Skip to main content
Better BusinessFeatured Articles

How Investing is Evolving and the Digital Solution to Deliver Personalized Portfolios to Clients at Scale

By 3 March 2022September 6th, 2022No Comments

In December, Stuart Holdsworth was invited to speak at the IMAP Virtual InvestTech conference which was held over the week 6th – 10th of December.

As outlined by Peter, what they have noticed more in the marketplace is a desire for account managers to provide greater levels of personalisation with investments in a more scalable way.   This session is called “How Investing is Evolving” which is also the name of my Stuart podcast which you can find on all of the usual podcast channels.

With Financial Simplicity, that is what we have been running and fine-tuning over the last 20 years.  I personally have seen a transition within the managed portfolios landscape over that time and it is why Financial Simplicity exists today and we power many billions of dollars of portfolios for wealth managers around the world.  

For the most part, in the early days of wealth management, it was mostly about stockbroking closely followed by the era of product manufacturing and product distribution, where essentially most of the industry was professional sellers of products which supported bringing the industry to the size that it is today. 

So if you consider that two things happened, there were product manufacturers which to date they have not only developed mutual funds but that have grown into SMAs, ETFs, and a host of derivatives products that have been manufactured around the world today.  Additionally, we have seen that professional sellers have now merged into becoming professional financial and/or wealth advisors.

The wealth management industry has over the last 5-10 years has collided into regulatory reform which has not only changed the disciplines in the industry but also has coincided with how consumers have been able to connect to services via the internet using smartphones and mobile devices.  

So, now what we’re seeing is the future of the industry, with regulatory reform and an increasing level of consumerism, it is all about customer success, which is not to be confused with customer service.   There is a big difference between the two.

Servicing, customer service is delivering to the standards that the provider defines. Customer success is all about delivering to the standards that the customer defines, helping them achieve what they’re trying to achieve in life.   It is not surprising today that we hear various phrases, in the UK that talk about customs duty. Locally, customers best interest, people talk about orientation around the client.   Essentially, from an investment perspective, a lot of the advisory market has now become professional buyers of investments, as opposed to the professional sellers of investments that they perhaps were in previous lives.

Things are changing.  As recently discussed in the 2nd episode of the How Investing is Evolving podcast, my guest Jonathan Coles, a consumer brand expert, talks about consumerism and how consumers are shifting their expectations.  Consumers are becoming increasingly demanding and judging the value for services provided, want everything made easy, and are becoming increasingly skeptical about things that we can’t access and grab ourselves.  

What this means is that the benchmarks for consumerism, and hence customer success, is that its things like onboarding in minutes or seconds. How many of us go online shopping and give up after two minutes if we are not driven to the place that we anticipate? People are starting to expect this in every aspect of their life; they’re expecting relevance, they’re expecting the experience to be compared to the best experience of the best app they have on their phone, and they are setting a high bar for their personal benchmark.  They also expect to have proximity to decision-making.  Whilst the industry has created some wonderful structures over the years that have blended all sorts of people’s inputs, what people want now is they want to talk to people and make decisions.

What does this mean for investors? Investors are suddenly moving from buying products to it’s all about my assets. I want to see how you manage all my assets and how are your ideas relevant to me and what I’m trying to achieve which is not necessarily relevant to the benchmarks or performance of asset managers. They want it all easy. They want to see it all at once, they want transparency, they want net performance, they don’t want to hear that somebody has given them a 20% return and then find that after-tax they’ve only got half of that.  In essence, what they are after is value for money.

The reference points and benchmarks are massively changing in wealth management. Now there’s broadly available no brokerage, low-cost ETFs, with cash always being a default investment. They want direct ownership and to understand where their assets are. It would be normal to expect that most people outside the industry don’t understand what custody is. They want access to the market themselves.  That’s their reference point for the ones that don’t have the time to get the knowledge or inclination or the courage to do it themselves will seek financial and/or investment advice.  The world of specialised professional investment teams who have developed investment philosophies who put their names and livelihoods around the performance they can generate are providing wonderful model portfolios marketplaces of information.

Now, in the world of margin compression, the economic reality for an investment advisor is that they must deliver more value and service to a larger pool of clients and do it with scale.  The formula many wealth advisors must now implement combines commercial growth with customer value.  They must tailor a service to individual investors financial needs and wants whilst fitting inside the license requirements and the investment team strategies.  They must be able to do that on a long-term ongoing basis with efficiency and with scale.   

