Technology advances changing way financial sector supports clients

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In partnership with AGL Wealth Management

AGL Wealth Management has combined innovative “robo-advice” with highly personalised client support to carve out a successful niche in the financial advisory world. Its senior wealth manager Steven Sweeney and managing director Craig Gibson discuss the firm’s “practical but innovative” approach in a conservative sector.

How did AGL start up and why?

Craig Gibson (CG): I had worked for one of the big banks in senior roles and around 2008-9, it was very turbulent. I was working with high-net-worth clients and in private banking.

The bank started going down a more restricted model of advice and it was difficult to offer the appropriate advice to clients with significant wealth. All of us who founded AGL had known each other and worked together for the best part of 20 years at the bank; you go to the people you rely on and trust.

Steven Sweeney (SS): The proposition was becoming mass-marketed and it was very restrictive. That was the catalyst. I stayed at the bank longer to support clients after the banking crisis, but joined AGL in 2011, two years after the launch.

How did things develop?

CG: It was about creating a “family office” to offer the full range of advice to high net-worth individuals with more complex financial affairs (through our AGL Wealth Management brand) – but also to advise younger members of the family who perhaps just wanted to start off saving a bit of money to put away, or to start an ISA.

They don’t need us to be so hands-on, it was about a lighter touch. So we created AGL Simply Invest for that market – joining Corporate Services and our core Wealth Management and Financial Planning brands.

SS: Although the son or daughter starts investing at a low level, that will tend to pick up as they get older. It’s about building relationships. We are not cherry-picking what we do for them – we can follow them all the way through life. They don’t need to go anywhere else.

We were also ahead of the game in moving away from commission-based financial advice towards a fee-based model.

How do you cope when you can’t deal with a broader client issue?

SS: We don’t profess to be experts in every field, so we have built strategic partners with other businesses – mortgage brokers, solicitors, accountants and so on.

CG: We don’t just choose people who we think are good at their job. We meet them, do the due diligence and constantly review the relationship and ensure their fees are acceptable in our market-place. We can sometimes negotiate better deals as a result and we also conduct client reviews with all partners round the table. Some professions can be very protective of their clients, but we prefer to make things easier for them by getting everyone together, not sending them to six different meetings.

You describe yourselves as “practical yet innovative” – but how do you balance innovation with being seen as a trusted adviser?

CG: We never take undue risks with clients’ funds. Our investment oversight committee meets quarterly and that’s about managing the managers, ensuring constant due diligence.

We constantly benchmark against our peers and make sure everyone on the team is performing at the level we require; if not, they won’t be in the team for long.

Some IFAs like to manage assets themselves; we don’t do that. We want to be seen as a safe pair of hands – but at the same time, we are a forward-thinking company, always keen to innovate. You have to differentiate between innovation and risk; they are very different.

SS: When we try something new in terms of technology, we don’t force it on to clients. We are not going to make a 78-year-old who has never used digital banking access his details online. We embrace technology but we are always open to discussion. It’s about tailoring our service to the client. We tell them what we can do and ask how they would like to interact with us.

How have you innovated as a business?

SS: Embracing new technology is crucial. More and more transactions are carried out on smart phone or tablet and the younger generation in particular are confident in doing their financial affairs online. But we still deal face-to-face with those who want the personal touch and this will remain the core of our proposition.

CG: We are also about to improve our website and looking at voluntary benefits for employers and their employees. Money is tight for businesses but their employees want pay rises. AGL Rewards offers a firm the chance to buy into discount vouchers which offer their employees access to 7,500 stores. If you are on an average wage and continue to do your normal food shopping, buy electrical goods and take holidays, it’s equivalent to saving about £1,000 per year. So it’s like a pay rise, but the employer doesn’t pay and doesn’t have the extra obligations with National Insurance and PAYE. We are here to make you money and save you money.

Robo-advice is part of our proposition, and can be a very good tool for some clients, but financial planning is sometimes about emotions and dealing with people. Computer algorithms cannot deal with the break-up of a marriage and how that affects people.

