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Who is powering the new age of robo-advisers?


The rise of the robots has been an ongoing discussion point in the financial services industry, but little mention is made of the companies behind the brands. Winterflood Business Services is one of those that powers the new age of robo-advisers, such as Moola, Wealthify, Scalable Capital, Moneybox and Netwealth.

WBS head Alex Kerry says: “We looked at the market gaps a couple of years ago and a lot of what the industry was saying about how the savings ratios in the country need to increase.

“These robo-advice propositions are going to help people to invest and our response was to get behind them and help them get to market. There are some really interesting ones that have got some great ideas. Moola is a great example, using gamification, which is the next stage of the revolution. It is all about making it as simple as possible to invest and engage with the end client.”

WBS provides the automated links and technology behind the platforms, while the robo-advice firms themselves create the user-friendly front end.

But the sheer size of the robo-advice market has taken even WBS by surprise.

“There are at least 70 companies out there doing it and the cost of acquisition is really high, so it takes a number of years before that becomes really profitable,” Kerry says.

That said, one area that does boost the assets on the platform, and so reduces the average cost per customer, is Sipps. Kerry says WBS is learning from Nutmeg, which introduced a Sipp on its platform and saw a considerable increase in average client assets. It is setting up a provider to offer its robo-advice clients.

Kerry says: “We are close to a decision on that. We could offer it to any customers as an additional wrapper but demand has been driven from the robo sector. All the business coming through is transfers, where people have built up small pension pots and are sitting in default funds, wanting to consolidate that in one place.”

While robo-advice is a growing area for the firm, its mainstay is much more in the traditional platform market.

WBS was spun out of Winterflood Securities in 2010, when Kerry joined to expand the business. He came from a background working in technology and operations, previously serving four years at Barclays, working in both the private bank and wealth management divisions in operational roles.

He says the expansion into custody services and launching WBS was “natural” for Winterflood. “We are tech providers as well as market makers, and it seemed a nice fit to offer outsourced services and start to look at offering platforms access to different asset classes.”

The move dovetailed with the announcement of RDR, with the business seeing the opportunity for more efficiency in the retail market as the industry faced the pressures to comply with the new regulations.

“We saw it as a prime opportunity to take institutional technology to retail customers, to help drive efficiency across a number of retail platforms and give better outcomes for customers in having access to asset classes they had not had previously.”

Recently the firm has been targeting greater efficiency and easier trading in the ETF market, and has introduced fractional dealing in ETFs, which is set to go live in two months.

Currently those trading in ETFs on platforms can only buy whole units, meaning many DFMs and others running model portfolios on platforms cannot achieve the exact percentage holdings they want in ETFs.

Kerry says: “We had a lot of feedback from ETF providers and platforms, which has driven the decisions we’ve made, and they said you’ll get no traction with ETFs unless you can do fractions.”

So WBS teamed up with BlackRock, with the former making the technology changes needed to allow dealing in fractions of ETFs, while the latter publicised the move throughout the industry and helped make key connections.

Kerry says Novia is likely to be one of the first adopters of the new technology.

“You would have thought there would have been a bigger adoption of ETFs post-RDR but I think it still stands at about 1 per cent of all platform assets.”

He acknowledges, however, that the shift to ETF assets is not necessarily in the interest of platform providers.

“One of the problems for platforms is that it doesn’t mean they will get any extra money. It means they’ve got all these assets in funds, some of which may switch to ETFs, but will they actually get anything for that? No. It will probably cost more for them to do that.”

That said, he points out that recent moves on acquisitions and consolidation in the platform space, including Cofunds’ acquisition by Aegon, are likely to drive more access to ETFs and other asset classes on platforms, which should make the products more mainstream, he says.

“Some platforms still don’t offer the full asset reach but some do, and the recent consolidation means they will have access to it. So there is going to be some changes. With the rise of the robo platforms need to offer ETFs and lower cost products.”

Five questions:

What is the best bit of advice you’ve received in your career? Management is about working well with your team and ensuring they get the credit and exposure they deserve. Always remember: the work your team delivers reflects far more on you than you might think.

What has had the most significant impact on financial advice in the past year? I was encouraged by the launch of FAMR and its focus on affordability and accessibility. This reflects two principles of our business: to reduce the cost of advice through greater efficiencies and increase accessibility through innovation. Supporting the new generation of robo-advisers is part of putting these principles into practice.

What keeps you awake at night? Apart from coffee, ensuring our proposition keeps evolving. As a software and services organisation, we have to ensure both the business and technology remains cutting edge so we can enable new entrants to thrive in the market.

If I were in charge of the FCA for a day I would… Put innovation and education at the forefront of the financial services industry. Initiatives like Project Innovate can help revolutionise our industry and engaging with young people can help narrow the advice gap.

Any advice for new advisers? Always consider the full range of assets available before making any recommendations.


2013- present: Head of Winterflood Business Services

2010–2013: Programme manager, business services, at Winterflood Securities

2007–2010: Company director/owner, Ogilvie Search

2005–2007: Head of operational assurance for Channel Islands, Cyprus, Gibraltar and Cayman Islands at Barclays Wealth Management

2003–2005: Service improvement team and ops assurance UK private bank, Barclays

2001–2003: GTS technical implementations, Citigroup

1998 – 2001: Treasury manager, Motorola



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