And whilst these services were once typically for the very high net worth private family offices or high net worth clients, now the reality is with all these consumer-based interests there is a growing need within the mass market.  The challenge for investment managers is providing good value personalised service, personalised for each investor, delivered in the framework defined by their licensee and investments teams, and doing it at scale.

At Financial Simplicity, 20 years ago we started to consider what technology requirements would need to deliver personalised portfolio management at scale. For the consumer, the most important component is assets via multi-platform aggregation that allows for separation as you can’t mingle accounts together like you can’t mingle your superannuation investments with non-superannuation-related investments.  

From the advisors perspective, it will be about developing personalised investment mandates for each client. Customers may very well go with the standard offering, but as Dell Computers found very early on, there’s very little margin in commoditised products, however a lot of margins when you personalise them.

Additionally, clients are looking for net performance, which means providing effective solutions for tax optimisation.  They also want access to their personal benchmarks, low-cost investment platforms, and products. If the advice proposition is going to be sufficiently compelling, it needs to be compelling against those backdrops.

The technology is today you’ve got to consider investment philosophies that suit every advisor or every firm that they represent.  Everyone is different. People categorise investments in different ways. The whole era of ESG is creating an investment categorisation minefield.  How people categorise investments in one firm may be completely different from how they are categorised in another firm.

Ultimately, it’s about putting those investments into buckets and asset allocations that suit the narrative and suit philosophy of a firm to create model asset allocations or investment model portfolios. This in economic terms for an advisor must be done with efficiency and with scale.

So, it’s about thinking about the clients and their needs all the time. It’s not just about periodic reviews. It’s about delivering high-value service to attend to the needs of every client as portfolios move. That also means first being aware and having in place constant monitoring and alerting if portfolios, particularly personalised portfolios, deviate from their individual mandates.   It’s about being able to take all this information, client rules and preferences, all investment strategies that the firm or the team adopts, and being able to compute it in a way that is intelligent, pre-complaint, scalable, and with one click button push. That’s a big contrast to the Old World which was two to three hours on a spreadsheet to bring all the information together and check it and tweak it and change it.

By being able to do it that quickly, the world of delivering investment portfolios personalised to clients goes from being something that’s laborious and difficult and risky, to something that is possible, efficient, and highly scalable.  

The recognition is that for anybody in the advice world, it’s not just about the investments is about adding your own personal flair.  It’s about having the human touch that sometimes the technology can’t detect. So being able to not only generate and manage investment portfolios on an ongoing basis but have that human touch and override it within the guidelines and the frameworks that the firms allow advisors to operate in. With all of that in mind, we had this vision around 20 years ago, and what we set out to achieve was basically to deliver a technology that could do all of these things, wrapped up in a single web-based platform and provide a simple way for advisors and wealth managers to mass manage client portfolios in whatever structure that they choose to, whether it’s advisory or discretionary, whether it’s in tamps or whether it’s in any of the sorts of regulatory frameworks or marketing based business models. 

Financial Simplicity exists today as a global specialist, empowering this mass personalised portfolio monitoring, decision making, and rebalancing.  And with a live demonstration, risky as always, in front of us right now. So I’m just going to switch over to a web browser. And hopefully, everybody can see that.

Somebody texted me of the account who I’m talking to talking to our blind audience. But this is just going to show you a little bit of financial simplicity. If asked to do a proper demonstration, it probably takes a few hours. But in this case, I’m just going to show you some scenarios where we’ve got some personalized portfolios that simulate somebody delivering a service to them at scale, I’m going to choose our good friend to the Hemsworth family, which you can clearly understand is not a real client, but just a bit of demonstration data. And the Hemsworth families, their their their relationship with their advisor is not just about one account, it’s about a whole family of accounts and family trusts. So number one is being able to aggregate portfolio data from various different sources and provide it to an advisor in a single consistent way.

But it’s not only about an investment strategy, it’s also about being able to combine it with various individual rules and preferences, even tax considerations, maybe the hands of a family that’s got a bit too much income in this moment. And so they want to reduce their capital gains tax bill, they may have to go, they’ve got some very specific rules and preferences and things in their portfolio that they like or don’t like, being able to put this all into one individualized mandate. That is not only a good record for an advisor to have for a client, but it actually serves as our show as a rules-based set of parameters that can go into an engine.

