In a new series, Funds Europe in conjunction with Investec Asset Management, looks at the challenges affecting fund distributors. Jonathan Polin, group chief executive officer for Ashcourt Rowan, explains how combining a face-to-face approach with new digital solutions could be the way forward.
What have been the main lessons you have learnt over the last five years?
When you look at the sector there is a huge modernisation programme that is still yet to be completed, and having been through that process I can say that it is a lot harder than it initially looks. But it is absolutely vital if we are to be able to deliver the sort of service that our clients deserve to have.
Also, the garnering of new assets in the sector is slower than expected and the majority are coming from existing clients or from managers that companies have recruited into their business.
Our client base is quite typical of businesses like ours, and 60% of our clients are aged over 65 years. There’s nothing wrong with that because they’re very good clients, but it means that we have to find ways to engage with a younger universe.
What do you see as the biggest challenges facing your business over the next couple of years?
One of the biggest challenges is how to drive profitability. We’re fortunate enough to have a significant, captive asset pool and it is important to think how we can make that drive out more profits for our stakeholders.
Regulation will continue to be a challenge; the sector has got to make up for the wasted years when regulation wasn’t focused on like it is today. We also have to institutionalise businesses so that the business owns the client, rather than the underlying manger. We need to significantly deepen our client relationships.
The other challenge is also how to deal more effectively with smaller clients and give the type of service they require, in a profitable manner.
We must continue to find better investment solutions and interact with the asset management community to ensure that they understand the solutions that our clients require and how they can help us develop them.
Although there are challenges, the flip side is that there are huge positives to the sector. In my view this is a once in a generation opportunity in terms of the consolidation of the industry and creating a vibrant and modern wealth management business.
Where do you see the greatest opportunities going forward?
It is about exploring digital communications requirements; how you deliver that will mark out the winners from the losers.
The younger element of the client base will continually want more hybrid DIY options with advice capabilities.
The research shows that more and more of our clients want to interact through their tablets, using programs such as Skype or FaceTime, to reduce the timeline and get access to their relationship manager when they need to without having to arrange traditional meetings.
Behind all of this is how we utilise and exploit the big data. We need to really understand our clients and then be able to offer them more customised solutions and advice. This goes together with developing and harnessing social media platforms, where investors like to socialise their thoughts within their own peer groups for reassurance.
How do you see your business models changing as a result of changing business pressures?
We have to develop more of a hybrid model, and that means having a broad waterfront of solutions that allows both face-to-face and digital to work in tandem. If you look at the digital solutions available today, be it a Hargreaves Lansdown or a Nutmeg, there is no advice driven around them.
They work on an execution-only basis and there isn’t any advice on why people should be doing it.
Where the developments will come will be companies that are able to deliver holistic financial advice but in a more cost-effective way. Also business models will change because ownership will change, as part of the shift in the value chain from asset managers and insurers to wealth management businesses’ distribution.
You will see asset managers and insurers buying these types of businesses up to give them back some of that value chain, and allow them access to the end client, from whom they have become increasingly detached.
What are the greatest influences on your business at present?
Regulation has to be for some years to come, because it’s so all encompassing. The progress of regulation is absolutely right to ensure that we can offer the best services to our clients, but some businesses need to catch up.
Stepping back a bit, the biggest influence will be the growth opportunities in terms of consolidation in the market. We need to really grapple with how we develop the business model of the future.
You can look to the states to see what their digital solutions like Betterment and Personal Capital are doing, or how their registered investment advisers (RIAs) actually operate there.
RIAs are the largest growth sector of the wealth management space in the US.
How do you feel you make a difference for your clients?
What we try to do is ensure that we can give our clients the very best access to high quality advice that will allow them to make the important decisions.
We are there to protect them through good and bad times, and to be the sounding board that helps them to achieve their goals.
However, the reality is also that we must develop the best investment propositions that we can, to have the best opportunity to give our clients the sort of returns they deserve.
Although service is very important, at the end of the day we’ve got to work to ensure that we deliver on the numbers because that’s why people are investing with us.
Looking five years ahead how do you see the industry?
I imagine that the industry will have completed the first phase of consolidation. You can see this in the UK where the amount of mergers and acquisitions activity and the dash for scale is what is all-important.
Therefore there will be a smaller number of larger players, which will be beneficial for clients because the businesses will have greater ability to invest in new types of technology.
From the regulatory point of view, being larger will mean having better systems and controls to protect clients’ interests and from a shareholder perspective, they will be better able to drive out real profitability and develop a market share.
I also believe that over time, and maybe not in the next five years but perhaps the next seven to ten years, you will see a change in the ownership structure and much more alignment with asset managers or insurers to provide complete solutions.
Jonathan Polin is group chief executive officer for Ashcourt Rowan
©2014 funds europe