Lessons from Silicon Valleyand what it means for Australian advisers

Presented bySanti BurridgeCo-founder and Chief Executive – Strategic DevelopmentImplemented Portfolios

7 Dec 2016

| Netwealth

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| Netwealth

Meet today’s speaker

Santi BurridgeCo-founder and

Chief Executive – Strategic Development Implemented Portfolios

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HEADING GOES HERE

Portfolio Construction MasterclassPresented by Santi Burridge

August 21, 2012Lessons from Silicon Valley and what it

means for Australian Advisers

HEADING GOES HEREKey Learnings

How financial service providers in the US are responding to the shift in consumer needs and technological disruption in wealth management

Current landscape - More than 800 data-driven businesses in Silicon Valley focused solely on financial services, who know more about clients than advisers do.

Why the adviser's role in the investment piece is fundamentally changing

What the new world is all about - Mass customisation via technology allowing advisers to build scalable businesses and personalised client experiences

Key measures Australian financial advisers can take to help ensure that the coming disruption is complimentary to their businesses

HEADING GOES HEREKey LearningsSilicon Valley is on the attack

• 16,800 lean start-ups in the valley currently• Everyone is trying to take our job, and when they attack our industry will be fundamentally

changed• They will then come here and take our clients

Mass Personalisation of advice is on • The customer is changing rapidly• It is not that hard but mass customisation is critical• Going mobile in a massive way• No longer use data feeds, data harvesting is here combined with artificial intelligence

Iterate and pivot• Culture

- We need to change culturally- Failure needs to be celebrated as long as we learn

Independence is celebrated• To not be independent will ensure failure• They will be managing 1,000 clients per adviser in the near future

HEADING GOES HEREIndependenceEven in Politics, with 20-25% regularly crossing the floor

55% advisers switching cited independence as the major factor

Why?• Consumer sentiment• Tech choice – Control Data• More faith in the model• Political pressure on institutions• It’s un-American to be insto aligned

Being consolidated now

Very cost focussed as the consumer is becoming increasingly aware• Fighting to maintain their margins by expanding offering into personalisation of advice

Predominantly % fees, flat fees failed as a business model

HEADING GOES HEREIndependent BlueprintStrong Leadership

Advisor managing a system not a product!!!!

Scalable, integrated investment processes

Willing to iterate, pivot, fail and make change

Marketing and sales focussed

Consistent Investment Philosophy

Independents are becoming institutions as they grow to significant scale

They are 10-15 years ahead of us

Butchers v Dietitians videoBrokers are Institutional aligned and Fiduciaries are independent

HEADING GOES HEREChange is on

Data is persuasive and powerful

Unicorns are real – start up valued over $1 billion

“Software is eating the world”

Silicon Valley has changed very recently• Was an “arms dealer” to insto• Now they’re taking clients from everyone – now they are a

“mercenary”

What is the most unsettling thing you could imagine happening to your job and/or business? Expect it to happen!

HEADING GOES HEREMass PersonalisationPersonal Capital – Human advice, technology solution

Remember the Bionic adviser? 100 – 1,000?

400 - 600 clients per adviser

Account Aggregation based

Clients interacting 60% by mobile

System generated outbound communication all in positive context

Quarterly or semi-annual technology enabled meetings

Quarterly calls with ‘your’ investment team

SOAs auto generated

HEADING GOES HEREMass Personalisation

Clients contacting via the website

Waking up knowing exactly what your client did yesterday on your platform

Clients want more information

Ask the clients what information they want and curate it to them

Bucket the clients into segments about what they want from you, not what they make you

The best are scalable with every client receiving a consistent scalable experience

HEADING GOES HEREMass PersonalisationRobos starting to win in the B2B space as the banks roll out

Advisers using Robos to deliver investment solution

Driving down costs and educating clients

They are just better at servicing than we are

Investment management in the traditional model It was discussed that the biggest lawsuit waiting to happen is that you cannot remodel every client by tech

Every client receiving a consistent experience focussed around their goals and values

CLAIRE WIVELL PLATER, MANAGING DIRECTOR, THE FOLD LEGAL

IFA article - Improving Portfolio Monitoring

HEADING GOES HEREMass Customisation

What did we do poorly? – Controllable Alpha

Ownership Structure Tax

Your Journey and your Preferences ImplementationRemodelling speedsAsset AllocationCommunicationControl

