Wealth Management 2019

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W E A L T H M A N A G E M E N T 2 Commercial feature Robo and human advice must work in harmony Investors want the choice between both robo- advice and face-to-face communications, but to make them work in harmony is not that easy ost robo-advice does not work without humans to back it up. Multiple surveys have shown that people of all ages prefer to speak to a human adviser, even on relatively simple subjects such as understanding investment charges. Major UK robo-investment players, such as Nutmeg and Scalable Capital, have real- ised this. They initially believed in pure digital advice, but have since made human advisers available to clients, if they want them, in a hybrid model. The move towards hybrid robo-human models represents a stronger threat to the many traditional wealth managers who continue to reject digital advice in favour of face to face. But even well-established players are still struggling to make a profit. Meanwhile, several large wealth managers, including Tiller, Investec and UBS, and many smaller financial planners have abandoned their robo offerings. So as digital advice continues to evolve, the race is still on to figure out which parts will be profitable and which are best left to humans. Mark Trousdale, chief growth officer at digital investment management platform provider InvestCloud, says hybrid models bring more choice for investors. They offer tools for those who want more control over their finances and a human backstop when they want it. Martin Harris, head of advice at Wealth Wizards, the company behind hybrid plat - form MyEva and hybrid product Turo for Tim Cooper M advisers, says hybrids work. "Sometimes people just want a human, especially for complex advice or big decisions," he says. "But the robo side makes wealth manag- ers more efficient and able to service low- er-net-worth clients who could otherwise not afford it." Wealth Wizard claims its technology has already reduced pension appli- cation processing times from days to hours and time on some bits of pensions advice from 15 hours to 30 seconds. "In future, robo-advice will cover 95 per cent of scenarios, in pensions and other areas," says Mr Harris. "The 5 per cent will still be necessary for more complex rules, such as exceeding lifetime allowances or inheritance tax advice." Simon Bussy, director of wealth at consultants Altus, says technol - ogy advancements have allowed hybrids to combine the best ele- ments of digital and human. "The original 100 per cent robos realised people still like dealing with people, and need help and advice," he says. "Others, such as OpenMoney, com- bined robo and telephone-based humans from the outset in a holistic advice service. Such propositions are leading the way because the customer is at their heart. It's not all about product sales." James Priday, managing director of Pry- dis Wealth, has launched a digital service to other advisers called P1 Investment Man- agement and another to consumers, Straw- berry Invest. "Advisory firms can have an execution-only service for, say, smaller clients or clients' children. But those cli- ents can move up to robo-advice, and to full financial advice, whenever they want, seamlessly through the same login details and platforms," he says. "We've found half of advisers don't want execution only; they see themselves as advisers only. But the other half love the idea of white-labelling execution only and robo-advice. Everything is going towards hybrid as clients want to be able to chop and change the service. But the human element will always be there, cutting it completely doesn't work." This optimism about robo-advice does not necessarily chime with the experi - ence of many advisers who have launched hybrids, but received no interest in the dig- ital element. Some say they cannot make it work without prohibitively large marketing budgets or that third-party robo providers could be helpful in future, but many are cur- rently more targeted at direct-to-consumer models, rather than wealth managers. Mr Bussy says several wealth managers are still people based, with relatively poor technology integration, but they increas- ingly recognise the need for hybrid. Guy Healey, head of private banking at Brown Shipley, which has a hybrid model, says: "Wealthy individuals usually have complex financial needs, some of which can be met through technology, particularly through access to portfolio information and financial educational via apps. "However, they mostly trust well- qualified professionals to provide objec- tive, often bespoke advice in areas such as succession planning, philanthropy and cross-border finances. A robo-adviser can- not empathise with, evaluate or under- stand such complex needs. "Wealth management is built on trust, developed over time through understand- ing and personal contact, and which a robot can never replicate." However, Mr Trousdale says digital tools can appear more empathetic by using sophisticated data strategies to personalise communication. Mr Harris adds: "A system can ask many questions. For example, ours asks whether clients feel comfortable making this deci - sion or need