Ian McKenna: The new wave of FS tech
In the US, Finovate has built up a reputation as the leading conference on innovation in financial services technology. With a refreshing format that limits presenters to just seven minutes on stage and where PowerPoint is banned, you have to demonstrate real systems, so the event is an information whirlwind and manages to be stimulating and challenging.
Last week, it held its second European event and show-cased a series of technologies which made it clear how essential it is for any adviser business to innovate and showed services that can make an important contribution to that change.
Overall, the event was very banking-orientated, although some of the key trends, particularly a plethora of solutions designed to address the challenges of secure identification of customers, could apply just as much to the investment industry.
I was particularly impressed by ValidSoft, which presented a voice biometric security solution for which the customer only needs their mobile phone. Etronika (www.etronika.lt) showed an amazing way to interact with online banking using voice and gesture commands, think Kinect for banking.
Another trend was to embed personal financial management tools within online banking applications. This could help the banks finally market financial products effectively and give consumers really valuable guidance.
In this area, Wipro demonstrated a system which, while targeting banks, looked like it would also have much to offer a broader advisory or wealth management business, certainly one for a life office looking to set up their own advice service to look at.
Cardlytics showed how it could deliver discount vouch ers for almost anything directly into online banking statements, a great way for banks to save customers money.
There was also some excellent content relevant to investment advice. I would argue probably the strongest presentations covered these areas.
The event was opened by a vision of what the adviser of the future could look like in the shape of Nutmeg (www.nutmeg.co.uk), an online discretionary investment management proposition due to go live in May.
Having raised funding from some of the original investors in Skype and Hotmail, this is a financial advice business, but not as we know it.
The online service in terms of its look, feel and navigation, called the user interface in tech speak, is simply outstanding, being elegantly simple, intuitive and informative. It takes the user through a full online know-your-client process, helps them identify financial goals and the extent of risk they are prepared to take in achieving these objectives. Investors are then guided towards a set of risk- rated funds which are automatically rebalanced periodically to continue to align with the customer’s objectives.
The service is charged at between 0.75 per cent a year to as low as 0.25 per cent depending on how many Nutmegs, loyalty points, a customer has collected.
I am sure many advisers would find the way has all been presented to be alien but, in practice, I think this is probably very like what some firms will look like in five years.
Investor Bee (www. investorbee.com) is a service I expect we are going to hear much more about over the coming months, especially as it launch its new fund rating service before the Isa season.
The company has accumulated information on over one million UK investors’ portfolios and can compare the level of return fund managers have achieved relative to the risk incurred.
The objective is to allow advisers and retail investors to better understand the quality of investment returns from multi asset products.
Managing director Graham Mannion says this will enable them to put funds in an accurate risk category, which the IMA has struggled with, then, once categorised, help identify the net return after fees that a manager has achieved relative to other funds with similar risk.
This service could be very valuable for IFAs in giving them new ways to demonstrate to clients the added value they achieve by identifying funds that give genuine returns against objective benchmarks rather than the fund manager’s preferred index.
Figlo (www.figlo.com/en) a Dutch financial planning software provider, gave another interesting presentation from an IFA perspective.
The firm has an IFA background and tells me it commands an 80 per cent market share in its home country but has delivered front-office software solutions to advisers, life offices and banks in many other countries.
It demonstrated how financial planning tools could be integrated within Facebook, with the ability to target the demographic which is likely to welcome such elements.
This last point is crucial as doubtless many Facebook users would find the idea of personal finance information intruding into their Facebook highly objectionable but for the right segment of customers this could be the way they would want to consume such information. Although it does not have a live offering in the UK, it is looking for clients and has a lot to offer. I would hope to see them launch in the UK soon.
Finovate Europe reinforced to me the extent to which the message to any financial services business, big or small must innovate or fade away.
It showed real technologies that in just the next few years will transform the ways in which financial consumers can be served.
The consumer will be the winner from all this change, having better access to more information and services of higher quality and at lower cost. Videos from the show should appear at www.finovate.com/europe12vid/ soon and will be well worth spending time watching.
Ian McKenna is director of the Finance & Technology Research Centre