Distribution Technology chief executive on a new evolutionary phase for advisers
The fee transparency introduced by Mifid II exposes advisers, platforms, DFMs and asset managers to client scrutiny. This scrutiny should not be heavy weather for good firms but it will prompt clients to assess the real value of what they are paying for. Value is less palpable than price.
Distribution Technology chief executive Ben Goss believes advisers are entering a second evolutionary phase, partly ushered in by the new regulation.
“The percentage of the UK population interested in investing their own money is very small. For the rest, our old reptilian brain is designed for fight or flight. Advisers play a critical role in helping clients make better decisions,” he says.
This should be the starting point for any conversation about the value advisers provide. Bringing together financial data to create a robust financial plan underpins this. And the volume of client data available has never been greater.
Goss believes that, even though Mifid II will prompt some difficult conversations, advisers will continue to win clients’ trust. “They have never had greater agency to provide an aggregated view of the client’s financial position,” he says.
It is interesting Goss does not see his firm as a technology company. His focus is on the investment process. Distribution Technology’s Dynamic Planner risk-profiling methodology forms a core of financial planning, with 27 per cent market share.
His vision is to create a virtuous circle from the perspective of suitability and reporting, making it easier for advisers to demonstrate suitability. He sees suitability reviews for ongoing clients as an Achilles heel in the advice process exposed by Mifid II.
The regulation’s requirements are more stringent, making this a costly and time-consuming process in the absence of some level of automation. Technology drives consistency of approach and an audit trail for advisers.
Goss also believes the relationship between risk rating and asset allocation will grow closer. If the asset allocation and risk models are aligned at every step in the advice process, Goss’ approach certainly creates a more seamless system.
Of course, Distribution Technology is not alone in developing this type of partnership. But advisers who embrace this process do hand over significant influence to Dynamic Planner’s risk-profiling methodology. And automating the assessment of clients’ psychological attitudes to risk is mostly a lot easier than evaluating their capacity to take on losses.
It is therefore crucial to be able to demonstrate the value of the Distribution Technology approach to the client, and not just to advisers and fund managers. Goss is confident that he can.
In spite of Goss’s stance that Distribution Technology is not a tech firm, technology and data pepper our conversation and form two important threads running throughout his career.
He started out as a researcher, analysing the economic development of Caribbean Islands. But he cut his teeth in the investment world working as a strategy consultant on Direct Line’s first investment proposition and Egg Invest. These two players led the move first to telephony and then to online insurance broking and banking.
Goss is clearly excited by some of the strides being made in other sectors. Vast data sets can now be interrogated through artificial intelligence, and he is enthusiastic about its practical applications for advisers. Distribution Technology will use both AI and the vast data sets it captures to accelerate the future evolution of financial planning.
Goss’ view on robo-advice is that it will be an enabler for advisers rather than a big boost for DIY investors. His early experiences at Direct Line and Egg convinced him that technology and investing could be a powerful combination and his first foray into technology was Sort, a proto robo-adviser launched in the late 90s.
He does not see a big market for pure robo. However, he singles out Financial Engines in the US as a success story. The biggest robo adviser you have never heard of, it manages £3trn in defined contribution pension funds, and its proposition remains rooted in adviser expertise through its telephony division.
Every firm has its own advice gap and automation is a way to address this market, according to Goss.
Distribution Technology’s solution, Access Advice, is end-to-end simplified advice but, from a fund perspective, it is whole of market. The adviser remains a critical component. For Goss, the UK market for this type of simplified advice is set to grow.
Miranda Seath is research director at Platforum
2003-present: Chief executive and co-founder, Distribution Technology
2001-2003: Commercial director/managing director, mPower Europe
1998-2000: Commercial director and co-founder, Sort
1995-1998: Strategy and marketing consultant, PricewaterhouseCoopers