The head of Merrill Lynch explained why the firm has zero interest in buying a robo-adviser — and it shows how buzzy wealth-tech startups are in a tricky spot
The head of Bank of America's wealth management business, among the largest in the US, said on Wednesday that his unit was not planning to acquire a robo-adviser. Investment-focused tech startups "mainly had their heyday in the mid 2010s and learned some hard lessons along the way," the Deloitte Center for Financial Services said in a report published Wednesday. "As a result, many have shifted to a business-to-business (B2B) model, merged with incumbents, or simply disappeared." Andy Sieg, the president of Merrill Lynch Wealth Management, told Business Insider that the unit is focused on investing in Merrill's existing technology and trying to ensure that its thousands of financial advisers are incorporating the full menu of tech into their practices. That thinking highlights how standalone robo-advice and wealth-tech firms may be in a tricky spot as legacy firms invest in their own technology. Meanwhile, the pipeline of new startups in the space has ground nearly to a halt. The firm has also doubled the number of its "digital specialists," from 15 to 30, who are responsible for guiding advisers on how best to harness new technology. Visit BI Prime for more wealth management stories.
The head of Bank of America's massive wealth management business said on Wednesday that buying a robo-adviser was not in the cards for the unit. Andy Sieg, the president of Merrill Lynch Wealth Management, said the unit is focused on investing in Merrill's existing technology, which includes its own self-directed investing tool, and trying to ensure that its thousands of financial advisers are incorporating the full menu of tech available to them into their practices. "The best road to the future for us is continuing to invest in our own platforms, and ensure that they're leading the marketplace in terms of capabilities," Sieg, who has led the business since 2017, told Business Insider. That thinking highlights how standalone robo-advice and wealth-tech firms may be in in a tricky spot as legacy firms invest in their own technology. Meanwhile, the pipeline of new start-ups has ground nearly to a halt. "They mainly had their heyday in the mid 2010s and learned some hard lessons along the way," the Deloitte Center for Financial Services said of the fintechs it broadly groups as "invest-techs" in a report published on Wednesday. "As a result, many have shifted to a business-to-business (B2B) model, merged with incumbents, or simply disappeared."
The San Francisco-based startup SigFig, for its part, has pivoted in recent years from a business-to-consumer to a B2B business model. Meanwhile the number of invest-tech firms coming to the market has dwindled since a post-financial-crisis peak of 81 in 2014, according to Deloitte's report. Just four launched in 2018, and only one debuted last year. "As invest-techs mature, they are now tasked with striking the right balance between collaboration and competition to secure their place at the forefront of the industry," Deloitte's team wrote. The global head of financial technology banking at RBC told Business Insider earlier this month that while some robo-advisers' growth has been quite impressive, "to make the business models work, it's predicated on AUM levels that are much higher than where they sit today." At the same time, legacy wealth managers like Merrill Lynch and peers like Morgan Stanley have to grapple with attracting a new generation of wealth and brokerage customers accustomed to cheap, automated transactions with brands that only emerged in the wake of the global financial crisis. Some 72% of Merrill Lynch clients are actively using Merrill Lynch and Bank of America's online or mobile platforms, Sieg said on Wednesday after Merrill and parent Bank of America reported fourth-quarter earnings results. Within that base, the number of clients using the MyMerrill app — separate from its self-directed offering — rose 44% in one year. Last year, the business launched new digital features for clients, including the ability to scan and upload documents into the MyMerrill app, as well as sign documents directly with the app and send them to advisers. The firm has also doubled the number of its "digital specialists," from 15 to 30, who are responsible for guiding advisers on how best to harness new technology. Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
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The coronavirus pandemic has spooked investors. A financial adviser can help in decision-making and sticking to...The coronavirus pandemic has spooked investors. A financial adviser can help in decision-making and sticking to a financial plan. Business Insider has highlighted the UK's top financial advisers to watch in 2020. Click here for more BI Prime content. The coronavirus pandemic has interrupted stock markets and made many investors wary about the best way to manage their money during these tough times. A financial adviser can help define a strategy and ensure you keep to it, but it can be hard to choose one. The latest data from the Financial Conduct Authority, the UK regulator for financial services, indicates only one in 10 adults seek financial advice when making investment decisions. The recent market volatility may push more toward professional advice, leaving many to question how to choose the right person. Business Insider has sifted through financial-adviser trade awards and review websites to highlight the most praised and promising people and brands to manage your money — and they are all open for business despite the coronavirus lockdown.SEE ALSO: British investors have flocked to DIY platforms with the coronavirus shaking global markets, but financial advisers warn of big risks Gemma Siddle, Eldon Financial Planning Siddle had planned to become a lawyer but joined