Disruption in Wealth Management
A major earthquake is long overdue…
Paper 1: Disruptive Behaviors in Wealth Management
Inevitable and wide-ranging impacts
Paper 2: Institutionalising Data in Wealth Management
Practical and commercial examples
Paper 3: Holistic Approaches in Wealth Management
Technology as a conduit to success

Disruptive Behaviours in Wealth Management
Inevitable and wide-ranging impacts
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016
In common with other parts of financial
services, wealth management is facing the
most unprecedented challenges in
generations. Weak client trust, anaemic
economic growth, higher regulatory
burdens and lower client investment
returns have all contributed to increased
threats. Despite this, significant
opportunities exist for incumbents and new
entrants alike to take advantage of this
state of flux.
Major disruption is inevitable
For decades, industry participants have not needed to change their business models
dramatically to earn acceptable margins and although service propositions have evolved,
they have done so lethargically. In an (admittedly) simplified look through the lens of
Professor Michael Porter, pricing power has been strong and industry rivalry low – until
now.
Geoscientists will tell you that the longer the period of inertia, the more severe the next
earthquake will be – therefore it follows that the only thing more concerning than an
earthquake, is actually no earthquake. Somewhat ironically, many disruptive technology
industries are clustered around exactly the part of California that is physically on the move;
it seems that residents living adjacent to the San Andreas Fault have a physical and
metaphorical fear of inertia. The long-term inertia in the wealth management industry has
made the next earthquake likely to be more powerful than ever before.
Innovative behaviours from HNW providers
Disruption is not just a case of having a flashy client facing platform. Three years ago, UBS
Wealth Management quietly launched an internal system called Cornerstone (a
comprehensive platform to carry-out ‘Health Checks’ on all impacted client portfolios). The
system was specifically developed to cater for HNW clients and seeks to de-risk portfolios,
improve client investment performance and enhance connectivity with the adviser and
client.
Wealth
Management
Industry
Rivalry
Threat of New
Entrants
Threat of
Substitutes
Bargaining
Power of
Suppliers
Bargaining
Power of
Buyers
FinTech, Boutiques,
Multi-Family Offices,
Accountants, Retail
P2P Lending, Cash,
Unlisted Equity, Real
Estate, Passion Assets
(Cars/Art/Wine)
Industry consolidation,
Standard Pricing, MIFID II
regulatory obligations
Execution-Only, Self-
Service Platforms, RDR
transparent pricing
Page 1

Disruptive Behaviours in Wealth Management
Inevitable and wide-ranging impacts
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016
What is the adviser experience like right now?
High touch, bespoke client service is a commonly held differentiator for HNW providers,
but the so far adviser are the ones feeling the strain. There is a rumbling discontentedness
from advisers feeling squeezed by the challenge of using sub-standard tools which are
wholly inadequate to deliver the HNW client experience expected today. Regulators too,
are demanding ever increasing suitability safeguards and commensurate reporting from
firms. A vicious circle emerges were advisers are spending increased time on remediation
and compliance leading to declining client satisfaction and lower commercial returns.
There is a ray of light for embattled advisers, with senior managers directly being held
accountable for the adequacy of systems and controls, the opportunity to seek ways to
ameliorate these challenges looks good.
Will HNW clients trust non-financial services disruptors?
The short answer is, yes. In a survey of 1,022 HNW investors, Scorpio Partnership/Factset
found that 38% of HNW clients under 35 were most excited by Google as a potential new
entrant. While the definition of trust varies between sociologists, philosophers and
psychologists, in financial services, what I believe we are really talking about is
competence – firms like Google ooze this.
We have all cringed at the words “If you cannot produce my portfolio statement correctly,
why should I trust you with my investments?”. Trust is relative and once lost is hard to
redeem. Disruptors have the luxury of starting with a blank data-set and will be more likely
to ‘institutionally’ understand their clients and by doing so, are more likely to deliver on
their promises.
Page 2

