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Retail Asset Management in the Connected World

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www.distribution-in-asset-management.com


With Contributions from:

Andy Coleman, Director of Distribution, Cofunds

Gareth Johnson, Head of Managed Investment Services, Brewin Dolphin

Brett Williams, Managing Director, UK, SEI Wealth Platform

AuthorMorag Cuddeford Jones

EditorMarsha Irving Head of Financial ServicesFC Business [email protected]


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Distribution in Retail and Wholesale Asset ManagementConference & Networking Event12-13 May 2015, London Breakthrough to a New Distribution Landscape: Bridge the Gap to Your Investor and Intermediary www.distribution-in-asset-management.com

Andy Coleman, Director of Distribution, CofundsAndy Coleman is responsible for sales and relationship management across both the retail and Institutional Cofunds segments. He has been driving the rollout of new products and services, including the implementation of the explicit pricing model, since joining at the start of 2012. He will be continuing this journey in 2015, through to the sunset of trail commission in 2016. Before taking up this role, he was Head of Distribution at AXA and was instrumental in creating and delivering to market the Elevate proposition.

Gareth Johnson, Head of Managed Investment Services, Brewin DolphinGareth Johnson joined Brewin Dolphin in 2002 as a member of the Operations Department. He held various roles within operations at management level before becoming responsible for the Group’s operational relationships with fund manag-ers and transfer agents in 2005. Within this role he helped to shape operational strategy and increase efficiency of the Group’s fund administration. Gareth joined the Research Department in 2010 and is currently responsible for the group’s operational relationships with fund managers, platform relationships and the management of the Managed Funds Service. He is a member of the CISI and of the Investment Management Association’s Investment Funds Ops Committee.

Brett Williams, Managing Director, UK, SEI Wealth PlatformBrett Williams is UK Managing Director, SEI Wealth Platform. Brett is responsible for leading the U.K. Private Banks team and will oversee the operation and continued growth of the SEI Wealth Platform in the U.K. market. Brett has worked in finan-cial services for 30 years and joins SEI from LW2 Private Equity Partnership, where he was Partner. He has held various senior roles in the industry including CEO of Cofunds, CEO of Selestia, and CEO of Skandia U.K., following Old Mutual’s acquisi-tion of the Skandia Group.

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Distribution in Retail and Wholesale Asset ManagementConference & Networking Event12-13 May 2015, London Confirmed Speakers: David Ferguson, Founder & Chief Executive Officer, Nucleus

Nick Hungerford, Founder & Chief Executive Officer, Nutmeg

Roger Miners, Chief Marketing Officer, Allianz Global Investors

Christian Pellis, Global Head of External

Distribution, Amundi Asset Management

Andrea Favaloro, Global Head of Sales and

Marketing, Generali Investments Europe

Shoqat Bunglawala, Global Head of Product

Development, Goldman Sachs Asset Management

Simon Ellis, Global Head of Client Segments, HSBC Asset Management

Steven de Vries, Head of European Retail Sales, Henderson Global Investors

Scott Stevens, Head of Marketing,

EMEA, BNY Mellon Asset Management www.distribution-in-asset-management.com

As customers find the online management of their day-to-day finances increasingly challenging, is there now scope for web and mobile chan-nels to change the landscape of investment product distribution?

If the end of 2014 was a period of intense change in the investment market, 2015 shows no signs of cutting the pace. The big news in the UK is the ability from April 2016 for retirees to access their pension funds, releasing an anticipated 5m cash-rich investors into the market1. Regulations such as FG15/1, clarifying the boundaries and exploring the barriers to market development2, released by the Financial Conduct Authority in January are once again causing companies to question how to best reach customers.

And whilst wrestling with the concept of what does and does not constitute advice, providers of investment products and the plaftorms they market through are also exploring the opportunities that direct channels on web and mobile could present.

Digital and finance are already proving to be happy bedfellows, with consumers increasingly comfortable with transacting online and evidence to suggest they want to deepen their financial relationships through this channel. A recent survey by Cisco discovered that the majority of consumers want a more personalised banking experience.

Notably, it has been suggested that the retail distribution review (RDR) will create an ‘advice gap’. Professional Adviser reported research by Schroders that revealed 49% of advisers had segmented their clients by size and 18% had admitted to asking small clients to leave their practice in the past. Of those, 69% had an invest-ment pot lower than £50,0003.

On the other hand, FT Adviser reported that the chief executive of the Personal Finance Society, Keith Richards, stated that 2014 was the year when ‘the need for professional advice was stronger than ever’ and the same article reported research from Towers Watson that indicated there was in fact a surplus of financial advisers to the tune of 5,000: Modelling data suggested 25,000 were needed across the UK while 31,000 were qualified to do so4.