Eldon more than a decade ago instead. She has built a bustling award cabinet since, with trophies from the Personal Finance Society for paraplanner of the year in 2012 and chartered financial planner of the year for 2019. She was also included in New Model Adviser's top 35 next-generation advisers each year from 2016 to 2019. "We have provided a remote service for several years and were able to adapt to remote working without any interruption to our service," Siddle said. Angela Marson, Fairstone Fairstone is one of the highest-rated UK financial advisers on the reviews website Trustpilot, with a score of 4.9 out of 5 from more than 3,000 reviews that praised its service and knowledge. It is one of the UK's largest chartered-financial-planning firms, with 600 advisers and staff members spread across 48 UK locations. "Clients have been happy to embrace the new approach to virtual meetings," Marson, a chartered financial planner at Fairstone, said. "My time is actually spent more effectively with clients, removing the time taken to travel to meetings, which has helped me as an adviser, to assist more clients." Kyle Nethercott, Hazlewoods You don't need to be a big brand to make a big impression. The Gloucester-based adviser Hazlewoods Financial Planning came 13th in the trade title FTAdviser's top 100 financial advisers for 2019 — a list dominated by large firms. The awards assess how qualified staff members are, their experience in different economic environments, as well as the value of investments that came in and out of the business over the year. It may have a small team of four advisers, but Hazlewoods still advises clients across the UK, and its management, including the financial-planning partner Nethercott, has decades of experience. "Our clients know they can contact us if needed, and we are conducting many meetings via telephone instead of the usual face-to-face," Nethercott said. Pete Matthew, Jacksons Wealth Management Matthew is the managing director of Jacksons Wealth Management. He launched one of the first personal-finance-focused podcasts in the UK and has a strong social media and web presence with his Meaningful Money financial-education brand. "I've been using Zoom video to talk to clients around the country for years now," Matthew said. "I've never met most of my clients in person, so that hasn't been an adjustment." Andy Hart, Maven Adviser Hart is the founder of Maven Adviser and is a respected financial-planning podcaster. He has also launched Humans Under Management, a series of events focusing on the behavioral-finance aspects of investing rather than just products and performance. "I've been remote-ready for close to a decade," he said. "Lockdown has caused a lot of disruption with the companies I use, but we're still taking on clients and servicing our existing clients." Barry Horner, Paradigm Norton Paradigm Norton, with offices in London, Torquay, and Bristol, is a serial industry-award winner, picking up regular accolades from trade titles such as Money Marketing and New Model Adviser that praise the way it works with clients. It is a Certified B Corporation, which means it must maintain certain social and environmental performance targets and balance profit and purpose. It also has its own impact-investing arm. "The week before lockdown the entire team of some 70 professionals were all successfully home working, and, other than the ability to schedule 'face to face' meetings, we were fully operational," Horner, its chief executive, said. "We have emailed our clients with regular and helpful updates, which has been hugely appreciated." Darren Sharkey, Quilter Financial Planning The nationally focused adviser Quilter Financial Planning came on top of FTAdviser's top 100 financial advisers for 2019. Its ranking suggests you get access to well-qualified, experienced support among its thousands of advisers. The team is led by Sharkey, who has worked within Quilter for more than 20 years. "Now more than ever, clients need to be able to contact their adviser and be reassured that their finances are in safe hands," Sharkey said. "Our advisers have tools and resources to offer advice remotely." Darren Cooke, Red Circle Financial Planning Cooke was one of the first to call for a ban on pensions cold calling to stop people from getting scammed. He started his own campaign in 2016, and the government went on to introduce a ban in January 2019. This indicates he is someone who cares for his client's well-being. "Clients are still receiving the same high-level service they did before," Cooke said. "The main part that has really changed has been replacing meetings with video calls, but so far that has worked really well." Tim Sargisson, Sandringham Financial Partners Sandringham Financial Partners was the top-rated firm on the adviser search engine VouchedFor in 2019 based on the number and level of reviews it received. Out of 1,974 clients, the national advice firm received 1,828 five-star ratings, 136 four-stars, and 10 three-star reviews. "Clients value you for your ability to provide reassurance and help deliver their goals," its CEO, Tim Sargisson, said. "The other critical part is how you deliver your service and our tools help advisers deal with clients remotely." Lisa Johnstone, VWM Wealth Johnstone's team picked up the trophy for chartered firm of the year at the Personal Finance Society's 2019 awards, which cited the way it engaged with charities, sought feedback from clients, and developed new financial advisers. It also offers its own range of ethical portfolios. "Our main method of contact is telephone and also Zoom for meetings, in line with our family office approach," Johnstone said. "Our newsletters are forward looking, whilst reinforcing some key messages and our outlook. "Being close to the families we work with means that current market events are expected, not predicted, but they are a normal part of the financial-planning journey."
