Fintech does not purely have to be seen as a threat to traditional wealth managers.
A growing number of private client firms are now partnering with tech-based specialists to broaden the range of services they can offer their clients and lure in millennials.
Recent months have seen Nutmeg partnering with digital challenger bank Fidor, Signia Wealth teaming up with liquidity platform Flagstone to offer its clients a cash management service, and JM Finn work with Swiss digital firm Crealogix to develop an app.
Fintech consultant Chris Skinner believes that taking a collaborative approach to technology offers a big opportunity for smaller wealth firms, while working with third-party specialists also enables firms to manage the speed of change and keep ahead of their rivals.
‘Small companies can change very easily today because you have this marketplace of companies that offer amazing specialist software that can be plugged together into a great customer experience.’
The next generation
Skinner says that the incumbent wealth managers need to fully embrace fintech if they are to attract millennials and the next generation of clients.
He says graduates today ‘are excited by the idea that you can create a whole new financial company using code’, with those who grew up during the financial crisis having a dim view of traditional financial institutions, particularly the banks.
The rapid rise of a number of challenger banks, such as app-based players Monzo and Starling Bank underlines this trend.
Online wealth manager Wealthify, a disruptor itself, is tapping into this trend and has tied up with Starling Bank.
‘One of the key partnerships that we have is with Starling Bank,’ says Wealthify co-founder and chief investment officer Michelle Pearce.
‘They are one of the new challenger banks that are starting to open up and they are really shaking up how people are managing and thinking about money.’
She sees digital banks as the next step in open architecture, moving away from the traditional ‘walled garden approach’. Whereas in the past someone who banked with HSBC would use a number of their other services, the likes of Starling Bank are helping individuals use a number of different providers.
While clients will still go to Starling Bank as their main point of contact, Pearce highlights that clients can now use its marketplace to access other products, such as Wealthify’s investment management.
‘We have launched in their market and we have a nice integration with them, and we will be working on it in the future too,’ she says.
‘We love working with other fintech companies, it is really exciting and refreshing to work and partner with them.’
Scalable Capital, however, has partnered with a more traditional player, ING German subsidiary ING-DiBa. Clients of the bank will be able to access Scalable’s platform without the need to go through the normal registration process, so this can be done quickly and without the need to enter reams of personal data, the wealth firm says.
Erik Podzuweit, founder and chief executive of Scalable Capital added at the time the partnership was announced: ‘ING-DiBa is the ideal partner for us. When it comes to digital innovations, they act exceptionally quickly
As part of a larger institution ING-DiBa is also well-resourced and able to invest heavily in technology.
Similarly, wealth giant SEI is a major investor in technology and it takes a flexible approach to how it is funded. If something is deemed necessary for its core capabilities, it will develop the technology in-house. It has also built internal teams to focus on key areas, such as artificial intelligence, Big Data and blockchain.
The idea behind this is not just to hire in people with these expertise but to also train and develop SEI’s own people to feel comfortable working with these systems.
However, the firm recognises that other specialist companies develop great technology and it will partner with third-party firms.
‘We are doing a number of things, not just building our internal capabilities. We are partnered with a number of firms that we
believe are offering something different and new to the marketplace,' says proposition director Kevin Russell.
He highlights SEI’s longstanding partnership with Iris the accountancy software firm as an example of this.
Incubating new business
In addition to collaborating with established fintech companies, SEI also aims to incubate new businesses developing technology that could benefit the company in the long run.
As an example, Russell reveals SEI is looking at working with start-ups to provide it with customer relationship management software tools.
Even smaller players have made opportunistic acquisitions to improve their proposition, with Moneyfarm buying the technology behind personal finance chatbot, Ernest.
The AI powered bot will be integrated with Moneyfarm’s existing communication tools in a move designed to improve the usability for clients.