But, in a climate where a potential advice gap looms, 67% of consumers in the aforementioned Cisco survey would welcome more financial education from their banks while 73% want advice on increasing their savings, the same number as would welcome an assessment of their financial status5.

Even for those most engaged in financial affairs, the potential to mismanage wealth is still great and the idea of managing complex matters with a couple of clicks on a phone is unlikely to become reality. Revealed in The Wealth Management 2015 report from Raconteur, Claire Trott, Head of Technical Support at pension provider Talbot and Muir noted: “Though the reforms are simple on face value, the financial

1 http://www.moneywise.co.uk/news/2015-03-16/5m-pensioners-will-get-to-cash-poor-paying-annuities2 http://www.fca.org.uk/your-fca/documents/finalised-guidance/fg15-013 http://www.professionaladviser.com/professional-adviser/news/2384409/advisers-back-rdr-but-admit-advice-gap-

is-growing-research4 http://www.ftadviser.com/2014/12/18/ifa-industry/companies-and-people/pfs-fca-are-addressing-the-ad-

vice-gap-mrgGQfpvVkE7UgmJ3n1trO/article.html5 http://raconteur.net/infographics/banking-customer-experience, accessed 16.03.2015

http://raconteur.net/infographics/banking-customer-experience


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circumstances of HNWIs are more complex and getting it wrong could prove very expensive.”6

So how are product, portfolio and platform providers managing the dual needs of freedom to interact online with an ongoing advice requirement, impacted by wavering consumer willingness to pay for it?

How is digital disrupting investment?

“I don’t see digital as being a big game changer. Managing your bank account online is zero risk, as is managing your mortgage. When it comes to managing a sum of money that you are going to invest – the mentality of the investor is entirely different. You’re out of your comfort zone,” warns Andy Coleman who looks after sales and relationship management across retail and institutional segments of Cofunds. “Digital will alter the industry but I don’t believe it will fundamentally change it.”

“If I take myself out of the financial services bubble and think about how I inter-act with things in my everyday life, there’s a lot you can take from retail and we’re spending time understanding the customer’s journey. We have our typical clients, but also the 21 year-old who is beginning their investment journey,” states Gareth Johnson, Head of Managed Investment Services, Divisional Director, Newcastle at Brewin Dolphin.

Taking the lead from retailers outside of the finance sector, interviewees for this paper identified a range of consumer behaviours that they considered influential in developing their own approaches. The accessibility of information, the ease of making contact, the showrooming and price comparison capability at home, in-store and on the move are all making themselves felt in retail asset management.

“We’ve been talking about the sort of innovation that needs to take place. It’s around the consumer’s experience and we have looked at how leading retailers from all sectors interact with their clients. The experience they have with Amazon’s 1-click for example, or ‘click to call’. If that’s their experience with leading e-tailers, why should they expect anything different with investment management online?” Johnson suggests.

The sense is, however, that ‘1-click to invest’ is not the route the sector will be taking:

“Digital will change asset distribution in so far as instead of people buying at some point they will buy any time they feel like it. The True Potential ‘impulse save’ propo-sition is an interesting development. I don’t think it will be the case that everyone will turn into day traders, but people will want to invest with no particular pattern. What’s really important is that consumers will simply want to be able to look at the details of their investments whenever they want to,” explains Brett Williams, UK Managing Director of SEI Wealth Platform.

ImpulseSave will allow customers to ‘top up’ existing investments via mobile or web with a view, as True Potential puts it, ‘to turn spenders into savers’7. However,

6 http://raconteur.net/finance/what-pension-freedom-means-for-the-rich accessed 16.03.20157 http://www.tpllp.com/impulsesave/

http://raconteur.net/finance/what-pension-freedom-means-for-the-rich

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adding a few pounds here and there – 40% of all top ups in the first six months were less than £10 - to boost an ISA is not as significant a step as considering whether to move ISAs into different types of investment.

“I see people self-serving up to a point but when it comes to tax planning they genuinely start to struggle,” Coleman, states, adding: “Relationships continue to be key here because there is a level of trust that is entirely different to buying house insurance online.”

Digital’s role in bridging the advice gap

As we have already seen, there is some debate as to whether new regulations will cause a genuine advice gap due to lack of advisers, or whether there will be some segments of the investing community who will try – at least initially – to opt out of paid-for advice. Asset management companies are keen to address these segments for the following reasons:

1. These segments do not exclude high net worth individuals (HNWIs) who may have some financial knowledge and feel they can self-serve. But ultimately they will probably need advice and/or management.

2. Low value segments who are not immediately valuable have the potential to become HNWIs in the future and the company they choose today at low to zero cost may have the potential to dramatically increase this customer group’s returns later on.

3. A large volume of customers who would not have previously considered investing are coming to market because of pension regulation changes. While much of their growth comes from existing customers, deaccumulation is inevitable and new customer groups are needed.

