Blade Runner- Future Business Models in Asset Management

Headlines

Main concerns for D2C clients right now:

• The potential for a stock market crash
• DB transfers: for many investors they are receiving the biggest lump sums ever received in a professional capacity, therefore clients will be fearful of it being mishandled
• The impact of regulation and tech: Adviser activity has been limited due to RDR
• On the whole advisers’ client acquisition is poor; advisers do not fear losing clients, leading to lazy behaviours

Key issues and challenges

Main challenges for advisers and asset managers right now and moving forwards:

Investors are disinterested

• There are fewer advisers than ever before, and those advisers are only helping clients with more that £100k investable assets. Everyone below this gets no advice and becomes disinterested

How to communicate with clients about achieving outcomes when the relationship is with the platform

• Previous belief: face to face communication is required but this isn’t the case anymore. Clients are happy to receive advice on the phone or the web
• Overall there is a need to create information which will better improve client understanding of their financial products
• Needs to be less reliance on direct mail / correspondence as they are not able to contact the bulk of D2C customers using a platform
• The assumption should not be that we cannot communicate due to regulation. We can communicate, but we can’t know exactly who individually we are communicating too
• Instead need to use marketing and mass comms to contact the types of people who invest, just not the individuals. There is enough insight out there to know what our customers want to hear and how, and yet asset management persistently ignores this, instead opting for jargon filled factsheets and disclaimers

FinTech is a disruptor, but what are we doing about it?

• There will be tech disruption risks soon which we are not even aware of yet
• Why aren’t retail banks setting up more FinTech services? Because the acquisition of customers is too hard. Legacy customers are not being transferred into fintech customers. We need to find a new way to do it
• The success of tech disruptors is their simplicity. Offering a solution to a problem people don’t even know they have, but also maintaining a good product
• Issues of default protection of existing models (e.g. the inability for the distribution side to contact the other side) is stopping innovation and automation
• We need to look outside the industry for innovation, not compare ourselves to other asset managers and admit defeat. In asset management, innovation does not happen in a bull market (despite the capital to facilitate it) – we wait for a downturn 

Conclusions and solutions

• All discussions are broken down due to regulation
• Can we combat regulation or is it too big?
• The regulator will be more willing to be malleable if the industry can prove that they are acting with the end consumer at heart. If actions are in the consumer’s interest, the regulator will move to facilitate that.
• Big name brands are now stopping to offer some services due to fear of reputational risk. The industry needs a brave participant to take on the risk