While we in the UK are busy sorting through the nuances of RDR regulation, a new venture in the US – PersonalCapital.com – may just have leapfrogged us all.
PersonalCapital.com – launched recently – promises to be the “next generation financial advisor”. And, it has some serious backing. It’s founder, Bill Harris, is the former CEO of both PayPal and Quicken. Moreover, it has raised $25m in capital from various venture capitalists.
So what does it promise? First, the platform aggregates all your investments from all sources. It then goes on to capture information about your goals and plans, before making asset allocation recommendations and helping you construct a portfolio of stocks and ETFs. It automatically reports and rebalances your portfolio, and it manages the timing of capital gains and losses. Then, for a 1 per cent annual fee, you get access to an independent financial adviser. Aided by technology, that adviser is able to manage up to 200 clients.
In short, it promises to offer independent, fee based, low-cost, empowering and engaging advice that will appeal to the digital generation. While the promises warrant scrutiny, they are on face value compelling.
It is no surprise to me that such an offering has launched. Indeed, it has been a personal and professional irritation that nothing similar has come sooner. Today, the Retail Investment market takes the simplistic view that consumers are either “self directed”, wanting an online execution-only offering, or “delegators”, wanting to put their full trust in a financial adviser. The reality is, the internet has given rise to a new digitally-dextrous generation of “validators” (a term coined by Forrester Research, describing how this generation uses the internet to validate advice they receive).
These validators want the tools and information they need to be in control of their investment strategy, but equally they want to seamlessly interject expert opinion where and when they need it. I liken it to learning to fly a helicopter. The cockpit is the investment platform, that both you and the instructor have access to. Sometimes the instructor will man the controls, sometimes you will, and sometimes you will do so together. All too often though, technologists in our industry want to build an auto-pilot, while advisers want to chauffeur their clients everywhere.
If this model is to take off, it raises some tough questions for all of us. There are major movements in our industry at present. Financial adviser firms are consolidating, platforms are looking at direct-to-consumer offerings, and providers are set to launch a new generation of restricted offering. However, none of these movements, as far as I’ve seen, threaten to meet the standard that Personal Capital has just set down.
Adam Price is the founder at VouchedFor.co.uk