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Ian McKenna in San Fran: New adviser tech coming our way

Ian McKenna MM blog 2013

Having been to five Finovate events in the last 15 months, this latest show in San Francisco has been without doubt the most stimulating.

A wide range of innovations having been shown which reinforce my view that it is not if but when we will start to see dramatic change in the way that both financial products and advice are delivered.

Even as a financial technology evangelist the capability of some of the technologies amazed me.

The overwhelming message I took from the show was one of companies wanting to deliver customer empowerment. A plethora of new services demonstrated could transform many of the traditional processes in our industry. It is fair to recognise that for the most part these are presently being targeted at the US market but it is very obvious how many of these could be adapted for the UK market and given the lack of the language barrier it is reasonable to assume that the UK would be the logical place for such organisations to come when they look to expand.

The Finovate conference lasts for two days and although many of the presentations focus on mobile payments and banking technology, there were many presentations  on businesses and services that can either challenge or complement established financial advice and investment businesses.

Space will not allow me to go into as much detail as I would like in exploring many of these so I will be posting an extended examination of several of the organisations mentioned on my AdviserSoftware LinkedIn group. This will allow readers to ask specific questions about each organisation and I will invite each company involved to respond.

Converting large amounts of data into reports is a time consuming process that takes place in virtually all such financial services businesses. Narrative Science has created a technology that has the potential to save millions of hours of work each year. Its Quill technology seems almost too good to be true. The system can pull together vast amounts of data and automates analysis generating readable output with text and graphics.

This could reinvent the way advisers collate data about funds and products.

The system is capable of generating documents designed to support different levels of detail and understanding depending on the end audience. It claims this has the ability to deliver human insight at machine scale and the business is already working on an implementation with leading edge digital wealth management advisor Personal Capital.

The examples I was shown at the event did make rather heavy reading but there is no doubt the process is impressive.

The emergence of services like Quantopian will create major challenges for fund management groups and investment managers, as it will become increasingly easy to analyse why they only achieve mediocre returns

There are a long list of questions I imagine any compliance officer would have before accepting a system like this, however, the potential for cost saving is obvious, even if you put in place a manual system to validate the Quill process this could still remove vast amounts of individual analysis.

Quantopian, has built what it says is the world’s first algorithmic trading platform. It will allow users to create and trade with algorithms, so that they can make decisions based on data not emotion. The service includes an open source back testing engine where users can evaluate investment algorithms. This enables the user to look for trends in a wide range of non-market data, not just prices.

It is clear from many services that have been demonstrated at Finovate that we are hitting a real inflection point in how technology can be harnessed by the financial services industry introducing the capacity to use information from a far wider range of sources and track the impact that such data may have on investment performance.

The emergence of services like Quantopian and others I will explore in the next instalments of this summary, will create major challenges for fund management groups and investment managers, especially those who simply follow the herd, as it will become increasingly easy to analyse why they only achieve mediocre returns and to design far more sophisticated strategies based on data that could never previously be evaluated.

Anyone able to take advantage of these new services will have very powerful tools at their disposal and should be able to enhance their performance. Quantopian expect to provide their services to both professional firms and consumers and are certainly an exciting player to watch in the future.

Moven demonstrated beautifully designed services that can operate over mobile devices to address the anxiety about money that Generation Y frequently experiences. Its Money Pulse service helps users understand how fast they are spending each month compared with their previous spending. Added to this, its Money Path tool helps identify spending patterns each month and a Spending Assistant should help people make smarter spending decisions.

Delivering information over mobile devices as a key way to connect consumers with their money

The company sees delivering this information over mobile devices as a key way to connect consumers with their money in a completely different way by providing access to information about their spending where they believe it is needed most i.e. as they are about to spend it.

Moven’s delivery of these services demonstrates fresh and innovative thinking about how to help young people take control of their finances via the mobile devices to which their target audience is almost permanently connected. Its solutions are stunningly simple and a great lesson in best practice.

Whilst customers who embrace personal financial management tools become very regular users, many organisations report relatively low overall adoption rates. Money Desktop, which for the third time won a coveted Best in Show award at the conference, demonstrated an outstanding user interface and user experience for their tools, which now link to powerful data analytics.

The company typically achieves adoption rates that are far higher than industry averages with some customers achieving adoption as high as 60 per cent. It gave me another example of a bank that has achieved 20 per cent adoption in just two months.

It sees the user interface and experience as crucial if such levels of success are to be achieved and also highlight the importance of having a great data aggregation experience.

To achieve this, Money Desktop has put in place an aggregation routing service which enables them to choose the most suitable source of data for different implementations. Its success rates are a stark contrast to the limited adoption reported by some UK banking operations so these are valuable lessons for those planning such offerings.

Jemstep is a registered investment advisor firm (the US equivalent of an IFA) which operate on a pure fee basis taking no fees from brokerage firms or advisers. This is where similarities with traditional advisers stop.

Focusing on meeting consumers’ needs in retirement it has built a highly sophisticated online service which captures details of the clients personal circumstances, attitudes to and capacity for risk and such other information as is necessary to assess the client’s circumstances.

After the necessary information has been entered into the system it then uses powerful algorithms to guide a consumer to an asset allocation to suit their objectives.

In so doing the system considers the tax efficiencies of different product wrappers, product fees, fund and brokerage fees and generates an explicit summary of all the actions a client needs to take to move them to a more effective portfolio.

Jemstep president Simon Roy says the company is taking a high tech approach to wealth management using institutional class analysis and portfolios to make advice available to customers at a price they can afford.

This a really exciting example of how qualified professional advisers with extensive experience in the industry are entirely reinventing their process to deliver enormous customer benefit for a fraction of the traditional cost of advice

The service is actually free for users with portfolios up to $25,000 (£16,000). For investors with larger amounts pricing starts at $17.99 per month for portfolios of up to $150,000 and increases in steps up to $69.99 per month for portfolios of $600,000 and above.

The company has already achieved thousands of users with average assets per client around $500,000.

This a really exciting example of how qualified professional advisers with extensive experience in the industry are entirely reinventing their process to deliver enormous customer benefit for a fraction of the traditional cost of advice. This is certainly an organisation I will write about in greater detail in the near future.

Ian McKenna is director of the Finance & Technology Research Centre


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. Mike LeGassick 14th June 2013 at 1:19 pm

    Fantastic stuff Ian. Well done for reporting this ground breaking technology and all of the new innovations that I’m sure will be crossing the pond soon. All the very best and keep up the great work.

  2. This is actually the first of a two part summary, I believe Money Marketing will run part two next week.

    Also I originally included links to videos of the actual Finovate presentations for each of the businesses covered but these are not included above. I will pot these links to the linkedin group over the weekend so if you wish to see these please use the link in the main copy above to register for access.

  3. Of all the services Jemstep sounds the most attractive to me. I really love the idea of self managing my retirement for two reasons: 1) Cost savings 2) Empowerment, no one cares as much about my retirement as I do and I want the tool to help me do it. To an IFA I’m just another pay cheque.

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