British investors have flocked to DIY platforms with the coronavirus shaking global markets, but financial advisers warn of big risks
Global stock markets have been turbulent during the coronavirus pandemic. Multiple UK platforms that cater to...Global stock markets have been turbulent during the coronavirus pandemic. Multiple UK platforms that cater to inexperienced investors have reported a surge in new accounts being opened. Financial advisers, who compete for business with such platforms, caution that there are big risks if investors make the wrong move. Visit Business Insider's homepage for more stories. UK do-it-yourself investment platforms such as Hargreaves Lansdown and AJ Bell Youinvest have reported a surge in new accounts being opened by investors trying to manage their money themselves during the chaos caused by the coronavirus pandemic. But professional financial advisers, who compete with such firms for business, are cautioning investors about the risks of going it alone, especially coming off the recent volatility in global stock markets. DIY investors, also known as retail or individual investors, might sell at the wrong time, for example, or even start investing with a portfolio that is poorly suited for them. Lisa Johnstone, the managing director of the advisory firm VWM Wealth, said DIY investing made her think of a poster she saw in the waiting room of a doctor's office that said "Don't confuse your Google search with my medical degree." "Don't confuse financial planning with investing," she said. "Especially DIY investing." Johnstone pointed to last year's collapse of the popular fund manager Neil Woodford's multibillion-dollar Equity Income Fund, which had received investment from hundreds of thousands of DIY investors. "The Woodford scandal is an example of why you should not pick your investments yourself from the internet or from ads in the Sunday papers," she said. "The DIY investor sets stock in the best-buy list, whilst the professional looks under the bonnet and actually knows what to look for." Don't put all your eggs in one basket David Macdonald, the founder of the advisory firm The Path, said a financial adviser could help with the all-important task of assessing how much risk investors might be prepared to take and to ensure they build a well-diversified portfolio so their investments don't all collapse. "The main thing for investors to consider is their risk tolerance," he said. "The longer someone's timeline is for investment, the more they can afford to take. A portfolio should be diversified so you don't put all your eggs in one basket. Investors need to know how many different investments they should have and the various types." For example, he said, a typical portfolio might consist of stocks and shares, bonds, and cash. "The asset allocation is informed by the risk tolerance a client has got," he said. Some DIY platforms do provide ready-made portfolios based on an investing goal and risk tolerance, but advisers would argue that they can build a more accurate and personal basket by getting to know the client. Planning rather than product-focused DIY investment platforms might focus on tax-free investing through an ISA product or push fund recommendations, but an adviser or financial planner will begin by looking at clients' specific goals. Johnstone described a financial planner as an accountability partner "to tease out what you and your family really want your money to do for you, to question the decisions you make and your relationship with money, and to encourage families to sit down and talk about their differences." "They invest with a proven track record, investment experience, professional qualifications, and regulatory requirements to do it well," she said. She added that a financial planner would have the discipline to maintain a long-term view even amid the kind of volatility in global markets from the past few months. "It is at times like these that those who don't have a financial planner wish that they had," she said. "When the S&P index falls 34%, it is a brave and rare DIY investor that will have the resolve to leave it alone." A long-term view also means being able to predict problems, such as decisions that might inadvertently lead to higher taxes down the road. "A financial adviser would start with the end in mind and look holistically at a situation to think carefully about before you get into something, how will you get out," Macdonald said. "You may find someone is a higher-rate taxpayer but has a spouse in the lower-tax band whose name it may be better to invest in." Macdonald suggested advisers could also help clients with more niche desires like the impact investing, which his firm specializes in. "Many investors put environmental impact and sustainability as a more important metric than outright financial performance, but it is hard to research these types of funds on your own," he said. How to decide between DIY or using a financial adviser Not all circumstances require a financial adviser. Holly Mackay of the investing-guidance website Boring Money pointed out that DIY platforms could be cheaper than taking financial advice, though advisers would argue that they offer extra value by helping form a plan and ensuring investors stick to it. Boring Money has tables designed to compare the costs and reviews of DIY websites, while the adviser search engine VouchedFor features adviser ratings and customer feedback. There is also a middle ground with robo-advisers such as Nutmeg or Wealthify in the UK and Wealthfront and Acorns in the US, which build and manage automated portfolios based on risk questionnaires that investors complete online. "For those looking to do relatively simple tasks such as investing in an ISA and not, for example, making complex pension decisions, it can be argued that it's not worth paying for financial advice," Mackay said. "In general advisers come into their own when it comes to complex decisions such as around retirement and pensions, or for those with more than £100,000 who feel that the costs of getting it wrong are too big to mess with."SEE ALSO: 8 smart things people with financial advisers do with their money that give them a leg up Join the conversation about this story » NOW WATCH: Financial experts share advice on how to invest your money during the coronavirus pandemic
Traditional financial channels, women say, have often been blind to their needs. Meetup groups and other...Traditional financial channels, women say, have often been blind to their needs. Meetup groups and other organizations are filling a void.