Disruptive Behaviours in Wealth Management
Inevitable and wide-ranging impacts
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016
Is disruptive behaviour only for new entrants?
No, but new entrants have received high-profile attention for good reason. My most
striking takeaway from a catch-up in 2010 with Nick Hungerford (Co-Founder of Nutmeg)
was his pithy articulation of the prevalent ‘client need’, the identified gap in the market
place and the requirement to find a superior way to use client information to generate a
clear set of outcomes.
However, incumbents are also developing new ways to serve their clients. I was intrigued
to see that HSBC had taken part in the FCA’s first Regulatory Sandbox (which helps both
authorised and unauthorised firms test new delivery mechanisms). According to the FCA it
“… creates a safe space because, if you act in accordance with this guidance, we will
proceed on the basis that you have complied with the aspects of our rules that the
guidance relates to”.
Similarly, in the UK UBS have launched their own online platform recently called
SmartWealth. At the launch, Jamie Broderick commented that “The UK has developed a
reputation for technology-led innovation in financial services. Regulation in the UK is
progressive and has established support for new innovations”.
PwC offshoot, World in Beta, recently summed-up the environment clearly:
“Collaborations between FinTechs and incumbents will deliver commercial advantage for
both parties… In short, FinTechs can be the force for good that the financial services
industry so desperately needs”.
Final thoughts on Part 1: Disruptive Behaviours in Wealth Management
Some of the highest calibre advisers in the world are based in London, furnished with
strong industry knowledge, intensive regulatory training and high EQ. Through appropriate
investment in technology we have a tangible opportunity to create an environment where
advisers focus less on the mundane and more on value-added advice.
According to Cognizant “The digital ’dark side’ is real but manageable. Pessimism and
denial are not good business models; the spoils will go to those who take the (managed)
risk”.
Page 3

Institutionalising Data in Wealth Management
Practical and commercial examples
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016
In the words of Bill Gates, “How you gather,
use and manage information will determine
whether you win or lose”. We are seeing an
omnipresent trend towards robo-advice,
experimentation with Artificial Intelligence
and Big Data. Despite the hype, it seems
prudent that Small Data should be
mastered first.
Only through a firm-wide culture of
effective data analysis can we be sure to
improve client outcomes, improve business
strategy and enhance commerciality.
Most technology solutions on offer are aimed at improving the link between the adviser
and client; this is highly noble but incomplete. For example, there is little point allowing
clients to digitally communicate: their changing needs and circumstances, their willingness
to invest in solutions, or request after-sales service (in a format suitable to them) unless
this data is transmitted seamlessly to all relevant departments.
Through better understanding of the client journey, multiple benefits emerge
i. Previous Client Experiences
• Improve investment product or service design where risks have been identified
• Ability to learn from biases identified by Behavioural Finance
• Create targeted information updates to clients (and their advisers)
ii. Current Client Needs
• Design systematic campaigns, tailored to specific groups of clients based upon needs
• MiFID II obligations to share data with product manufacturers on “target audience”
iii. Future Client Requirements
• Allow more strategic investment into new propositions
• Assess enhanced two-way client communication methods to meet expectations
Page 4
Client
Advisers
Products &
Services
Executive
Office
Finance &
Operations
Legal &
Compliance
Marketing
& Comm’s
Current
Client
Needs
Future Client
Requirements
Previous
Client
Experiences

Institutionalising Data in Wealth Management
Practical and commercial examples
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016
Predicting and delivering client needs
It isn’t in a world of science fiction where we can predict human needs – quite frankly,
great advisers can do this on autopilot. The reason why we need to fully institutionalise
this process (through better data sharing) is because too many firms have consistently
struggled to demonstrate to the Regulator that, all advisers, are doing this, all of the time.
Consultative selling
Selling has become a dirty word in the industry but unless advisers are consultatively
selling firms are left at risk of merely executing orders – this feels like a race to the bottom
on price and an unnecessary diminution of the role. Clients have begun to feel the
negative impact of a fear to advise which has contributed to the current malaise. The fact
that the headcount of advisers is probably the largest single expense in the business
highlights the necessity to give them the systems, services and tools to allow them to
succeed in providing (and executing) genuine advice. Improvement in technology related
to client data capture and transmission has to support consultative selling but here must
be carve-outs allowing for sensible deviation where necessary, rather than only offering
‘Big Brother’ oversight.
Re-think what data to record, how to record it and how to use it
Success requires collating and analysing client behaviours and needs, in logical groups.
Some will suggest that it is not possible to group HNW clients into boxes – I disagree. HNW
clients have clearly identifiable needs but usually cluster by their attitudes and values,
such as Next Generation, Philanthropy or Impact Investing.
Creation of firm-wide templates, which gather more relevant and comparable data,
alongside previously captured data, should be a priority before embarking on more
ambitious but necessary approaches. When developing a new approach to client insight,
be very clear (internally and with clients) about why it is so essential. Simply stating a need
to comply with incoming regulations is not the reason – it is to serve clients better.
There will always be business areas that feel they lack the existing data, or cannot commit
more time to cleanse the old data but this must be rebutted. I came across a statement
that is over a hundred years old from Charles Babbage, yet still has relevance today “errors
using inadequate data are much less than using no data at all”.
Page 5

Institutionalising Data in Wealth Management
Practical and commercial examples
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016
Final thoughts on Part 2: Institutionalising Data in Wealth Management
It is a fact that Millennials are demanding changes in service delivery. Even HNW clients
are generally happy to self-serve in a multitude of financial services from basic banking to
derivatives trading. However, when they do speak to an adviser, they expect the
interaction to be fast, efficient and cerebral. In relation to HNW Millennials, Scorpio
Partnership/FactSet note that: “HNWIs are not simply passive consumers of insight – they
want a dynamic data system whereby information is shared both ways”.
Greater investment in this area is essential but remember the size of your technology
spend doesn’t matter – it’s what you do with it that counts.
Page 6