But if I move on to say just a bit about different types of investment strategies. Now the reality today is that the world’s moving far from just traditional defensive growth equities, bonds, portfolios, people can set them up like that.

But people might also want to set them up with all sorts of different types of asset allocations that they may choose. And so coming back to one of the requirements in delivering personalized portfolios at scale is being able to categorize every investment and build your own investment philosophy, in order that you can use those templates across the firm.

If I go back to our homes with the family case, so we come in the clients coming in, or we’re just well aware that the portfolio needs some attention, then we might want to do something about it quickly. Now, one of the things that we have built-in financial Simplicity is the ability to help individual wealth managers and advisors identify in advance very quickly the ability the identification of portfolios that may have deviated from what’s been agreed with the client. And that’s particularly important for two reasons. One is from a customer servicing perspective, if you’re not delivering what you’ve promised, that’s a problem and potentially even a contract law issue. But from a regulatory perspective, fee for service and the obligation of the people to deliver to mandates is an increasing and decreasing elements. So France especially, we have a remarkable ability, where our firm or an advisor can manage hundreds and 1000s of individual portfolios, and track all of their compliance to that individual client mandates with ease and efficiency, as you can see here and populate what we call a portfolio heatmap. Every square on here represents one of the client portfolios, and it’s coloring them green, orange, and red as to how far they deviated from what’s been agreed with the client, we find our Hemsworth family came down here, we’ll find zoom into that portfolio, we can see the asset allocation of its current composition in the inner donut. And you can see in this case, they’ve just contributed a large amount of cash. But the outer donut is actually the mandate that’s been agreed with them, we can see where it’s overweight, a number two way, but what more importantly, across all the various different accounts of that family relationship, consistent with the overall investment mandate, and all the individual rules and preferences of the relationship with the client, all identified by these various different icons, we can see that it’s reviewed, or rebalance the portfolio, calculated all the necessary order adjustments, that on execution will bring that portfolio back into a green compliant, and I servicing a an entirely compliant from a servicing perspective, nature. At the same time, we can also see things like asset allocations if we want to monetize things, and even if we want to go to and make particular changes to client portfolios, so adding the personal flair, if we want to come in here and start saying no, we actually want to change some of the orders associated with this, then we can do so. So in this particular case here, if I want to sell some of these, these investments I can do, which people in Portfolio Management, no this throws everything out with financial simplicity is artificial intelligence, it can recalculate all the adjustments to the portfolio based on the human flair and manual input by an advisor at a click of a button.

This all can then basically work in unison to create individual reports for clients, whether they be records of advice that some of our advisory clients do, or just order sheets that go into a discretionary process. Now financial simplicity is not only just about supporting individual portfolio reviews, with all sorts of details like this, it actually can go back to how do we do this, not for one client at a time. But if we identify and maybe sort our client base by a certain category, in this case, here, I’m just going to choose my discretionary clients. I might do that review process, not for one client at a time. But for all of the individual clients, rebalancing or reviewing all of their individual mandates in one workflow is the key to a highly scalable, client-centric business.

So I just click through here and has a good demonstration. So what it’s done here is it’s reviewed all the individual reports are generated all the individual orders for all the client accounts that are participating in that. And then I take that information and put it into my platform or trade management system to ultimately bring all the portfolios back into line. A lot of our discretionary Clients use this capability to ultimately save them a hell of a lot of time with cost and effort in improving their service quality to their clients.

So that was a quick overview of financial simplicity and what technologies exist today to bring basically personalized investment management, which is a vast difference from product-based portfolio management, personalized because it’s all about the client. And personalized because it’s in addressing the individual nuances needs, or mandate specific preferences that each client puts into, or is asking in their service relationship with their advisor, so they can deliver customer success.

So that’s enough from a demonstration perspective.

So if you’d like to understand more about some of the theories that I’ve only scraped the surface on today, please go to our how investing is evolving podcast. There are a few episodes up already. And there’s a number coming out in the next few months. But we’re about the digital solution is to help people deliver personalized investment management, personalized portfolios at scale. Thank you. Thanks to it, and Brian is always doing a live demo, it seemed to go very well.

