As part of an occasional series of profiles of fintech firms operating in the wealth management industry, this publication talks to a firm that recently bought a stake in a regulation tech business and rolled out new offerings.
(This is part of a series of profiles of technology firms operating in the world's wealth management sector in which they explain business strategy, plans for the future, and more. To see a previous example, with the firm Objectway, click here.)
Australia-headquarted fintech firm IRESS, now operating in the Northern Hemisphere as well as Down Under, reckons hybrid models of digitally-driven wealth advice are the most likely future path amid the buzz around "robos". And the firm continues to eye potential acquisitions in the wake of a deal inked late last year.
On the robo question, a middle-of-the-road stance appears most likely to be where clients want to be, IRESS argues. And its view seems to be echoed by the industry more widely, as some of the razzmatazz around the rise of artificial intelligence fades and specific business models are put to work.
"When it comes to digital advice, we believe a hybrid model will be the preferred approach. We don’t see anything to suggest a world where digital has a monopoly on advice. We believe it will continue to be a combination of people and technology," Mark Loosmore, executive general manager, wealth, IRESS, told this news service in a recent interview in London.
The rise of robo-advisors that use data to arrive at an asset allocation that fits stated investor wishes, and provide ways to tweak portfolios and churn out information, has prompted apocalyptic thoughts that human wealth managers will lose their jobs. But the value of face-to-face advice, particularly in economically challenging times such as the 2008 fiancial wreck, remains stubbornly powerful.
"Technology needs to support the client in making decisions in a way that works for the client. They are telling us client reporting is about enhancing service and reducing risk. An increased focus on client-led planning tools, `nudge' and `prompts' is beginning to come through our discussions as their clients feel more comfortable with this technology in other aspects of their life. This, they tell us, is balanced by a concern not to confuse, overwhelm or disintermediate the advisor," Loosmore continued.
Data - and the sheer volume of it - is one of the challenges human advisors, not to mention their clients, face today. "Requests for valuations, once a time consuming, manual exercise for the adviser, can be self-served by their clients, giving visibility and reducing cost. Clients want to have visibility at different depths, depending on their understanding and experience, and our solutions must cater for all, up to the active stock analyst. People need access to this data at all hours across a range of devices," he said.
"Whilst access to data is essential, firms tell us that their clients still want appropriate support and advice in managing their finances," he said.
Opening the wallet
IRESS recently bought a minority equity stake in Australian regtech firm and data-cruncher Lucsan. (The purchase price wasn't disclosed.) "IRESS will consider equity investments of this nature where there is an opportunity for IRESS to form strategically-aligned partnerships in areas related to IRESS’ core business focus," Loosmore said. The firm has made other deals: In 2016 it bought Financial Synergy, extending IRESS’ services and solutions to superannuation clients in Australia and INET BFA, expanding its market data and trading offering in South Africa. Both organic and M&A routes remain part of the firm's growth strategy.
This year, as announced in 2017, IRESS is rolling out an online advice offering for XPLAN clients (XPLAN is the company's advice solution for wealth firms of all sizes.)
Although Loosmore said the firm is unique in the range of its offerings when asked about who its rivals are, he did point to other organisations that are competiting with it in particular areas. For example, in Australia, competitors with XPLAN include Coin (owned by Temenos), Decimal and AdviserLogic. In the UK's financial advice market, Loosmore cited names of competitors such as Intelliflo, Time-4-Advice and Focus Solutions whereas in the product sourcing market our key competitors are iPipeline, Webline, MortgageBrain and twenty7tec.
From the Land Down Under
IRESS was founded in June 1993 in Australia; it has 1,800 staff across 17 offices worldwide. Listed on the Australian Securities Exchange, it operates in Australia, New Zealand, the UK, South Africa, Canada, and Asia (not the US). There are about 9,000 clients globally, and several hundred thousand users, ranging from individuals through to some of the world’s largest financial companies.
At the helm of this company is CEO Andrew Walsh, who took up the post in 2009 after joining in 2003. He is also helped to found XPLAN Technology, which was brought under the IRESS umbrella in 2003.
As the group has pushed northwards, it it acquired Avelo FS Holdings, a UK business, in September 2013. The various Avelo businesses came under the IRESS brand; some product names were retained. In November 2015, IRESS acquired Proquote Limited and Pulse Software Systems in the UK, with an eye on ramping up capability in the capital markets and private asset management market segments.
Geographically, in the Asia-Pacific part of its empire (including Australia and New Zealand), the IRESS trading, portfolio management and market data solutions account for roughly half of the business, with software for financial advice practices and superannuation making up the other half. In the UK, IRESS’ product portfolio is mixed: the financial markets business is a smaller segment overall but Loosmore said it is picking up speed. The advisor practice management system market is the largest element of the UK business. Through XPLAN and Adviser Office, IRESS provides systems to around a quarter of wealth advisors, which IRESS said makes it the largest supplier of such systems in the UK.
The UK has two other product areas. One is called The Exchange, a life and pensions quotation portal. IRESS also provides application processing systems to retail banks and "challenger banks" such as as Atom. IRESS also provides its portfolio management system to about 30 wealth houses such as Investec and Close Brothers Asset Management.
IRESS, like its peers, gets a front-row seat in seeing the consolidation activity drawing some wealth management houses together, as well as the continued trend of breakaway teams from some of the larger houses. A big part of the operational changes involved is technology, Loosmore said.
And talk of tech takes one back to the robo phenomenon, as discussed above.
"Over the past couple of years, we have seen a number of automated advice propositions spring up around the world in response to an increasingly online and automated world. As clients seek more options and flexibility, advisors and wealth managers have been busily adapting and evolving their offering to service this changing demand. We’re also seeing a shift in focus from delivering efficiencies to driving better outcomes and value for clients," Loosmore said.
Love or hate them, robots, and the technology around them appear here to stay.