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FinTechs and incumbents collaborating to fuel change in wealth management

It has been hard to miss the arrival of many new wealth management services in recent years. 

Certainly, Londoners will have seen adverts for many new investment apps and FinTech advisors or ‘WealthTechs’ on the Tube. 

WealthTech is not purely a B2C story. Collaboration and partnerships are becoming more commonplace as incumbents aim to benefit from startups innovative ideas. 

To discuss this and more, Innovate Finance brought together a cross-section of the wealth management sector at its “Shining a Spotlight on WealthTech” event on 12 November 2019. 

Schroders kindly hosted the evening at its London Wall offices. 

Nick Alter, Head of Wealth Technology at Schroders, opened up the evening by providing the context for the event: the challenge for wealth managers to strike a balance between new FinTech solutions and the more traditional personal advisor relationships. Nick also gave an overview of Schroders’ work in the FinTech ecosystem, in particular the Cobalt programme

Charlotte Crosswell, CEO of Innovate Finance, echoed Nick’s words and added that a big wealth to millennials was round the corner. This group will soon be wealth managers’ customers, many of whom will want to use tech solution but may still want the more personalised advice when necessary. Charlotte also discussed the idea of democratising finance and providing more choice for consumers, two big themes of the evening. 

We heard two excellent four-minute pitches from FinTechs operating in wealth management. 

The first was from Nick Wakefield, Managing Director at Bambu, a B2B robo-advisory technology company. Nick explained that Bambu’s mission is to make wealth management as accessible and simple as possible. Bambu focuses on goal-based investing, which makes it far easier for users to understand their investment target and how they are progressing on the road to achieving their financial aims. Bambu’s customers include HSBC and Franklin Templeton. 

The second pitch came from Peter Reading, CEO and Laurent Guyot, CFO of Qwil Messenger. Qwil is a messaging platform for an organisation to communicate safely and conveniently with their prospects, partners and clients. Peter and Laurent demonstrated a big use case in wealth management: using Qwil to send valuation statements to clients in a fully automated way. 

The pitches were followed by our panel, moderated by David Porter, Head of Investment Delivery & Strategic Partnerships at Alliance Bernstein. The panellists were: Adam French, Founder of Scalable Capital; Tim Gibbons, COO, UK Wealth Management at Cazenove Capital; Nick Hall, Account Development Director at Wealth Wizards; Mel Palmer, CMO at Nucoro; Juan Palomares, CEO & Co-Founder of Hulgrave; and Anjali Sarin, Head of UK at MoneyFarm

David introduced the first topic for discussion: How FinTechs are finding working and collaborating with incumbent businesses as opposed to competing with them.  

Mel gave an account of Nucoro’s experience to date, explaining the complexities of providing robo services to incumbents. She pointed out that the economics of a B2B business model are more attractive than B2C, and working with incumbents gives you a big distribution network to reach many end consumers. 

Looking at the other end of the spectrum at consumer-facing companies, David asked how whether they have changed tack at all and moved towards B2B. Anjali explained that Moneyfarm’s original goal was to create a good B2C proposition, but over time the company decided to share what it has created. Partners such as Posta in Italy and Allianz in Germany are providing a great distribution channel. Anjali said that those partnerships do not represent a change of tack, but an example of “growing up”. 

Adam spoke about Scalable Capital’s early exposure to a partnership with ING. He said that it not only influenced Scalable’s tech stack, but also many features of running a business, such as governance and internal processes. Adam added that Scalable’s collaboration with BlackRock was an evolution of its journey, rather than a complete shift in strategy. He also argued that the idea of B2B being easier than B2C is a myth, pointing out the many difficulties of trying to incorporate a small and agile company into a huge monolith. 

Nick discussed Wealth Wizards’ approach to partnerships, which is to aid hybrid advice. Wealth Wizards devises digital journeys for its bank and building society customers, without taking the face to face element away. 

David moved the discussion on to the idea of democratisation of wealth management, with the aim of uncovering what it really means and genuine examples of it in action. 

Mel talked about her own experience as a relative newcomer to the investment world and her view that although the mission of democratising wealth management is very important, it is far too early to say it has made a big impact yet.

Adam how Scalable didn’t attempt to reach a mass market from its inception but instead focused on a group of people they dubbed “smart, busy professionals” – those who already knew they should be investing. Adam felt that through the greater distribution that partnerships have provided, it is much easier to deliver products to people who are in need of financial education. 

Anjali argued that there are many different angles to democratisation of wealth and that it is very hard to cover all of them with just one business model. She drew on Moneyfarm’s genesis, which was in Italy, where pricing was not transparent and it was expensive to invest. 

Juan echoed Anjali’s point about transparency, saying that without having full access to the data about fund performance, it is hard for customers to know if their portfolios are performing well. 

David moved the conversation onto the impact of Open Banking on the wealth management sector. Nick argued that Open Banking should really be referred to as “Open Data” as it is about data sharing and helping consumers have more control and awareness of their financial lives. 

Tim, providing the perspective of an incumbent, Cazenove Capital, suggested the onus was on wealth managers to educate customers as to why Open Banking is a good thing and in their interests to share their data. He added that it may be easier for a trusted brand to put forward that case for Open Banking than new startups. 

Adam questioned whether the average person cares as much about trust as we might assume, adding that it is convenience that seems to be the most sought after aspect of a product. 

The panel briefly covered impact investing. Tim said clients are becoming increasingly interested in understanding what good their investments are doing beyond bringing personal returns. He added that this new focus is creating a challenge at the back end to understand and quantify the “goodness” of specific investments. 

The final point of the evening came from a question from the floor, which put to the panel that the companies present are really only serving 10-20% of the UK population – many do not have the luxury of surplus income to invest. Juan pointed out that auto-enrolled workplace pensions were giving many more people investment opportunities, but added very few were getting proper advice on that. 

This was a fitting place to conclude the discussion, which highlighted the wealth management sector has some way to go before it can claim to be truly democratising finance. 

Nonetheless, it is clear that innovation is occurring at pace in the sector. Above all, the power of collaboration between FinTechs and incumbents really shone through. 

Many thanks to our excellent panellists and to our moderator, David Porter, for creating such a fascinating discussion and covering a multitude of topics!

You can see photos of the event here.