A new brand for a new segment?

Moving on from serving a traditionally small, select group of HNWIs to consider volumes of smaller investors is not just a question of using digital technology to reduce cost per acquisition. Many investment products are considering their brand perception.

“There are emerging pockets of investors that have always been around but they’re coming into the managed environment. We feel that brand is very important here in terms of being able to access that market,” Johnson notes.

“Our board are quite advanced in their thinking about brand and what a product launch looks like. But we have to be cognisant that a client with £3m is different to a client with £15,000 in terms of their awareness of the market. Do we look like a £15,000 customer company?” Johnson asks.

In this case, the answer may well be yes as he continues: “It’s an evolution for a different type of client and we do have a service in the pipeline. It’s not our typical client group, the engagement is different but it’s something we’re keen on pursu-ing. Firms need clear rules on which to base judgement so we’re reviewing FG15/1 to see how we can serve that market.”


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Equally, new entrants into the market are going to have to consider how they are perceived by the customer and whether their current brand positioning is appro-priate. Take, for example, Saga Group – the travel and insurance group focused on the over 50s.

The company already has a shareholder services offering so positioning itself in the investment area is not difficult for consumers to accept. However the company states it is aimed at over 50s and this is the demographic most likely to be active following the pensions moves in 2016. However many over 50s consider themselves still too young to be part of the ‘Saga generation’ (as noted in a parlia-mentary memorandum: Unlocking the value of the over-50 consumer8). This is an occasion where its strong brand heritage could work against it.

However, the idea that digital will allow other non-traditional financial brands to enter the segment is not far-fetched. Already there are new financial brands with no heritage putting an end to the preconception that institutions with longevity are paramount.

“A lot of groups are facing similar challenges. The situation is evolving and innova-tion in this space has the ability to drive brands forward and think: ‘let’s not look at traditional financial services for influence, let’s look at retail and see how we can use some of that experience’,” Johnson suggests.

However: “The spend required to build a brand and find new customers is still quite prohibitive. You see institutions such as Hargreaves managing it because they already have a brand and customers in place,” Williams states.

He suggests that moving into consumer brands offering financial advice packages is an area ripe for brand partnerships: “From a risk perspective there is a lot of opportunity for platforms white labelling product for companies such as John Lewis for example. So, equally, businesses like John Lewis wouldn’t want to risk damaging their reputation because of markets or investments performing badly.”

“There is a big opportunity for anyone who has a consumer brand to give guidance or advice. The FCA needs to clarify what is advice and not advice because this is a prime area for banks to get involved in. They have the volume of customers and their information as well as an existing relationship,” Williams notes.

While digital will be able to open the mechanics of customer acquisition up to a much wider audience, real growth will continue to come via more traditional means: “I’m confident that IFA customer bases will grow because of customer recommendation and experience. Great experience is what grows a brand,” Coleman notes.

Grow your own customer

Working on the brand to attract a new customer segment is just the first step. Much of the way the new investors will want to manage their money will be differ-ent too, partly determined by the digital channel and partly by the level of service they will need.

8 http://www.publications.parliament.uk/pa/ld200506/ldselect/ldsctech/20/5030802.htm

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“A key theme for us would be interoperability in the customer journey. Customers might want to invest £15,000 in an ISA and then work with that money through some self-select products. Customers may gradually inject further capital and as their pot grows they are likely to reach a tipping point where their investment is substantial and they need to access advice. D2C customers who might have previously stayed away are now in an incubator, but may want financial advice and wealth management as their journey continues,” Johnson reveals.

Investment patterns will also change. “Family wealth is where I do think pension freedom is going to significantly benefit platforms. Because the end consumer rather than buying an annuity can leave their money invested a lot longer, they will leave it on the platform longer. Therefore there will be a reduction in redemption rates. Investment fund groups and managers have got a responsibility, an opportu-nity to start thinking not necessarily about providing funds that generate income but ones that can be developed with a focus on capital preservation to provide income over the longer term,” Coleman concludes.

“The other shakeup is that people are living longer. Customers will only be deaccu-mulating when they are 70-75. The advice gap means providers need to be more concerned about providing solutions to problems rather than sophisticated portfo-lios,” Williams warns. “Everyone’s expectations about what they can do online have been changed by sectors that have nothing to do with financial services. They’re used to finding the answers to all their questions instantly.”

Managing their new customer groups’ low tolerance for paid advice will be tricky in this environment where customers believe they can answer any question with a few clicks of a mouse. “With the plethora of information that’s available these days, even those consumers with just a little knowledge are a lot more savvy than they were a while ago,” Johnson states.

Investment providers and platforms are going to have to navigate the advice void carefully. Providing useful information to new investors will be a valuable brand-building tool, but it needs to avoid straying into advice. Advisers and product providers are finding new ways of building relationships.

