer to be operated on by a robot, or have their money managed by a robot,” he says. “And it turns out people would rather put their health in the hands of machines than they would their finances.”
Reassurance
This may change over time, admits Mr Choukeir, but, for now, clients want someone to speak to when markets go through a rough patch. A wealth manager can send an email, or valuation reports and alerts, just as a robo-adviser would, what client really want is pick up the phone and speak to someone, he says.
Our approach is one that we call Phygital – the combination of physical and digital – which can vary depending on the client or the mandate we are managing
“That is how individuals want to manage their wealth. They want information, and digital allows them to have that on the go, but they also want to meet and speak to people. That is a human characteristic about engendering trust about something precious to them.”
Robo-advisers have been a great innovation, believes Mr Choukeir, and have brought some interesting ideas to the market, but he points to research carried out by Kleinwort Hambros, part of the Société Générale group, which strongly suggests there is still a strong place for physical interaction.
Hybrid model
“Our approach is one that we call Phygital – the combination of physical and digital – which can vary depending on the client or the mandate we are managing,” he explains.
Although it is logical to assume that millennials and the younger generation are craving more digital interaction, Mr Choukeir argues that it has little to do with age. “It is more to do with the source of wealth. How did you generate it? If it came from the tech space, then you tend to be more comfortable with the digital world, regardless of your age. If you are from a human-facing business, be it retail, or doing deals face to face, then you want more physical interaction.”
With markets dealing with an ageing economic cycle and an uptick in volatility, robo-advisers are likely to come under pressure and will need to think about how they can reassure their clients, he says. “Indeed, some robo-advisers have gone as far as hiring human advisers to work with their clients. They are no longer purely digital.”
Growing trend
This has certainly been a growing trend. In the US, market leader Betterment is now letting all its customers access human advice, a service that was previously available only to those with at least $100,000 invested. In Europe, Scalable Capital, the robo-adviser backed by BlackRock, now offers an initial free consultation to new customers before they invest, and subsequent investment advice for a fee of £200 ($255).
We’ll only be able to solve the advice gap with greater digitisation
Nutmeg, the UK’s largest online wealth manager, has also adopted a hybrid proposition when it comes to offering advice. Like Scalable, it offers new clients a free initial chat about their circumstances, with those choosing to receive tailored recommendations being charged a fee of £350.
It also offers a portfolio review service to its higher net worth clients, whereby it will review any external investments, be they with a financial adviser, private bank or trading platform, free of charge.
Nutmeg admits the way it, and other online wealth mangers offer advice, will continue to evolve.
“Financial advice has been so slow to adapt to changing customer needs,” says Lisa Caplan, head of financial advice at Nutmeg. “In the next few years the way financial advice is given is going to radically change. People are used to interacting with technology to make so many aspects of their life easier, financial advice is no different. We’ll only be able to solve the advice gap with greater digitisation.”
