the future of financial advice

8/14/2019 The Future of Financial Advice

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Good morning.

Twice a year, I fly over to the US to attend conferences on emerging financial

technology.

At these conferences, I get to talk to a lot of firms who really are at the cutting edge

of online finance. They provide me with insights into their current propositions, and

tell me what they think the future holds.

Many of them view Canada, Australia and the UK as their secondary markets, so if we

want to get a view of the future of financial advice & technology in the UK, we should

look over the pond into our very own continent-sized crystal ball.

Lets start by looking at the future of financial technology for advisers

1Copyright Fincision 2009


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Back in April last year, I wrote a post on the Fincision blog about the back office

market in the UK; it wasnt too positive, and I got involved in a couple of interesting

exchanges of view as a result!

Since then, in the UK weve seen Salesforce Wealth Management Edition go AWOL,

Capitas Enabler project permanently disabled, and 1st Software passed from pillar to

post before being bought by the dark side.

Whilst some of the emerging adviser networks have made new systems their USP, our

established technology providers dont seem to have moved on much over the last

year, which I find very disappointing.

Contrast this with the situation in the US.



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In response to companies like Salesforce & Sungard upping their game, Pershing set

itself the task of leap-frogging the opposition and building the next generation of

adviser technology: NetX360.

Pershing interviewed more than 700 investment professionals, and more than 1,500

suggestions were considered.



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Many firms told Pershing that they want integration and they want the ability to pick

and choose their software providers, but they do not have the scale or the

infrastructure to achieve their goals.

So Pershing is stepping in as a conduit. With NetX360, clients will be able to have

third-party integration on demand, and the products will often be available at a

better price than small firms can negotiate on their own.

There are also no long-term contracts to sign.

Furthermore, advisors can control access to third-party software through the

platform; so if a firm has 10 employees, but only two planners, the planning software

can be enabled for the planners alone.If a firm wants to use a basic, inexpensive portfolio-reporting package for small

accounts and a more sophisticated one for large accounts, NetX360 will run both.

Pershing MD Suresh Kumar thinks the concept can be taken further still. Kumar has

talked about opening his platform to other developers, drawing the analogy with

Apples iPhone App Store. In essence, he believes that Pershing can and will offer

advisers an App Store for NetX360 soon. It could be revolutionary.



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Like many applications, NetX360 will allow advisors to create their own home pages -

or dashboards- but it goes much further, allowing users to create and name multiple

customized pages, each made up of discrete views or elements, including data fromthird-party providers that integrate with the system (such as CRM software &

investment research tools).

So, for example, first thing in the morning, an advisor might create a page that

contains today's appointments from his preferred CRM application, his alerts, a list of

top clients and a list of unrealized gains and losses across the practice.

Once the morning review is completed, the advisor can choose to use a second page

for the rest of the day. He could create several pages around common tasks, so theremight be one for equity trading and another for research.



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Pershing wants to help advisors grow their businesses and reduce expenses. A single

integrated set of workflows helps with the latter and Pershing will allow firms to

combine their consolidated data with external information for prospecting andwealth scoring.

Pershing is also considering anonymously tracking usage to identify how top-

performing firms differ from the rest. Are successful firms consistently viewing

particular screens that others ignore? Are they using a specific set of programs that

differs from those used by the majority? By distributing this information to all users,

Pershing could help raise the bar across its whole user base.



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Pershing is even planning to release new NetX360 apps for the iPhone and the

BlackBerry shortly, and soon, American advisers might even see that NetX360 App

Store.

So where is the UK equivalent of Pershing? For the technologists in the house, thats

your challenge.



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And if that isnt enough of a challenge, we should also consider the impact that the

rising tide of consumer-facing financial technology is starting to have



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Some pioneering american financial advisers are partnering with cutting edge

technology firms to embrace the internets challenge to their traditional business

models.

Together, they are designing and building online solutions across the whole spectrum

of financial education and advice.