We are small in number, we do not have lots of admin costs and our use of technology cuts our overheads and we can put more back into the business. We use professional partners and outsourced services where appropriate. Our products are agnostic and work across different platforms and lots more companies are looking at the kind of straightforward online advice offered by AGL Simply Invest.

We are also building our brand through a variety of different channels, including social media, short videos, radio and advertising. We need to be available on people’s iPhones and Android to build brand awareness and our new website will be completely interactive across all platforms. We are also strong on Google analytics.

Has the sector fully embraced the enormity of technological change?

CG: As a sector, wealth management has been very slow to embrace change. It is ripe for further commoditisation; it is scalable both in terms of implementation (thanks to robust, readily available software) and delivery – via the proliferation of mobile internet devices.

Change will be good for AGL as we are a smaller, nimbler company. Some bigger firms are buying out companies and not consolidating across different platforms and are not so agile when they respond to the inevitability of further change. In the next five to ten years, costs will come down considerably and fund managers will have to embrace technology much more.

SS: If you think we will be doing business in five to ten years’ time in the same way we do now, you will probably not be around in five to 10 years.

Firms will have to offer bespoke portfolios to be available on an online platform and a failure to embrace change could lead to a rude awakening. But our job – as our guiding principles say – is to deliver the service our clients want to receive.

People with complex arrangements will generally want to sit down and see the whites of your eyes – and that will not change. We will continue to sit down with our wealth management clients four times a year.

We want to make sure their assets perform well enough to help them achieve their goals in life.

How do you cope in an era of much higher client expectations?

SS: We do get challenged by clients but we just have to show them our analysis and explain how we got there, based on their goals, their risk levels and objectives. We answer the difficult questions and if necessary, get our investment managers to justify themselves in person.

We need to understand client expectations will continue to change, but in a period of rapid technological change, remember that everything is client-centric.

We are the guardian and gatekeeper of their financial goals, dreams and ambitions. We have been very successful at keeping clients and need to keep offering excellent service and never rest on our laurels. We are in a hugely competitive market, especially in Edinburgh, and cannot afford to be lax on service.

Robots lend a hand

Last year robots finally arrived in the UK investment area. So-called robo-advisers, or automated investment services, are firmly established in the United States, where fund groups and specialists have pioneered algorithm-based investing, and it seems momentum is now gathering behind the movement here.

Demand for low-cost online investment propositions is being driven by a combination of factors, among them the effects of the 2012 retail distribution review – including the widening of the advice gap and greater scrutiny of costs – and the fact consumers have become increasingly comfortable running their financial affairs online.

What do we actually mean by “robo-advice”? The term refers broadly to automated online technology where risk-profiling questionnaires help investors identify their goals and establish their appetite for risk, using that and other personal information to recommend (and usually manage) a suitable low-cost portfolio.

You could see them as a simplified, direct-to-consumer variation on financial advice, using algorithms instead of humans to reduce the cost and make it more accessible to the mass market.

One issue is that robo-advice sites don’t (yet) provide full advice where the individual’s circumstances, tax position, objectives, existing holdings and other factors are taken into consideration during the process.

One of the key selling points of online advice propositions is the lower cost, compared with full advice. This will include the cost of the wrapper, ongoing management costs and any ancillary fees, such as exit charges.

The latter are usually nominal, if levied, as the advantage of slicker technology is that exits and transfers tend to be quick and cheap to process.

But there are risks in relying on automated risk and suitability tools. One concern is that investors are wedged into pre-defined models that don’t accurately meet their needs.

However, automated advice services are evolving all the time and will continue to do so as technology develops and new entrants join the fray.

If someone wants to go online but needs hand-holding advice, they’ll struggle to find that without human interaction.

It’s clear, however, that forward thinking firms will start to embrace automated advice as part of their wider client proposition, so robo-advice is definitely here to stay.

This article appears in the Summer 2016 edition of Vision Scotland. An online version can be read here. Further information about Vision Scotland here.