Amazon Web Services had big data just today. So I think anyone doing a live demo may have been in trouble.

You pick the right day, we’ve had lots of questions, which invariably these demonstrations tend to create. I’ll just kick-off. Have you had anything any thoughts about whether this sort of tool could be used directly by a client without an advisor? In the middle or authorized by an advisor? Perhaps? Yeah, I mean, when you have engines like we do that can make client-centric decisions, then it’s often an obvious question. Somebody says, Well, why don’t we actually give that to consumers themselves? And I think that over time, that sort of business model will eventuate. I’m actually if you look at smart, a small case in India, which Amazon has recently invested into, it’s heading down that direction. And I think it’s an inevitability before institutional-grade investment management technology gets on the desktop of consumers. Now, I think it’s a lot. It’s the business model around that. And the sophistication of feeding data in and out of those sorts of technologies is yet to be resolved, I think, in many cases, but I do suspect over time, that that will become available. I don’t think that means that everybody wants to be a tier-one investment or portfolio manager themselves. But I do think technologies will have that in mind.

Each, Stuart’s referring to a business called the small case, which is an Indian-based wealth management technology provider, I think, yeah, Amazon’s first entry into wealth management. So really interesting. Yeah, what they’re doing there. And I think I think I think we’ve talked about it in this in the second podcast with Jonathan Coles, who’s a marketing special consumer marketing specialist, the power of consumer brands, and the people who haven’t mass consumer access, you know, he represents a real, real threat to the way the industry, the investment industry exists today, may only take something because they only took Alibaba six months to create the biggest world’s cash fund after fidelity took 34 years to get to the same level. I mean, I don’t know if those numbers are accurate, but it’s representative of what the power of people with very strong consumer brands can do. And you start combining that with sophisticated technologies, the game can change. Absolutely, Just some functional questions. In terms of when the client asset allocation changes, have you built in built any sort of capability, that documentation gets sent to a client, anything around that compliance side that you’ve worked on? Yeah, we have done yeah, I sort of cut that out of this showcase. But for those who are interested, feel free to give me a call. But well, when when, when the technology generates those portfolio reviews, we have a feature there that can generate supporting documentation. A lot of our advisory clients use it to create what they call a record of advice. Putting that into a format that they know, that meets their requirements, and being able to generate those on mass is being a particular favorable feature for something that, you know, we find a lot of people talk about developing multi-account multi-currency, multi-asset class portfolio reviews, take three to four hours. And suddenly when they can do it in three to four seconds, with a level of repeatability accuracy and scalability, it becomes a game-changer in terms of the business dynamics of those businesses. Ultimately, that leads to the ability to respond to clients better and implement investment changes better. So, therefore, improving performance and treating clients in a more desired way. But secondly, the business impact of that means that ultimately, you can serve more clients with the same level of the standard without any additional resources. And that’s obviously a formula to start scaling the growth of the business. I did do some homework. I read your article that you published an IFA last week about you know that the regulatory model needs to sort of adapt to this that we think it was called square pegs and round holes are a good analogy, that so much advice generation production is actually about taking a generic consumer into a generic product when an actual fact protects data personalized, that gets what you’re trying to get up. That’s right. I mean, if you look at it from the different side of the ledger, almost on this side of the fence, when you’re looking from a consumer perspective, a lot of the regulation is it doesn’t reflect what the consumer experiences. It’s more been about product distribution, and the, you know, the licensing and the legality of that. And I think that we face as an industry a wonderful opportunity to adjust, you know, from a regulatory perspective, to align regulation totally with consumer servicing or customer service thing, I think I can create a much more efficient framework for delivery advice, which ultimately means provides becomes more affordable. Absolutely. I just one other question, which probably ties into a bit of a thing this week, which is saying, you know, the large uptake of non-custody, reporting by advisors, so some advisors choosing to have their clients off-platform, does your solution provide the ability to push trades direct to a broker? You’ve got that capability built? It does, and as I touched on it very briefly, but you know, going back to the, you know, what, what are what investors want these days, I mean, I think increasingly there is more education around money, which is great. And people are realizing the compound effect of fees. And so the natural effect for investors is a desire for lower fees, but in the best interest duty for advisors, then naturally becomes on the priority list as well. And so we’re finding increasingly a lot of groups interacting using financial simplicity to interact with essentially direct chess holdings in stockbroking platforms, particularly when you combine that portfolio of ETFs. There’s, you know, there’s some real merit in that’s not for everybody, it’s not everybody’s investment philosophy. But you can start seeing from a consumer’s perspective that takes a number of boxes.

