Large investment firms have moved away from a belief that a digital wealth management offering would be nice to have, to recognising that it is a ‘must have’ argues Ian Cadby, CEO of online wealth management platform Tiller Investments.
PI: You launched Tiller last year, after a career in hedge fund management. Why an online wealth management platform?
After 30 years of managing institutional money in the hedge fund world, we began to explore the emerging robo-advice industry in 2016. We thought that conceptually it made a great deal of sense for wealth management to be accessed online, and wanted to see if we could come up with a better proposition than what was already on offer, given our experience in the sector but also in developing our own proprietary technology to manage portfolios. We spent a year getting under the hood of the industry and invested our own money with all the different robo firms in the UK and the US, so we could assess their processes. Although there are some good robos in the market, we felt that there were some missing parts of the jigsaw. The space was dominated by ETFs, and having come from a background of realising there is also alpha to be found in small pockets, we wanted to build a platform that would give customers more choice and personalisation.
We also noticed that most digital wealth managers were targeting younger millennial clients, copying the US model. However, in the UK there aren’t many millennials with a lot of free cash to invest or have the interest in investments; in the US, the landscape is completely different. For that reason, we made the decision to build a wealth management platform for existing wealth managers to digitalise their offering for existing and next generation clients. And a second channel targeting “high earners not rich yet” (‘Henry’s’) on the retail side allowing us to refine and grow our proposition.
PI: It’s interesting to see you offer both passive and active portfolio management. What proportion of your clients are interested in the active component?
Most online wealth management firms invest primarily in passive investments. Early on we set out our stall to offer more choice and personalisation, and as far as we know, we are the only ones in the UK to offer passive and actively managed funds as well as thematic investment opportunities.
It may come as a surprise but most of our clients have been interested in our Smart portfolio, which is a blend of both active and passive investments. This shows client interest in the potential added value that portfolio managers can provide to long term returns.
PI: How do you see the robo-advisory business growing over the next decade?
I think this year we have seen large firms move from a belief that digital wealth management is a ‘nice to have’ to a ‘must have’. Over the past few months, our discussions with large wealth firms, private banks and insurance companies, have shown most are moving into this space or keen to move into the space. I am confident of rapid adoption over the next few years. There is a slight delay now as these institutions work out how they are going to deliver their proposition, as they’ll need to figure out if they are going to build something from scratch if they don’t already have a digital service, and incur the cost of building one. Or they could choose to partner with a digital wealth platform like us which can offer white-label solutions. I would argue that the wealth management industry is playing catch-up, as no one would think twice about doing internet banking anymore, so it is a total anomaly that you generally can’t buy wealth management services online. But the industry is headed in that direction.
For those with simple financial planning needs, it’s increasingly likely they won’t see the need to incur extra cost by using an adviser. However, for those with more complex needs, there will always be a place for expert advice delivered in person, or you can have a hybrid approach depending on your needs. It is a bit like how traditional travel agents still exist alongside online booking tools. Maybe you no longer go to your travel agent to book a flight, but for more complex, bespoke trips there is still a need to speak with a human travel specialist.
PI: If you could change one thing about the investment industry, what would it be?
A little esoteric perhaps, but within 5 years I would like to see some benchmark exam (covering governance, company law, strategy and financial competency etc.) which all directors of regulated investment firms must pass prior to being allowed onto the board of a regulated entity.
PI: Something we don’t know about you?
My original career was in Air Traffic Control, and I had to leave because I failed one of the CAA medicals due to failing one of the eye sight tests. If there was such a thing as laser eye surgery back then, I would have probably been forging a career in aviation!
PI: If I wasn’t working in investment management, I would be a…
I love investments, if I wasn't leading this hugely exciting Fintech business, I would go back to being a derivatives trader.
Ian Cadby, chief executive officer and co-founder, Tiller Investments