Will Bailey, EVP for Europe and Innovation at InvestCloud, explains how bridging Silicon Valley’s technology expertise with London financial heritage
Will Bailey, EVP for Europe and Innovation at InvestCloud, explains how bridging Silicon Valley’s technology expertise with London financial heritage is creating a unique opportunity for FinTech innovation in the City, and why this encouraged him to make the move across the Atlantic.
As an American having made the move over to live and work in London, the predictable question I’m always asked is, why would I want to swap sunny California for grey Britain? I must admit that while the weather is certainly a bit duller over here compared to InvestCloud’s Los Angeles headquarters or San Francisco offices, the opportunities in FinTech are anything but.
London is one of the major financial capitals of the world, next to New York, Frankfurt and Geneva. The city, in tandem with other nearby locales, is also a hub for technology and innovation – from relatively new firms such as Deliveroo to established veterans like ARM. The combination of these makes it an ideal breeding ground for financial technology innovation.
FinTech has certainly made a name for itself in London. It is an area that has captured global interest. This attention is something that doesn’t look as though it will abate anytime soon, even with Brexit looming in the background. Investment in the sector is booming, too. In 2017 venture capitalists spent more than $1bn (£760 million) on disruptive companies.
A special relationship
As a business with a strong Anglo-American connection – many of our founders, including our CEO John Wise, are British – it makes a lot of business sense for a technology company working across the asset management value chain to be involved with the UK market. For us, this means we can bridge the long heritage of financial services with the cutting edge digital thinking of California.
For years, many investment managers have gotten by on legacy technology systems – or worse – a total reliance on Excel spreadsheets. In today’s digital-first world, this simply isn’t acceptable. The need for digital solutions is not just an issue for certain geographies; it’s a global requirement with impacts across the entire asset management value chain.
As an industry, asset management thrives on an awareness of everything going on around it to make smart investments. But what has happened in the past decade and a half is a dramatic shift in how everyone does business. Asset managers and investors have certainly capitalised on the opportunity to find alpha by making smart investment decisions in disruptors. Examples include early stage investments in firms like Uber, which has revolutionised how we think about transport, or in companies such as Amazon that have reinvented the shopping experience.
Unfortunately, asset management still lags when it comes to leveraging that same awareness to rethink how we engage with clients. The current service standards set by the sector have been oriented toward offline communications – face-to-face meetings and hard-copy reporting. But the modus operandi is shifting to online. From the US in the west and China in the east to the UK and Australia, digital is now quickly becoming the primary channel of engagement.
The burgeoning robo advice sector is a bellwether of this dynamic. Companies like Nutmeg are capturing the attention of a whole new audience of investors – the mass affluent. While robos may not be able to deliver the degree of personalisation that an ultra-high-net-worth individual expects, they do provide a valuable lesson in how to use digital platforms to create an experience that appeals, especially toward younger generations.
London is a city that has always been at the forefront of innovation; its investment firms echo this behaviour. Digital will allow the sector to secure a special relationship of its own with a younger generation of investors, while helping to future-proof the business itself.
As with all locales, investment businesses operating in the UK face their own unique regulatory burdens. Directives such as GDPR and MiFID II are adding extra pressures all along the investment management value chain. For example, to comply with GDPR, water-tight data control is an absolute must. The penalties are harsh: €20 million or four percent of global turnover, whichever is higher. Non-compliance is not an option.
FinTech is well placed to ensure compliance and deliver business benefits from it. Like many other industries subject to regulation, investment businesses in London are recognising the opportunity it spurns, especially for those who make the leap sooner rather than later.
There are two truths we all know: 1) information is power; and 2) we live in a data-driven world. With these in mind, regulations or directives such as GDPR and MiFID II present investment businesses with both a carrot and a stick for adopting data warehousing and other similar technologies.
The centralisation of data can help firms achieve a single version of the integrated truth across all clients and business areas. This in turn allows managers to make better decisions based on better, more complete information. The result? A greater understanding of your clients and your business, as well as better investment decisions and regulatory compliance.
The space in which FinTech and investment firms in the UK are operating is an exciting one. There is a great change taking place, with regulation and the transfer of wealth set to greatly affect operations in the next few years. While one could look at this as a curse, it instead presents a once-in-a-career opportunity to build something new that will future-proof the industry. Now is the time to embrace the opportunity.
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.