And just one last question, not to put you on the spot. But the Asics presented a couple of days ago talking about the new chess project built on the blockchain or chess replacement.

And one of the things that were it, it will create all sorts of new business models for investment management, using that capability. Have you had any thoughts about how that could be? What the implications of that technology will be for financial simplicity? Yeah, absolutely. So I missed that presentation. So I can’t speak in the context of understanding.

But I think Undoubtedly, the introduction of distributed ledger technologies that can be accessed by multiple stakeholder groups creates an absolutely wonderful opportunity to rationalize the duplication. And I’m sure that would be an all part of their presentation because I think that’s, that’s fundamental to the theory behind it. But absolutely, we see that you know, when you combine more available registry technology and consumer, you combine that with the consumer data rights, where consumers will have the ability to extract that data and move it to where they want it to go. We think that combining that with personal portfolio management technologies, like financial simplicity, create all sorts of wonderful opportunities, and all sorts of different types of advice models. So we can see, we don’t think it’s a one size fits all, we think there’ll be various different specialists doing various different components of investment management when they can have access to that type of information in a broadly available way. And we, we certainly see an environment where without the data available, and data through the consumer data, right available that instead of the adviser remodel being based on, you know, platforms and products that were associated with them in the past, in the area of product distribution, in the shifting to the area of customer success, the customer might bring all the data with them might not be a case of as an advisor, I use a platform is I use something that goes read what my customers tell me. Yeah, so the sourcing of data at the moment coming from platforms and product providers, feeding advisory groups, I think the channel of that data will or the path of that data will probably change over time. Yeah.

That’s an excellent point and honored thing we discussed yesterday was customer data permissioning. And what that’s going to mean for this industry so yeah, I think I think we could probably run a week-long conference on that particular topic for that’s gonna be one moving forward. And when you combine that with you know, the moment is we know a lot of the categorization of investments is done either by

You know, research houses, but you want to start to find is that the consumers will start getting involved in this. So, I mean, the reason why personalized portfolio management is such a good value proposition is that it engages the customer, it allows them to have a say. And so coming back to the second podcast, our series, it’s all about the importance of integrating customer input into the say, of the decision making creates stickiness, it creates a higher value, it creates all sorts of benefits. And I need to talk a lot about that. But that all that changes even further when the customer starts bringing their own data to them. I mean, if we look at non-financial services, websites, and business models, it’s all about trying to get the customer data. And it’s all about trying to how do we can get this so we can adapt our service to serve you better. And I think investment management and investing is evolving, is it’s all about deconstructing what was a very sensible move in the early days of creating closed products. But with the introduction of ETFs and SMEs and fundamental indexing, that all gravitating to this path where basically there’s more customer and more advisor involvement, and blending their philosophies rather than just selling the philosophy of an investment manager. And so it’s this blending process that we’ve we believe we finessed it’s taken us 20 years to do. I might add by finessing that it’s an all stakeholder win outcome. Yep. Great. Well, I’d certainly encourage people to check out Joe’s podcast, and his opinion piece in IFA is a very thought-provoking spill. Thank you very much do it. We do have the wrap up there and he says time I just like to take this opportunity to thank our speakers Eric rocks, Stephanie Wilson from ssmc. And of course, Stuart Holdsworth from financial simplicity. We have one more session for the week, which starts at 12 o’clock tomorrow. I think we have a quick slide. We’re going to pop up there, Toby, just talk about the next session. So we’ll, we’ll hear from Lou from Nikolas wealth will be discussing their proton solution which was a 2021 IMAP Innovation Award winner, and Daniel Bauerfeind. Sinclair is going to be talking more specifically about some NDI models and some particular technology that they’ve been building, which I think is going to be well worth tuning in for.  

If you’d like to hear more about How Investing is Evolving subscribe to our Podcast Channel below:



Stuart Holdsworth

Author Stuart Holdsworth

Stuart has over 30 years of experience in the use of technology for the strategic competitive advantage of businesses in the financial markets and investment industry.

More posts by Stuart Holdsworth