Transforming Wealth Management: Q&A with Tom Winterton from InvestEngine.
Head of Platform at InvestEngine.
InvestEngine is an industry‑leading investment platform with a mission to make investing more simple, more accessible and more powerful.
If you'd like to hear more from Tom, you can find him at the Wealth Transformation Summit in London this June.
Hi Tom, can you briefly describe to us what InvestEngine does for the customer?
We're here to help customers build long term investment portfolios, with a user friendly app and the aim to automate as much of the process as we can.
How have you seen the Wealth and Investment Management market change in recent years?
There have been some big shifts in Investments & Wealth over the last few years. At InvestEngine, we focus exclusively on ETFs (exchange-traded funds), and across the industry we’ve seen a trend of significant inflows into ETFs and many new funds being launched. It's something most expect to continue over the coming years. Retail investors are increasingly gravitating towards passive index-tracking strategies due to their simplicity and cost-effectiveness. The movement reflects modern investors' preference for minimising fees while achieving steady, market-average returns.
Another shift we've seen is a real bifurcation and split of the market and services offered to customers. The cost of serving clients through a more traditional in-person model, whether IFAs or traditional investment manager firms, has risen significantly, so we've seen a lot of consolidation. For example, KYC (know your customer) requirements and regulations often make it unprofitable to serve clients with less than £100k or even £200k to invest.
At the other end of the spectrum, and especially since COVID, we've seen the rise of app-based investment platforms offering low or sometimes zero-fee investing. These platforms aim to use technology to transform user experiences, leveraging open banking tech to automating many processes, offering instant transfers and auto-investment type features. These advancements are making investing more accessible and straightforward, encouraging regular investing habits and democratising wealth management for previously underserved customers.
What do these changes mean for traditional Wealth businesses?
Change is always difficult, especially in Wealth and Investments. Businesses must operate within the financial services ecosystem and adhere to all their regulatory obligations. But I still see traditional Wealth providers having to adapt to the shift we're seeing in tech. Customers expect well designed digital services and increasingly automated processes. The good news for traditional providers however is there's no shortage in FinTechs looking to partner and support businesses. I see these types of partnership being increasingly important.
As someone working in a FinTech, I've been very lucky to participate in many workshops, discussions, and events hosted by more traditional businesses. These interactions are invaluable, providing insights and fostering partnerships that drive innovation. I strongly advocate for collaborative approaches between traditional firms and FinTechs, even when immediate opportunities aren't apparent. This is a real opportunity to innovate, which will move the industry forward far quicker than companies working in their own bubbles.
“Customers expect well designed digital services and increasingly automated processes. ”
To date, what have been the blockers to innovation in Wealth? And do you see that changing?
One significant barrier in my view has been the regulations around providing financial advice in the UK. This has long been recognised as an issue, with various attempts to solve it with ideas such as simplified advice. However, I see it becoming even more challenging as we see businesses try to integrate AI into various aspects of the industry and customers expecting these types of services. The next generation of customers are also increasingly looking to YouTube and other media for guidance. The FCA's Advice Guidance Review is a step in the right direction, but regulatory hurdles will continue to be a recurring theme as technology evolves.
Another major blocker is always going to be the existing infrastructure everyone operates in and that will take time to change. The London Stock Exchange (LSE), settlements through Euroclear, HMRC and our payment systems, relying on the interoperability of a few major banks. Speak to any Wealth or Investment FinTech in the UK and they'll have to work with these systems and tech, often developed decades ago. While we are unlikely to see new systems emerge overnight, elements of this infrastructure are being challenged, upgraded and improved over time. There are lots of opportunities, particularly with the advent of blockchain and related technologies. Who thinks we'll be waiting 2 days to settle a trade on the LSE in 10-15 years time? I'm not so sure we will.
What role do environmental, social and governance (ESG) considerations play in shaping innovation in Wealth?
ESG has played a strong if not uncontroversial role in investment over the last few years. After an initial rush into ESG screened or themed funds we've seen a fall back more recently with various 'Green Washing' allegations. We're now starting to see new propositions taking a deeper, more informed approach to the difficult problem of ESG investing. And the space will continue to evolve.
I can see a drive to more transparency in investing being an ongoing theme. Companies such as Tumelo are championing pass-through voting. And at InvestEngine we partner with another FinTech to offer "look-through" services for all our ETFs, showing all funds underlying holdings. I think these and other innovations to support ESG will only increase in importance.
Other than InvestEngine, can you tell us about another Wealth firm or FinTech that you admire?
Interesting question....this has really got me thinking.
There are lots of FinTechs doing a great job improving different parts of the ecosystem. We've worked with Truelayer for quite a few years now and they've really helped drive forward and support us with open banking payments. It's a prime example of where you have dozens of banks, regulatory pressure and new technology - Truelayer has been great at helping us get a system working that our customers really appreciate.
Perhaps controversially, I'm also going to mention the FinTech YouTubers out there - lots of whom we work with directly - who are helping break down information barriers and educate customers and future investors.
Not everyone will agree but I see them being increasingly important both for FinTech and traditional Wealth managers, engaging with more people and getting them to think about Wealth Management.