Today Octopus announced the acquisition of Bath-based wealth technology business Seccl Technology. I wanted to share our views on where the wealthtech market is heading, why we’re so excited about this acquisition, and to reach out to fintech and investment and advice firms who recognise the opportunity and are interested in taking a new approach.
The current state of the wealth management market
I don’t think it’s unfair to describe the current state of the financial advice industry as broken. Only a fraction of the UK population currently receives advice, despite the known benefits that it brings. At the same time, most financial advisers are wary of taking on new customers with less than £50,000 to invest. Research from Schroders suggests 60% of financial advisers have turned away customers in the last year. For ‘traditional’ financial advisers, servicing more customers just isn’t cost-effective.
The average financial adviser looks after around 100 clients, and most still spend the lion’s share of their time dealing with client-based admin, which prevents them doing what they are best at – delivering advice. To top it all, customer trust is low, advisers are broadly unhappy with platform providers and customer choice is still limited.
A frustrating customer experience
Imagine you’ve decided to contact a financial adviser for the first time. For your adviser to be able to give you the highest quality, tailored advice that you deserve, they’ll first need to gain full sight of your wealth and spending habits. It sounds simple enough, but it’s a task that can take weeks, if not months. Once that’s in place, getting your assets set up on their technology platform can be equally laborious.
Millions of people are impacted by platform technology without even knowing it. The problem is that these platforms often don’t allow people to centralise their assets in one place. Even when they can, the customer experience is constrictive and hard to work with. At present, it’s a user experience that leads to frustration, friction and complexity for both the adviser and their client.
It’s clear that, between the provision of advice, the underlying product providers that this advice feeds into, and the technology and wrappers that sit in the middle, something isn’t working.
Octopus believes in tech-enabled solutions
At Octopus, our goal is to be indispensable in the process of offering good and efficient financial advice and investment services. Currently, the biggest barrier to financial advisers serving their customers in the way they want to continues to be the conspicuous lack of tools at their disposal.
Second, we think that if you can remove large sections of inefficiency, we can drastically reduce the amount of man hours required to provide fantastic financial advice. Advisers will then be able to serve more customers at a price point that makes the advice process worth doing.
So, for us, the big question is: what does the future of advice look like? What can we do to get more financial advisers to serve more clients, while at the same time making sure each individual who seeks advice is given an exceptional customer experience? We believe ‘hybrid advice’, where technology extends the reach and insight of a human adviser, is the answer. To us, good tech is about scale and prioritising human interaction where it’s needed most.
Used effectively, hybrid advice could help financial advisers to serve double or triple the number of clients they currently serve, by stripping out manual and cumbersome processes while maintaining the human connection with the client. Yet the underlying tech that exists today within the financial services industry is simply not able to facilitate this. We think the time is right for this to evolve.
What can the wealth management industry learn from other sectors?
There are thousands of businesses currently solving every conceivable problem through tech. To think it can’t happen in financial services is naïve. Software has transformed so many areas of our lives. Ten years ago, we didn’t have Google Maps, Uber, AirBnB, Deliveroo, Spotify. They’ve all changed how the entire world works, travels, consumes and educates itself from the ground up.
Having grown used to the speed and convenience that such services bring, consumers now have very little patience when things don’t work. The financial services industry shouldn’t be any different. Open architecture and easy integration really is key to offering the frictionless experience that all customers crave.
The fundamentals of API
The Application Programming Interface (API) sits at the centre of this. If you’re new to APIs, check out this great summary from the New York Times. An open API is an application programming interface that allows the owner of a specific piece of software to give developers (and by extension customers) universal access to that software and the ability to use it how they please – for example, building their own user interfaces on top of it.
To put it in perspective, between Twitter, Google and Facebook there are over 30 billion API calls a day. That’s 30 billion times different pieces of software “talk” to each other by allowing actions and the sharing of information. Every single day.
What’s the biggest benefit of an API?
