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October 19, 2018updated 06 Feb 2019 12:03pm

Is fintech getting personal? Why online wealth management needs a human hand

By Oliver Williams

The appeal of fintech to HNWIs is simple: It is an efficient and hassle free means for them to allocate investments. And in that efficiency comes cost saving. Clients of these online investment platforms can cut out expensive advisors with clever algorithms.

However, there is increasing concern among those in fintech circles that investors – especially the wealthiest kind – want some form of human help in building their portfolio online.

A report by EY recently found that among high earners in the UK, half of women and 28% of men prefer face-to-face over online advice on their investments. The report also notes that men’s “top gripe” is the high fees of professional advisors.

In speaking to start-up fintechs and centuries-old private banks, PBI has found similar sentiment among high net worth clients today. Here’s how banks and fintechs are adapting to this new need.


Jargon busting

Speaking at London’s Digital Wealth Forum recently, Simon Rogerson, CEO of investment firm Octopus Investments, said that advisors are needed to guide clients through complex financial jargon: “We are talking about stock, bonds, asset allocation, and the end client does not understand those terms. The proportion of the population that do understand those terms is not enough to make an industry”.

The Financial Conduct Authority (FCA) issued a set of ‘streamline guidelines’ in 2017, providing issuers of online advisory services a set of clear definite instructions to enhance client engagement. One significant concern was clients’ understanding of technical language.

These FCA guidelines state: “Firms should consider whether the client is likely to understand the intended questions and whether they will accurately capture the client’s objectives and needs.”

A lack of understanding of these “objectives and needs” might put clients off online services according to a recent study. In polling personal investors, UK stockbroker The Share Centre found that one in three women believe that a lack of information and too much jargon are core reasons why fewer women invest in the stock market.


The hype over hybrid

Courtiers, a UK wealth manager, this week announced that it was going “completely digital” after launching a “digital client platform” with US fintech provider InvestCloud.

Behind the tech, however, humans will remain. “We will 100 percent retain the personal and human service, as some existing clients may not wish to engage digitally”, said its CEO, Jamie Sheppard.

“A hybrid approach is the way forward. Technology offers advancements in capabilities and what we can offer to clients, but human interaction will never lose value”, Sheppard told PBI.

This “hybrid approach”, itself a new piece of jargon, is where many see fintech and wealth management converging. The consultancy Accenture defines hybrid as “a digital platform used by the client alongside an advisor, brokerage or robo-account that provides a periodic meeting with a certified financial planner.”

Indeed most of the major consultancies seem to advocate wealth managers adopt this approach.

“Blend the two”, Accenture says in its ‘In the era of hybrid advice’ report, “and you have an industry future that may look quite different from its past—but one that will improve the client experience in ways previously not imagined.”

Another consultancy Capco says that “firms that successfully employ the hybrid advisor model will be empowered to evolve their business, attract a new generation of customers, and serve them in a flexible and cost-effective manner” in its ‘The hybrid advice model’ report.

Writing in PBI, GlobalData says that “the successful wealth management propositions of the future will combine the best of human and digital capabilities.”

In a survey, consultancy Capgemini found that  57% of wealth managers  reported a hybrid transformation programme underway this year, a 3.4% rise over last year.


Going back to the future

Some of the most digitally oriented fintechs are taking note and incorporating the traditional wealth management service of personal advice into their high-tech offerings.

Scalable Capital, a European online investment manager backed by BlackRock, launched over-the-phone and face-to-face consultations earlier this year. According to the Financial Times, Nutmeg, a competitor, plans to follow suit.

Private banks with fintech departments are either closing them down, as UBS did with its Smartwealth platform, or marrying them with in-house advisors in various fee models. Two recent examples of such a pairing include Wells Fargo’s Intuitive Investor and Charles Schwab’s Schwab Intelligent Advisory.

When it comes to creating such services, Sheppard offers one piece of advice: “Wealth managers such as ourselves must drive tech adoption, not be driven by it.”

With additional reporting from Mishelle Thurai

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