Holistic Approaches in Wealth Management
Technology as a conduit to success
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016
We can learn a lot from Formula 1 teams,
where data, technology and a culture of
continuous improvement form the core of a
winning strategy. The drivers work
symbiotically with dozens of engineers,
who in turn collaborate with all relevant
component suppliers in real-time. Drivers
are empowered by technology as opposed
to disenfranchised by it. The same attitudes
must be adopted in how wealth
management firms operate.
Page 7
‘Le Geek, C’est Chic’
Being a geek is incredibly fashionable these days but we must take a hard look at what we
need from this behaviour and how it will be both impactful and commercial. Clearly, a
synergy of humans and machines is required for future delivery but we must get the
balance right. Greg Davies, of Centapse, wrote a great article recently where he cautioned
about the allure of ‘Shiny New Toys’ in Wealth Management, suggesting some
straightforward approaches may also be able to deliver meaningful results.
A lesson from the Whiz Kids of Ford
Sometimes even the best client-centric ideas fail to yield the anticipated outcomes. In the
1950’s Charles Bates Thornton assembled a ten-strong team (nicknamed the Whiz Kids),
including Robert McNamara, who later became US Secretary of Defense.
In a notable example, McNamara introduced the Lifeguard safety package at Ford in 1956.
The Whiz Kids had a highly scientific approach to understanding and improving car safety –
it was nothing short of revolutionary but it appeared that the sales teams and marketers
were incapable of convincing the general public that they needed it (the sales gap to
Chevrolet tripled to 190,000 cars in the same year). Apparently, Henry Ford II is reported to
have said: ‘McNamara is selling safety, but Chevrolet is selling cars.'
A key lesson is make sure that the relevant parts of the businesses understand what the
goal is, why you are trying to achieve it and the intended improvement to client outcomes.
Don’t operate in a silo, do communicate clearly and always revisit the hypothesis so you
can learn from any mistakes.

Holistic Approaches in Wealth Management
Technology as a conduit to success
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016 Page 8
New technology requires new dashboards
Most dashboards that are circulated to Executive Committees need to be improved. The
information fed-back to a driver in a Formula 1 car today has evolved with new technology
so that only the most relevant information is provided to help the driver make the best
decisions. Most would agree we need to do more in Wealth Management. The major
reason for the mis-match stems from the fact different departments use idiosyncratic data
that doesn't talk the same language – rendering many dashboards totally unwieldy.
Poorly integrated technology solutions will not give the feedback required to the Executive
Committees, which hampers their decision-making. Essentially, this requires the adoption
of ‘data behaviours’ across the entire business to help create smarter decision making.
Use data and knowledge gained from Behavioural Finance
In the late 2000s at Barclays Wealth, I first encountered their innovative Investment
Philosophy. It occurs to me that Behavioural Finance has multiple commercial applications
way beyond risk profiling, but to be truly impactful, aggregated client data needs to flow
through all parts of the business. To make good strategic decisions, firms must be able to
demonstrably understand the full lifecycle of service delivery and associated client
outcomes.
Final thoughts on Part 3: Holistic Approaches in Wealth Management
Across the City, Executive Committees are pondering serious questions such as: Can we be
sure we have the best platform to serve our clients? Are we constantly assessing the
products and services we offer to make sure they are appropriate? Can we observe the
spirit as well as the letter of regulations and deal with the requests for information quickly
and less expensively?
These questions may seem vague, intangible or even navel-gazing but they are absolutely
the right questions to be asking and have profound importance for future profitability. I
remain convinced that with the right technology, data and organisational behaviours they
can be answered with hard facts. The commercial upside will be enormous to a UK
industry with £700bn AUM – the winners are already starting to emerge.

Acknowledgments
Hyperlinks to relevant content
Disruption in Wealth Management – A major earthquake is long overdue
Greg Simmons | December 2016 Page 9
Photography Credits:
Getty Images – Big Data (Credit: Fandijki)
Getty Images – Seismograph (Credit: Wf Sihardian / EyeEm)
Getty Images – McLaren Pit Wall (Credit: Mark Ralston)
Further Reading and References:
World in Beta (PwC) - FinTech
Barclays - Investment Philosophy
Scorpio Partnership - HNWI's vision for WM industry in the information age
Greg Davies, Centapse - Shiny new toys. Does Wealth Management Need A.I. ?
Fortune.com - Big Data in Formula 1
Autonews.com - Ford had a better idea in 1956 but found that safety didn't sell
Cognizant- The Work Ahead Mastering The Digital Economy