help. Also, whether they have recently been bereaved or divorced, for example. It's important to establish if they have any basic vulnerabilities." With computers catching up in their abil- ity to empathise, wealth managers will need to hone their soft skills to stay ahead. R O B O - A D V I C E Wealth managers and financial planners are constantly learning which elements of robo-advice work for their clients and the parts humans do better. For example, Matthew Walne, director at Santorini Financial Planning, introduced a full robo-investment offering in 2016 to target 18 to 40 year olds. He subsequently ditched parts of it due to lack of interest, but retained many of the technological features that he found beneficial. "Face-to-face meetings remain at the heart of the process," he says. "But we now use Zoom for those who don't want to visit the office. Clients can use an electronic calendar system, Calendly, to create appointments, via my website, and get SMS and email reminders. "They also receive personalised brochures, which demonstrate credibility through a unique digital experience, explain our process and set expectations." After the first meeting, Santorini clients receive an electronic fact-finder, client agreement and risk-profiling questionnaire, provided by digital advice provider Advice Front. They can also see their interactive cash-flow forecast, make changes and see the impacts immediately. "Clients like this experience as they can complete it at their leisure," says Mr Walne. "There is secure messaging and document storage too. It streamlines the whole process and allows for more human interaction where needed." InvestCloud's Mark Trousdale adds: "Human advice will be complemented by constant access to digital communication if investors want it. This makes it easier to contact your adviser when you want, which helps boost client retention." Finding the robo- human balance PwC 2019 AI IS SE T TO TR ANSFORM AS SE T AND WE ALTH MANAGEMENT Whether asset and wealth management CEOs expect AI to significantly change the way they do business in the next five years PwC 2019 24% of asset and wealth management CEOs regard the speed of technological change as a top threat to their business Strongly agree Agree Strongly disagree 1% Disagree 6% 45% 45% 6% Getty Images/fotostorm oor engagement in pensions and access to affordable finan- cial advice has created a mam- moth gap in savings that will leave people ill-equipped for retirement. As the urgency to close the gap intensifies, arti- ficial intelligence (AI) is providing a much- needed solution A lack of engagement in financial ser- vices has resulted in a retirement savings gap that is growing at a worrying rate. Retirement naturally seems a great dis- tance away for most of a person's work- ing life, which in an age of instant grati- fication has resulted in a general apathy towards pensions. Millennials, in particu- lar, who already make up the majority of workers, are known to live in the moment rather than save for the future. The issue also extends to the financial industry, which until the recent rise of fin- tech startups had done little to increase engagement with consumers because of a lack of market competition. With a small pool of large institutions having domi- nated the retirement market for a long time, there has not been enough incen- tive to invest in innovation and improving customer experience. This is now begin- ning to change as consumers demand an experience closer to digital services such as Netflix and Amazon. A recent report by the World Economic Forum (WEF) suggested that the average retired person in the UK will outlive his or her savings by more than ten years. In 2017, the WEF also esti- mated that if UK savings remained at their current level, the country's retire- ment savings gap will grow from £8 tril- lion in 2016 to £33 trillion by 2050. "The retirement savings gap is colossal," says Fahd Rachidy, founder and chief executive of ABAKA, an AI-powered cloud-native platform for digital saving and retirement solutions that helps financial institutions provide accessible and affordable advice to consumers. "Governments are worried that if people don't save enough money, they are going to have to foot the bill. We need to put the onus on industry and collectively we need to do more to help people save more. "It's a win-win situation for everyone. People save more and get a more secure financial future. Industry providers get more revenue on their top line. But it needs to happen now because the user experience involved in accessing your pension or increasing your contribution is ridiculous for the 21st century. Large providers are sitting on a huge number of legacy technologies, which are archaic and preventing them from innovating." General awareness around pensions and retirement savings in the UK is woeful. More than a third of the adult population in the UK say they have no pension at all, rising to 55 per cent among millennials, according to a study by Finder.com and OnePoll. Of those who said they do have a pension, 36 per cent didn't know how much was actu- ally in it. Perhaps most worryingly, 43 per cent of those quizzed in the study said they had no idea what a