By introducing the ability to build products and services more rapidly by relying on third party integrations, the use of APIs promises dramatic improvements in terms of speed and simplicity, creating a richer experience for customers.
To consider it in relatively simple terms, think of Amazon. You often see third-party shopfronts – retailers who are able to sell their goods – to customers via the Amazon website or app. Amazon has an API that allows seamless updating of product and inventory lists into Amazon shopfronts, meaning suppliers can onboard all of their own store data without managing two separate shopfronts.
This creates zero manual burden for sellers to update their stock on Amazon, and provides Amazon customers with a more broad and comprehensive range of products to choose from. Regular buyers can also use the API to download product lists and make their buying process more automated.
Similarly, Uber’s API allows a direct integration of Uber into other third-party applications. For example, if you managed an app that showed people restaurants near them, you could allow customers to order an Uber directly to that restaurant through your own app, without having to copy and paste addresses or switch interface.
In both instances, the goal is interconnectivity. The API seamlessly integrates the services of different providers in real-time, giving suppliers a much larger market to sell to, while creating a far better user experience for a broader range of customers who appreciate the value of simplicity.
When will financial services customers get to benefit from API?
Advisers are currently unserved with this kind of user experience-enhancing technology – there’s not one single operating system or open banking model where anyone can plug in and offer financial services products and solutions to clients. But total open integration is exactly what financial advisers and their clients need. And it’s coming.
What could the customer experience be like in the future?
In an API-driven model, customers will get set up with a financial adviser in minutes, not months. And the adviser will be able to easily offer their new client a host of other useful services from third parties that are integrated into their technology platform:
- Haven’t made a will? Your adviser will be able to quickly and easily create one for you, by automatically pulling in the key details they already hold about your wealth and estate.
- Got kids? Your adviser will be able to open up a Junior ISA account via their mobile app — and keep an eye on their money, too, so they can better plan between generations.
In short, today’s increasingly prevalent API models and open marketplaces of tools and services will help to create a new and frictionless future. Which brings us to the latest Octopus acquisition (subject to regulatory approval): Seccl.
A genuinely innovative API approach
Dave Harvey, Hugo Thorman and the team at Seccl have created something that we think is genuinely innovative, and that can form the basis of a new approach to technology within wealth management. Their API-first architecture has the potential, in time, to develop into a full wealth management technology stack that any fintech or advice firm can access, build onto or integrate with.
But enough about the future. Today, Seccl can deliver a platform technology experience that better serves the needs of two core groups:
- Fintechs: any fintech firm that wants to offer investment services or tools and is looking for an open API-based custody offering with a developer sandbox and slack channels to chat to the team.
- Financial advice firms, wealth managers and discretionary fund managers: we are currently looking for five to ten firms that already have, or would like to gain their discretionary permissions, to explore the development of their own platform using the Seccl technology, thereby taking control of the full client experience.
It’s our intention to create software that is intuitive and simple to use. No more having to train your staff for hours to master the intricacies of new tools. We want our offering to be so intuitive that hardly any training will be necessary. Second, we think that inefficiencies mean that financial advice platforms are over-priced. Our services will be newer and better built, and as such, we can lower costs. By easing the pressure on margins, we expect this to lead to lower costs for firms and clients.
The future won’t be built overnight
There’s a lot of work to do. But, just as with nearly all other sectors, we believe the future of wealth management lies in open architecture technology — with publicly available APIs that allow product providers to integrate in hours, and firms to build solutions for their customers in the way that they want.
We haven’t seen the full impact of what tech will do to the financial services industry yet, but it will revolutionise how people within the industry work. We’re ready for the challenge and we’re hugely excited about the future that Octopus can help to build with Seccl as part of our family. We hope you want to be part of this future too.
If you would like to build on top of the Seccl technology, or you’re simply keen to find out more about how we can help, please send me a message, I’d love to talk to you about it.