Dena Brumpton, CEO of Barclays Wealth & Investments UK, tells Ronan McCaughey about the opportunities for wealth management players created by radical changes to the UK retirement market. Brumpton also discusses the plans for Barclays’ Smart Investor platform and why tech giants such as Google and Amazon cannot be ignored as future wealth management competitors
Private Banker International (PBI): How has the UK wealth management sector changed in the last few years?
Dena Brumpton (DB): It’s interesting, because if you look at the wealth participants in the industry, they have not changed a huge amount. However, the environment has changed massively.
For example, we have a retirement market that is dramatically and significantly different. There is an aging population and the UK has a low birth rate.
Therefore there will be fewer people coming up to pay the bills for the retirees of the future and we know there has been a reluctance and inability to save and invest for our pensions as is needed.
It was recognised that you cannot make people buy annuities when interest rates are so low but regulation has gone completely to the other end of the spectrum and allows people to do what they like with their pension pots at retirement.
Pension Freedom came shortly after the Retail Distribution Review which was still bedding in and this led to the IFA market shrinking, in some part because it could not cope with the cost of conforming to the regulation which of course led to the advice gap.
These issues have been around for a while. What’s been interesting is the slow pace of the industry to be innovative and develop new products and services to address them.
Robo-advisers emerged and everybody said it’s the robo-advisers that are going to solve this part of the market, but I’m not sure anybody goes through a robo-experience and feels they have had any detailed advice.
A person may have had technical investment advice, but there is no advice around how a person’s life will be better planned in future.
I think you are going to see the emergence of much more sound financial planning models, in terms of hybrid, digital and human models, rather than the focus which has so far been on automated investment advice for the mass affluent
The good news for Barclays is that we have wealth management offerings for both ends of the spectrum.
We have the fully relationship-managed business with Barclays Wealth Management and we also have our fully digital investment platform, which is execution-only, and is called Barclays Smart Investor. We also have our Private Bank which offers our international client base a bespoke service and access to the corporate and Investment Bank.
For us to fill the gap in the middle i.e. the hybrid space, is a much lesser bridge to cross than it would be for others who don’t have that scale digital platform.
We are going to evolve the Smart Investor platform, that currently has 325,000 customers, over the next 6-12-24 months. Smart Investor is a scalable digital platform with access to 24 million Barclays customers and investment expertise.
Smart Investor is execution only, but it doesn’t take a lot to see an execution-only platform moving into more guidance, and then you have this hybrid model that will emerge in the middle, which over time could be an interesting area to explore.
Below: Dena Brumpton, Barclays Wealth & Investments UK
PBI: How concerned are you about Google and Amazon as potential competitors in the wealth management space?
DB: It’s a difficult one because it’s very easy to ignore Amazon and Google, but we ignore them at our peril. You only need to look at the payments space and how much the PayPals of the world have disrupted the payment process.
Whilst it will be more difficult to do it in the investment space, because the regulated environment is so challenging, I do not think we can dismiss the possibility of Google and Amazon entering the investment space.
It’s not beyond the realms of possibility to think you could buy your ISAs on Amazon in the future.
We should be careful and ensure we are always looking to those large platform companies.
PBI: Will Brexit damage the UK’s wealth management sector?
DB: We are not worried about Brexit from a regulatory standpoint in terms of our wealth management business because it is very much a UK business, but our chief investment officer is closely monitoring all opportunities that come out of Brexit.
In the UK we have a market that is growing enormously. Because of those shifts we talked about in the retirement space you have these retirement assets that were the purview of the insurance and annuities market that are now coming into the wealth manager arena.
So, the amount of growth for the UK wealth management sector is not going to be impacted at this stage by Brexit. There are a lot of structural shifts in our own economy that will keep the sector growing.
PBI: How does Barclays’ Wealth & Investments business manage its customer relationships?
DB: If a client is part of our wealth management business, he or she has a dedicated wealth manager looking after that person and a wealth management executive who tends to deal with you more on a day-to-day basis.
We also have a “sky-branched” wealth client services team available 24/7.
Client-buying behaviour is changing, so the amount of face-to-face time is probably reducing a little bit and now with wealth managers using digital tools, they are able to be more efficient when they are with clients.
We have a great digital app so our clients can see not only their bank accounts, but also their investment portfolios, their asset allocation and their performance.
It’s that human engagement supplemented by digital tools that really keep the relationship grounded.
Then, at the other end of the spectrum, Smart Investor is fully digital.
PBI: There is a lot of market discussion about millennials’ needs. How do their requirements differ compared to older clients?
DB: I think buying behaviour has changed across the board. I think the silver surfer generation is getting to be digitally savvy because they have more time on their hands.
I believe by another few generations, buying behaviour will change again. But our industry at the moment is still a very personal industry. Particularly when people are looking at their retirement or pensions, they want to look at people in the eye and feel they are doing the right thing
That human and emotional connection with clients is really important to us.
We are also very much focused on behavioural finance, so when we talk to new clients, we talk to them about not just who they are and their wealth levels, but we talk to them about their emotional connection to their wealth and how they react and respond when markets rise and fall.
PBI: How do you expect automated wealth management platform and robo-advisers to drive down investment fees?
DB: There is no doubt the more you can automate, the more you can reduce your costs, but you can only go as fast as clients can digest. And that trust with an adviser is a personal thing.
The biggest thing that will happen to fees is MiFID II and the transparency around fees that people will have. That has already started and there is a lot more clarity around fees today. We are very transparent about our fees, as evidenced by our kite mark because we are deemed to be very transparent. Not everyone in the industry has that ARC3D award for fee transparency.