Even given the turbulent economy of the past year, there have been a number of

significant angel & VC funding rounds for these fledgling collaborations, and as youll

hear a little later, a highly successful and very profitable exit for one of the better-

known players.

Before, we have a look at some of the leading firms in each of these areas, lets just

recap where we stand in the UK market



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If anyone doubts the scale of the consumer interest in using the internet for financial

research, consider this:

Martin Lewiss moneysavingexpert.com website was visited by 7,920,000 different

people in July, and they looked at over 68 million pages.

In one day, 710,000 people decided Martin Lewis had something interesting to say

about their finances.

We dont have a true internet-based full advice service here yet, but Im aware of a

number of well-funded ongoing projects with that will deliver such a service within

the next few months.



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In the US, not only have they gone further up the triangle into providing full advice

online, use of services in all of these segments is sky-rocketing as peoples financial

habits change in the wake of the credit crunch.

A whole new area of macro financial planning is emerging, focusing on short-term

goals and savings in such areas as credit card accounts, mobile phone plans, utility

tariffs, reverse auctions for high interest savings, and peer-to-peer short-term

lending.

And people are accessing these services not just from their computers, but on their

mobile phones too. As Steve Jobs likes to tell us, theres an app for that in fact there

are currently 1160 finance apps available for iPhone alone!

Lets start at the leading websites operating in some of these areas



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The next generation of comparison shopping site is already delivering a much richer

user experience.

Billshrink is the leader of the pack, and is probably the most advanced comparisonsite I have ever seen... ... and its free...



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In the UK, weve already seen GoCompare spend a fortune on TV advertising to

promote their new user experience, which is still way behind what youve just seen

from BillShrink. But for us here in the UK, the real fun will start when Google entersthe fray.

Heres a screenshot of what Google has been trialling on a very stealthy basis, but is

rumoured to be launching soon!

This is going to force the other comparison sites to really up their game and, who

knows, maybe we wont have to wait much longer to see that much richer BillShrink

experience in British colours. I think I prefer it to dragons & meerkats.



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Last year, I talked a little about how consumer versions of tools that have traditionally

been the domain of professional advisers were appearing.

The trend is continuing, and this year Im going to show you another planning tool

which is blurring the lines between amateur and professional.

Green Sherpa is a new web-based cash flow and budgeting solution that allows users

to go beyond reports of actual spending, or static budgets based on historical

averages, and instead create a plan much like a professional would produce.



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Mint was built the Silicon Valley Way. It started in CEO Aaran Patzers apartment,

where, with two other partners, he built the software on a shoestring budget using

mostly free open source technology. Mints founders interviewed their first realprofessional, a VP of engineering, in Aarons kitchen.



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From those humble beginnings, Mint has grown to be one of the most popular

financial websites on the web... ..and yet again, its free...



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Mint automatically pulls together bank, credit card , savings and investment data,

much like Green Sherpa...



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But it also provides personalized moneysaving and moneymaking suggestions.

Users identify an average of $1,000 in savings opportunities during their first session.



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Just a few months ago, Mint extended its macro financial planning focus and

launched a limited financial advice service, that it developed in consultation with a

number of CFPs, called Financial Fitness to its 1 million plus users.



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Yesterday, exactly two years after launch, Mint was acquired by NASDAQ-listed firm

Intuit the company behind Quicken and TurboTax . The deal is worth around $170

million. In all, Mint raised $32 million over three venture rounds, so thats not a badprofit for all those who invested about a 5x return.



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I would imagine that Simplifis founders would settle for a similar exit, and who

knows, it might just happen

Simplifi is leading the way in delivering full independent financial planning advice

over the internet. They even have a virtual financial adviser called Sophie, who guides

users through the advice process.