“The traditional mediums of face to face discussions are still hugely valuable but aren’t as prevalent across all demographics. How do we harness things like video content because consumers aren’t inclined to read as much for example,” Johnson explains.

Williams adds: “Consumers are going to want advice but they won’t necessarily know where to go to get it. It will lead to clients making use of technology to be advised in a different way. They may still be getting advice but it’s not face to face, and even if they’re not getting advice they’ll still want guidance.”

“The services we promote to a Financial Adviser will be different to those on D2C. It is about understanding your customer and their needs” Johnson states, adding: “You want every client to stand on their own two feet - we don’t want cross subsi-disation and I’m not going to employ large numbers of staff to work on account opening. That’s where you use technology to develop and improve. And keep an eye on your key financial metrics.”


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This tiered approach to providing product, then support and eventually advice is a product of the ability to use digital channels to more cheaply service the lower value groups. With the potential of the annual ISA investor to turn a £15,000 invest-ment into £200,000 in a few years, the importance of matching acquisition and servicing cost to the customer is vital. Self-service with added brand value in the form of informative content will be vital in nurturing future prospects.

“When working with Financial Advisers, we have launched on seven different third party platforms that have been key in allowing our Managed Funds Service to be scalable, driving assets to a highly commoditised service where we can deliver investment management to the masses via financial advisers.

“They can free up their time because the platform has outsourced the adminis-tration. We are then outsourced to do the investment management which allows the adviser to focus on their ‘adviser alpha’, the bit of the value chain that they are fantastic at, such as financial planning, tax planning etc” Johnson explains, adding: “It’s allowed a lot of advisers to move to the new model and drive profitability and scalable growth. RDR has allowed them to understand what their core is.”

Where to target overall growth

“I expect the biggest growth in the direct market will be from the existing clients of existing advisers,” Williams states. But, it remains a question of prioritising invest-ment and balancing customer acquisition with retention and growth. Ultimately, existing customers will want to spend their wealth making deaccumulation inevita-ble. New customers will have to be encouraged.

“The pensions reforms will place a greater importance on clients understanding what they have to do and financial advice will be very important,” Johnson states. “There will be an even greater advice gap than there is now. The proposed changes in the Budget 2015 will accentuate this – for example selling annuities will become possible but how will consumers know whether they should or shouldn’t without access to advice?” Williams adds.

“RDR and other changes have made passive investment more attractive and we’ve already seen the industry move in this direction. The challenge for active managers to get out there and justify the extra cost is going to get greater,” Williams states. “Pension rule changes are going to have a significant impact because many have to decide what to do now they’re not going to get an annuity (which many won’t). They will want more solution-based portfolios for peace of mind.”

“The direct to consumer market has been relatively slow to grow in the UK, many entrants have struggled to acquire new customers,” Williams notes. “Where I believe it will work is with institutions who have existing customers that may have been left alone for a long time. By building a relationship with them digitally there’s no question that customers are going to be more active.”

There is no doubt that the market is soon to see an injection of many customers who have previously been excluded from the investment club. Williams notes that with changes to pension rules and subsequent changes to the treatment of inher-itance tax for pension investments: “There’s never been a greater need for advice but it’s never been more risky and expensive to provide.”

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“The new regulations from January 2015 (FG15-10) are very much in the formative stages and what constitutes discretion and advice. Whatever happens has to be driven by client outcomes,” Johnson concludes.

Medium term growth may well be found most securely within existing client bases who are able to make use of digital technology for convenience. In turn, invest-ment houses will find the cost to service these clients can also be reduced as digital provides efficiencies. But inevitable deaccumulation, driven by longer lifespans, means eventually focus will have to move to servicing today’s changing investor. Asset managers’ future success will be very dependent on the actions they take today.

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Contact Us:

Marsha Irving

Head of Financial Services FC Business Intelligence T: +44 (0) 207 375 4353 E: [email protected]

Distribution in Retail and Wholesale Asset Management Conference & Networking Event 12-13 May 2015, London

Andy Coleman, Director of Distribution, Cofunds, Gareth Johnson, Head of Managed Investment Services, Brewin Dolphin, and Brett Williams, Managing Director, UK, SEI Wealth Platform all feature in this white paper.

All three of these individuals will be speaking at the Distribution in Retail and Wholesale Asset Management conference and exhibition (12-13 May, London). This niche, high-level European show will feature discussions on how new innovation is dramatically changing a traditionally closed industry. Meet these high profile speakers onsite at the show and continue your discussions in person on about how the changing investor landscape, including how the influence of the connected world is directly affecting your industry.

To receive an additional £200 off of current booking rates, quote WP200 in the discount field on our registration page www.distribution-in-asset-management.com/register

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