healthy pension pot looks like. Of those that did estimate, the average response was £174,000, despite Royal London recommending a pension pot of at least £260,000 if you want to avoid an uncomfortable retirement. Mr Rachidy was inspired to start ABAKA having witnessed his own father's chal- lenges in saving for retirement. "My dad never had a pension and I think a lot of people today will end up like him if they don't do anything today," he says. "We come from a place where we always had to worry about money. That can be very stressful. When you spend your whole life working, at some point you want to take some time off and per- haps enjoy a holiday with your family. When my dad was looking for financial help, he couldn't find it. "He turned to his bank and to pro- viders, but they weren't interested because he didn't meet the criteria of having enough money. Advice was not accessible and even if you could find it, it wasn't affordable. That's still a chal- lenge today; there is a clear advice gap. It's worrying that 90 per cent of the working population in the UK is not on track to achieve just a basic retirement income to cover their living expenses. We're determined to change that and think the best way to do it is to help the industry transform itself and deliver outstanding and hyper-personalised customer experiences." ABAKA harnesses Artificial Financial Intelligence TM to revolutionise how organisations financially plan for their clients. It has created an AI-driven dig- ital platform that gives the financial services industry the means to better engage with their clients. The software platform consists of a library of mod- ular, scalable applications designed to integrate with an organisation's systems and business requirements. Financial institutions can use the modules and applications to build their own solutions and customer experiences. Those modules include innovations such as conversational AI, intelligent personalised nudges, data aggregation technology and pension tracing consoli- dation. True conversational AI, otherwise known as chatbots, is a particular game- changer for engagement, according to Mr Rachidy, because it fills the advice gap by providing instant access to infor- mation on pensions, savings and invest- ments through humanlike conversations. "Instead of having to wait months for information from your provider, you can instantly talk to a robot online," he says. "We are the UK's first conversational AI platform in this space and we are deliver- ing our solution across multiple markets now, in Asia, the US and Europe. Studies are showing more and more people are using chatbots and specifically for financial services. Once you've had this experience you don't want to go back." ABAKA refers to the application of machine-learning in financial services as Artificial Financial Intelligence, and believes it will revolutionise the indus- try and help close the gap in retirement savings. Financial services are especially ripe for AI innovation because of the vast amount of transactional and behavioural information that providers collect on their customers. If leveraged in the right way with the right technology, this infor- mation can be used to enhance engage- ment and help people plan and save better particularly through actionable intelligent nudges. As well as providing more afforda- ble and accessible advice to consum- ers, Artificial Financial Intelligence also empowers advisers by allowing them to service more clients, even those who don't meet their normal commercial cri- teria, in addition to helping large pension providers and retail banks to provide a solution at scale to the mass market. "It's data driven and creates better understanding of your customers, more opportunities for providers to service those customers and greater trust between all parties involved in retirement planning," says Mr Rachidy. "Artificial Financial Intelligence is the future. Our mission is to create more engagement in financial services and to educate, engage and advise customers to build their own secure financial future." For more information please visit www.abaka.me Chief financial officers must embrace digitisation to harness their most valuable asset, a single view of financial data, and become forward-looking and strategic advisers Commercial feature P Our mission is to create more engagement in financial services and to educate, engage and advise customers to build their own secure financial future of millennials seek financial advice services increase in baby boomers seeking advice on accessing their pensions since 2016 of interactions with financial institutions are through chatbots 84 71 85 % % % Deloitte Pensions Advisory Service Gardner & Juniper AI holds the key to a secure financial future for all NE ARLY T WO THIRDS OF MILLENNIAL S FEEL THE Y ARE DOING WORSE FINANCIALLY COMPARED TO THEIR PARENTS Overall, how do you feel your generation is doing financially as compared to the prior generation (e.g. your parents)? PwC feel worse off 62% feel worse off 46% feel worse off 40% Millennials Feel worse off Feel about the same Feel better off Gen X Baby boomers 17% 24% 23% 21% 31% 37%

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