Heres CEO Bryan Link demoing Simplifi at Finovate Startup



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Last week, I talked to Bryan, who used to be one of you - a financial planner - and

asked him to comment on how you should be thinking about the threat of automated

advice



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As an adviser, I would think about this concept of online advice as another

dimension to the types of services a face-to-face adviser could bring. The way we

look at it, with the organisations we work with is, we want to be part of theirsegmentation plan. We want to provide advice for that group of customers who

either dont qualify for face-to-face service because they dont have the assets or the

income, or they want to opt out of that process. There are a number of folks out

there who are just uncomfortable with sitting face-to-face with a professional at this

point in their life. They feel like for whatever reasons, a combination of psychological

factors, and maybe embarrassment about their own situation, theyre just not ready

to take that step. So we feel that the online advice approach is a great first step into

building an advice-based relationship, and then having an adviser come into that role

as the relationship develops over time



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Food for thought.

I admit that Ive painted a positive picture of online financial services so far, but there

is a down side. The internets various privacy and security issues are well

documented, but in a financial context, these are even more serious.

Identity fraud and account hijacking are very real threats, and users should be

continuously on their guard when using these services.

For financial professionals, a thorough due diligence exercise against any online

service that a firm is considering using is critical, because when things go wrong, they

go very wrong indeed, as we are about to find out



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Back in May, a financial website called Rudder suffered an embarrassing email glitch

that affected a large number of its customers.

In the pre-Internet days, no one other than those few hundred customers, and some

of their friends, would have heard about it.

Even last year, the story might have died without ever crossing over to the mass

media. But when it comes to breaking news and company gaffes, 2009 is a whole

new ball game.

Everyone wants 15 minutes of fame as an investigative reporter, even me...



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and this is the dream platform: Twitter!

I'm going to recap how the news broke, because it illustrates the power of social

media services such as twitter, facebook & blogs

As the story unfolds, its worth taking time to think about how you would respond

should something similar happen to you remember youve got just 6 hours to

survive!



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So, what triggered this incident?

According to Rudder, a pre-planned system upgrade on the18th of May caused over

700 users to receive email containing balance and transaction information for other

users.

Rudder pulled the plug on the upgrade after realising it had all gone terribly wrong.

Besides seeing private data in the email, unauthorized users were also able to click

through links to access the full website account at Rudder.com.



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How did the news break? At just after 2:30 PM our time on 19th May, Adam Briggs

of Beech Grove, Indiana, used twitter to alert his 600 or so followers to problems at

Rudder.

He didn't stop at that. He also took the time to search and warn several Twitter users

who'd recently mentioned "Rudder.com. Briggs went on to tweet 21 times that day

about the Rudder problem.



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Briggs then sent me screenshots of his Gmail inbox, full of email meant for other

Rudder users...



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plus a screenshot clearly showing this Rudder users paycheck details, mobile phone

bills, bank account and credit card balances.



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Based on this evidence, at 5pm I decided to run the story on the Fincision blog .



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Within minutes, the story was being retweeted around the internet, and the blog had

over 500 visitors within an hour.



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At just after seven pm, I got in touch with my friend Pete Cashmore who runs a blog

called Mashable.

A half-hour later, Mashable, which is the fifth largest blog in the USA, published a

post on the Rudder problem. From Mashable, the problem was retweeted 120 times

within 20 minutes.



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Then at 9 oclock, the second largest blog in the USA, TechCrunch, which has more

than 2 million subscribers, posted the story.

And because of high comment activity, it stayed on the top of TechCrunch most of the

next 12 hours.



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Finally, just over 10 hours after the error was first reported on Twitter, Nikhil Roy,

Rudder's CEO, broke cover to post a detailed reply on TechCrunch and Mashable. Roy

apologised for the error and explained what had happened.



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Rudder also created a special blog which listed the steps they were taking to fix the

problem, and offered users a complimentary subscription to an identity fraud

protection service.