Why transparent portfolios won

Why Mass Portfolio Customisation wins

HEADING GOES HERESoftware Disruption is real

Category Disrupted Revenue Disrupted Disruptors

Mobile Handsets Nokia, Motorola, RIM, Mobile Operators

$75B iOS, Android

Advertising Broadcast and print media, Big brands

$50B Google, Facebook

Music Music retailers, Distributors, Labels

$25B Apple, Pandora

Movies Movie retailers, content creators

$10B Netflix

Hospitality Major Hotel Chains $10B AirBnB

HEADING GOES HEREIt’s coming

They are spending every day thinking about who to attack next• It is not a slow process • Fundamental and dramatic

Financial services is huge

800 plus Silicon Valley businesses focussed on Fin Services

They are data driven & know more about our clients than we do

The implications are really dramatic

HEADING GOES HEREIt’s happening

Schwab decimated broking & attacking advice as we speak

Well funded

So successful they are cancelling other business lines that could not compete with their own service

Vanguard Personal Portfolio Services

They don’t care about losing cash, even at $1 billion in revenue

HEADING GOES HERETime to Pivot

So what should we do as a result of this new reality?Start with the end in mind and plan backwardsBuild 2 Client Avatars

• Today’s client• 5 years time

What is the best service you can provide FULL STOP and demand this from your providers or leave

Be value driven as costs will be market driven not client drivenThe maths has to change

• 1975 – Charles Schwab halved brokerage rates, it’s now nil• Client has $250k to invest and an income of $100k pa• Client pays 2% pa or close to $400 a month • Adviser has 100-200 clients paying $500k to $1mil pa• Start thinking about how you could do it for $25 a month

HEADING GOES HERETime to iterateWe have been building it for years and are focussed on

delivering this to youFull back office automation• Digital Signature• Paperless office• Automated compliance report deliveryMiddle office automation• Seamless execution across every client via tech• Mass Customisation • Mass PersonalisationFront office automation on one integrated system• World’s best client engagement. Get a CRM that works for you• Interactive platform • Brilliant data analytics allowing you to engage customers at another level

HEADING GOES HERETime to Engage - Data

The big one is marketing and customer relationship systems

Fully automated rules bases engine that is customised to me

Event triggered messaging automated• Data driven and event responsive• You just did that and we know and we reach out

This is happening in many industries but not in fin services…..yet

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Advice business are making twice as much as youThey have a one scalable, consistent and individualised client experienceThey are collaborating, thinking about technology firstData is everything and what they do with itMarketing drives from the dataThey are trying to exceed client expectationsMass Personalisation of advice is coming and we can do it if we do the above

Let’s be clear

HEADING GOES HEREBusiness Value

Enough is enough What’s yours?

54%?60-70%?

Do you want to win? What do you want to win?• Best Product?• Best Service?

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Managing 1,000 clients per adviser is now real

Stop managing products! PLEASE JFDI

Start only managing your system and your client experience!• Do you have Pirates working for you or are you running the Navy?

Be your clients trusted network

Change from Product to Service

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PIMCO – how is your performance?

We have never lost a customer!We have been asking and answering the wrong questions!It is about the journey, engagement, trust Set the expectations you know you can beat so the customer is going to be satisfiedThe whole industry is about trust a journey not a destinationIf you can develop the trust you have an opportunity to serve on an ongoing basis

Change the conversation

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Create your perfect client Avatar• What do they want?

Be able to mass customise now• Any time you decide to run a client one by one is a

decision that is going to cost you• Be brilliant at servicing the customer by tech, not people• Your role is changing to managing a system – embrace

it if success motivates you• Pivot, iterate and create great services• Any staff that are not systems based must go

- Lose the pirates• Have fun and reward failure as long as you learn

Where to from here

HEADING GOES HEREIn their words

Richard Arnold Software Industry Is Gunning For You Now

HEADING GOES HERE

Join us in April for the 2017 US Study tour in

Philadelphia and Manhattan, NYC“How will you manage 1,000

clients (not 100) through technology (not people)?”

Q & A

Thank youDisclaimer

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