This is a watershed moment for adviser businesses, and nowhere more so than in the world of alternatives and tax efficient investing, says David Lovell
The ease with which the children have taken to Google classrooms, Zoom meetings and online learning over the last few weeks seems extraordinary, until you realise that they were born into a world where iPhones and video calls were already the norm. The current situation is merely an extension of this and a pretty logical and seamless one to them. Aside from the missed friends and teachers, from a technology perspective this is not a new normal – it’s just normal.
This is, of course, not the case for huge swathes of UK businesses for whom this really will be a watershed moment in a number of ways. This is certainly true for the financial adviser marketplace and ecosystem, where we are now witnessing years of legacy systems and traditional business practices being swept aside in an accelerated tide of digitisation.
Financial advisers, like those in every business sector, have had to quickly adopt new practices in a matter of weeks. Those advisers who can do so the quickest, with the least disruption to their business and clients, have got a real chance to thrive in the coming weeks and months, rather than merely tread water. These are likely to be those who had more fully embraced technology into their businesses, and were more prepared for the current situation than others with robust business continuity plans, employees set up and comfortable with remote working, and a suite of technology solutions that are fit for purpose and fully integrated into the business. Firms that were not already there, now seem to be getting the type of support that they need from their networks and service providers in order to quickly close the gap.
Any business that relies on client relationships and face to face meetings will have been fundamentally impacted, but financial advisers have the ability to use technology to make real positive changes to their businesses over the next twelve months, and use the time saved by travel, conferences, meetings and lunches to really take stock of their business and drive efficiencies into every corner. This will almost certainly mean careful communication with their clients via Zoom or similar platforms, many of whom will be themselves more available and open to discussions. However, it might also mean taking the time to assess new technologies and offerings that could be seamlessly integrated into the business, including a review of entire client investment portfolios, going beyond just the core focus areas.
Advisers have never been better positioned to research, invest and monitor alternative investment portfolios for clients
Tax-efficient and alternative investing has almost certainly not been the focus over the last few weeks for most advisers, and for most advisers it will be relevant for only a small percentage of their wealthier clients, but there is much to commend it as a area of review over the next stage of our nationwide lockdown, not least that great progress has been made over the last few years in improving the accessibility of tax efficient investments, and the means of accessing this. An adviser’s ability to research, invest and report on and monitor client alternative portfolios has never been better, and can now be approached in a similar manner and with the confidence with which advisers look at traditional main market funds.
The importance of uncorrelated (or partly uncorrelated assets) in client portfolios, and how alternatives can play a part, is an important topic and one that merits its own separate discussion. That aside, the ability to consolidate client assets and interact with these as part of a wider portfolio, in a similar manner to that which advisers have become accustomed to over the last two decades on main market independent platforms, is worth a closer look.
Client-led and intuitive: the new wave of technology within the alternatives space
The new wave of technology within the alternatives space has the advantage of having no archaic legacy systems and is much more akin to the client-led independent wraps than the unwieldy supermarkets that preceded them. The best of these alternative asset technologies provide a great platform with which advisers can interact and share with their clients, delivering the type of intuitive functionality and customer experience that they are well used to (and now expect) from their own personal banking.
Whether the adviser takes a look at the individual fund manager portals, independent third-party research firms such as MICAP and MJ Hudson Allenbridge, or specialist platforms such as GrowthInvest, they will now find high-quality and detailed information on products, and a near-complete coverage of the tax efficient market. This sits alongside flexible portfolio analysis tools and, in the case of our platform, the ability to invest quickly and easily into a wide range of products.
Within the world of tax efficient investing, things moved very quickly in March, where the traditional end of tax year rush was inevitably impacted. Fund managers moved quickly to add additional flexibility to their offerings, many VCTs allowed subscribers to re-evaluate and remove their subscriptions (many re-evaluating at a lower NAV). Some managers and custodians who had not offered the ability for digital application forms moved swiftly to accept digital signatures or scanned copies. Previous preferences for cheques and physical application forms (understandable in the 1990s, but unnecessary now) have been quickly replaced by digital applications and bank transfers. There is no possibility of a return to only ‘wet’ signatures being accepted now. This is a significant market shift, freeing up advisers and their clients to access the whole market via a fully digitised solution for the first time.
What next for the tax-efficient industry?
There is a huge amount that still needs to be improved and worked on within the world of tax-efficient investments: there is a need for much greater transparency on fees, where it is often still difficult to line up and evaluate the impact of the different structures and terms on the client. There is a need to create better liquidity in the secondary market, across both unlisted equities found in EIS and SEIS structures, and in the VCT market. There is a need for both the industry and government to find a way to take these investments to a much wider audience of HNWIs than the current pool of 30,000.
There is work to be done on the frequency of reporting and the ability to see real-time changes in valuations and portfolio monitoring. These developments, and with them the continued improvement of both the adviser and client experience, will all be driven by technology, and some of the last residual barriers to doing so are no longer in place.
In years to come, we will never forget these times, and the impact to society will be extraordinary and will remain difficult to discern for some time. We would of course never wish for a cataclysmic event, but it is a watershed moment and as such it provides some opportunities for reflection and change.
As I spend more time than I had ever imagined in a small part of South West London (and a lot more time interacting with Google classrooms) it is perhaps fitting that to end, I turn to a local hero and school pupil Tim Berners-Lee, Inventor of the World Wide Web to look forward: “The Web as I envisaged it, we have not seen it yet. The future is still so much bigger than the past.”
About David Lovell, Chief Operating Officer at GrowthInvest
David is the Chief Operating Officer at GrowthInvest. He has worked in the UK financial services industry for over 20 years, holding a variety of strategic director roles. David has held roles at FT.com, and played a key role in the development, growth and subsequent sale of Matrix Solutions. As well being part of several successful disruptive product launches, over the last decade David has provided consultancy and advice on distribution and fundraising strategies to a wide range of clients looking to approach the UK’s financial intermediaries and high net worth investors.