Not a bad response, but Rudder could have used social media much better. The

company's Twitter page and that of its CEO were silent all day. A short Twitter

posting, even "we've stopped all emails and are working on it" would have reassured

users and potentially made the story less alarming. Also, Rudder didn't have a blog,

so there was no place where they could post updates during the day. It was complete

silence for 10 hours, other than the interview with TechCrunch.

The big lesson here is the need for damage-control procedures that take into accountthe power and speed of new media. The entire episode could have, prior to Twitter

and the blogs, been known to just a few customers of a very small company, but

instead traveled from a lone tweet to a large splash across the homepage of a major

publication, all within a few hours.



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The wounds inflicted on Rudder within that 6 hour period have been significant; in

the following month they lost over three-quarters of their customers, and to date

they have not recovered from that position.

The internet can make you, and it can break you. Be prepared for both



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Last year, I talked about the threat from the net. This year, I hope you will take away

the message that there are many opportunities to be explored, not just threats to be

avoided, and perhaps seeing how the american market is developing will inspire youto think about how your business might gain from the digital revolution we are

experiencing. I want to talk about new opportunities right now.

Our industry is no stranger to change, but there is one particular aspect of change

that is regularly promoted to advisers that troubles me, and that is the assertion that,

in order for financial advice firms to survive, they must first segment their clients,

which is OK, but then get rid of the unprofitable majority.

Ive read stories of up to 60 or 70% of existing customers receiving a polite letter fromtheir newly-converted new model adviser telling them that, in the nicest possible

way, they cant afford him or her any longer and should look elsewhere. Years of time

& effort in marketing, networking & relationship-building are being sacrificed in the

name of progress. But why are these customers now unprofitable? Why do you have

to show them the door?

Its that last bit I have a problem with, and I know some of you do to. Well, this is my

message for you



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I cant think of any other profession that believes it can have too many customers

right now. Too many customers isnt the problem. This is the problem:



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Yes, you dont have enough time in the day to physically see all of your customers,

but thats a distribution problem. If you could deliver your service without having to

see your customers, they would become profitable, and the problem would go away.

And really, its not a problem. Certainly, as weve seen & heard in the past 20 minutes

or so, our American friends dont view it as a problem. They see the opportunity, and

they are acting on it

So, imagine this



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What if there was a way to distribute your firms financial advice via the internet?

What if there was an advice distribution platform that you could rent, brand, customise, loadup your own advice processes and decision trees, choose the products and providers that you

want to recommend, and then introduce the platform to those customers that you cant

afford to see?

People still want a trusted adviser, ideally someone who is qualified and experienced, who is

regulated & insured, who can help them with their financial problems, but they want that on

their terms, and when it suits them. They also want validation; they want someone to tell

them they are making the right decision in much the same way that Amazons people like

you bought this... works.

This platform would show who else has acted on your recommendation & whether they

thought it was a good suggestion, but Financial Advisers are still the people best placed to

provide the initial guidance, but there are challenges to be overcome.

The skills to build such a platform lie outside our industry, which means we need technology

partners. The costs of building such a solution, plus the challenge of scaling it across the

number of supporting firms it would need to make it a viable ongoing service, is not

something that one individual firm could take on; it requires collaboration.



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There are regulatory and process challenges that would require an imaginative andengaging user experience to overcome them and compel your customers to use theservice.

The opportunities would be vast, though. Products, investment portfolios, advice,books, seminars, videos, premium advice via skype & webcam, could all be sold viasuch a platform, and could revolutionise our industry in much the same way thatPershings new platform will in the USA.

We are at a time where there is a perfect financial storm underway. The events of thelast 12 months have changed the way the masses view financial services. Morepeople are saving, its harder to get credit, people are far more realistic about therefinancial situations, and they are coming to the conclusion that they need expert

help.

We should be engaging them, not turning them away, and distributing your advice viainternet is the way forward.

Its a wonderful dream, and if you like the sound of it, come and talk to me later. Theadvice distribution platform may just be a little closer to reality than you mightthink



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Contact Mike Linskey:

[email protected]

the future of financial advice

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