One of the more exciting developments in the world of asset management is the increasing proliferation of platforms that help wider groups of people access financial products that would traditionally have been gatekept by professional investors.
For Fidelity International Strategic Ventures (FISV), the CVC of financial services firm Fidelity International, which invests roughly between $3-10m in series A and beyond, putting sophisticated investment tools in the hands of more people is a major theme.
The unit on the cap table of several such startups, including Moneybox – a mass-market product for retail investors to put their money in stocks, shares and more – as well as Moonfare, which, while not as accessible as something like Moneybox, gives private investors access to private equity funds with investments as low as €50,000, when the usual tickets are far beyond that.
It’s not just about direct investment but also financial planning more generally – and it’s not just generic robo-advisers anymore. AI-powered tools like the one produced by Canadian startup Conquest – which FISV invested in last year – is designed to give guidance, planning and advisory services to people who might not otherwise get it.
“We’ve gone through this era of just the robo-advisors saying: just chuck it into a few ETFs and we’re all golden. I think that’s great for some portions of the market but not for long-term investment, saving and wealth creation specifically. And so you do need some of these components to come together,” says Alokik Advani, managing partner at FISV, on the CVC Unplugged podcast.
Of course, you can’t expect people who do not invest professionally to be as aware of the risks and pitfalls that come with putting your money out in the market. Advani says that there must still be clear regulatory guidance on who gets to access what kind of risk, and a strong education piece that is commensurate with the more complex nature of the products people have expanded access to.
The corporate venturing unit looks at anything that loosely touches that world of wealth or asset management, including business-to-business and business-to-consumer startups.
Hyper-personalisation
It’s not just about access but also personalisation. You can invest in a stock and shares ISA, or you can pick and choose the underlying stocks based on your preferences. This kind of personalisation is more prevalent in markets like the US where the market is more flexible and affordable for the end user to do so – without the same kinds of execution and clearing fees that exist elsewhere – but it opens up new opportunities to sell.
“I think the notion, depending on the client segment, is what does someone really want? Everyone wants to feel special. Everyone wants to feel like you’re getting something personalised,” says Advani.
“Though someone may not go to its end state and make their own portfolio from scratch, they may want to just pick and choose saying: well, I don’t want that particular company because I don’t believe in its ethos, but I want that other one to replace it. So having a bit of that can be helpful for some part of the market. There’s another part of the market that may want something totally bespoke at the higher wealth end of the curve.”
Renovation of financial infrastructure
Another big theme FISV looks at is the modernisation of what he calls the “pipes and plumbing” of the asset management industry, whether that’s data management, compliance, automation, monitoring or other areas where the underlying infrastructure needs updating.
“In an industry that’s been built with what are now very giant incumbents, there’s going to be legacy infrastructure that needs some renovation,” says Advani.
“That renovation may come from incumbents, may come from people building stuff internally but may also come from startups that are able to bring more unique technologies.”
AI-plus-human
In a time when everyone’s looking for applications for AI across their business, for fintech the more general ones tend to be centred around cost reduction across large organisations, says Advani.
What FISV is more interested in, though, are the ones that directly impact asset management.
“What are companies that could do something different? That’s around investment, research, portfolio construction, portfolio management. What impact could it have now and in the future? We’ve been meeting a range of companies that are looking at some of these very niche narrow verticals to see what impact it can have and where we can partner with them to trial and test some of these things.
When it comes to managing people’s finances, though, there is always the question of trust. How much trust will people put into a piece of software – however intelligent – to handle their savings?
“I still keep thinking that for the foreseeable future, it will be a combination. It’ll be machine-plus-human to be able to deliver that and cross the trust chasm but also to increase the efficiency of what you can do for your clients, how fast you’re able to do it,” he says.
Better regulation
Conventional wisdom suggests that regulation lags behind innovation, to the detriment of the latter. But in fintech, that’s not always the case anymore, according to Advani.
“I think that used to be the case a while ago. I think, in general, regulators have taken the time to understand the fintech ecosystems, different markets, different products around the world,” says Advani, referencing successes in the UK, Europe, and India.
“Some have established large teams to deal with it. Some have established sandbox environments where young companies can come and test out, how they can interact with it.”
“Now you’ve got well-established bodies of startups and industry organizations that are continuously interacting with regulators, not on behalf of incumbents only, but on behalf of startups.”
