InvestorBee: Filling the Information Gap in Wealth Management

Which do you consider the greatest innovations in wealth management so far?

Graham Mannion: The introduction of indices, led by Dow Jones, changed the course of wealth management. Before then the concept of benchmarking performance was at best vague. Since their introduction, the transparency that indices bring has hugely benefited the industry at large.

In more recent times, there has been a wave of innovation that is simplifying the process of buying and managing investments for consumers. This is leading to an interesting battle between distributors, who want to provide custom blends of different investment products, and asset managers who are focusing increasingly on offering mutual funds and listed securities that provide a diversified portfolio solution through a single unit.

Which will be the next big innovations?

It’s likely to come in the direct-to-consumer space because of the need created by regulations such as the Retail Distribution Review in the UK and the opportunity and expectation created by evolving digital technology. Wealth management is lagging behind other financial services, like insurance, in the way that consumers are empowered to make effective decisions by themselves.

What was the main idea behind founding InvestorBee?

During my time in the wealth management industry at UBS and McKinsey, it became clear that there was a big information gap. My clients at UBS used to come to me frequently with the same problem – how were they doing? They had no context to understand how their overall basket of investments was performing. In my pursuit of answers to that question, I founded DCisions first and thereafter InvestorBee.

There is such a big gap in the investment management industry today that people struggle to see it. Data is ubiquitous and if we can harness it properly, the wealth of knowledge that we can gain from it is vast. At InvestorBee, we analyse over 1.4 million real consumer portfolios to see how they are performing.  The main idea is to provide simple, fact-driven benchmarks for the investment returns people achieve, taking into account the risk they are taking and the fees they are paying. The resulting insight helps retail investors like you and me make objective and fact-driven decisions.

What is your business model?

We make money at three levels: firstly, by helping established distributors make sense of their customer data and manage their customer relationships better, secondly, by using this data to connect distributors with new customers more efficiently and thirdly, by applying our data to solve marketing challenges beyond the investment industry.

You offer a multi asset funds comparison tool. Many studies have shown that funds couldn’t repeat top performances consistently. Wouldn’t it be more useful to propose a set of cheaper ETF products depending on a specific asset allocation strategy?

We do offer that on the site for registered users. Every quarter, we publish the asset allocations needed to track each of the five risk-based benchmarks and provide basic instructions and fee comparisons to help people execute these strategies.

That said, our research showed us that the industry is gravitating towards multi-asset funds. They have become increasingly popular and we believe they will form a significant part of the investment landscape in the years to come.

It’s important consumers are able to see whether these products deliver value for money, based on the risks they take and the fees they charge. Ultimately, InvestorBee will reveal how consistent these products are in terms of the performance they deliver. It’s for our users to decide whether they prefer to hold multi-asset products or simply use our asset allocation data to construct a passive portfolio.

Whatever we as investment professionals think is “right”, some people are happy to track the market but some will always want to aim to beat it. Either case, we can provide information to help them make the best possible decision.

Investment advisory is all about trust and people. According to Mike Alfred, CEO of BrightScope, «financial advisors continue to grow in to one of the most powerful players in the financial services world and the entrance of online investment advice providers will not reverse that trend». What is your strategy to gain trust and reverse that trend?

We don’t need to reverse that trend. On the one hand, the direct investing market is large and growing - we can help these players improve customer acquisition and share of wallet. On the other, where consumers rely on an adviser, our insights are a complement, not a replacement. As the advice industry evolves, demonstrating value add to clients will only become more important.

The implementation of the Retail Distribution Review in the UK in January 2013 will generate an advice gap, smaller clients will become too costly to serve, and many others may decide not to pay explicit fees for advice. A recent article in Citywire indicated that in the UK alone, as many as 3000 IFAs could face closure. Many retail investors will need to rely much more on their own initiative eventually.

Whether or not you want to use a financial adviser, all we are asking is – why not arm yourself with the facts?

Interestingly, the financial advisers we have talked to have been enthusiastic about InvestorBee. For a variety of reasons, they often find themselves unable to assist certain types of clients and want something credible and trustworthy to recommend. The feedback we’ve been getting is that the impartial, data-driven nature of InvestorBee fits the bill.

For how long will the asset and wealth management industry stay a people business?

People will always play an important role, however the balance of interactions between online, telephone and face-to-face will continue to evolve, and face-to-face will look increasingly expensive. Personal investment advice will tend more towards larger more complex clients because these will be the clients that need it and can afford to pay.

Do you plan to expand internationally?

Our system and processes have been designed from day one to be relevant internationally. We also have patents for our business method in the U.S and Australia. International expansion is a possibility in the future. For now, we are focused on the UK.

Where do you see InvestorBee in five years?

We are, and always will be about data. With that and our independent position, DCisions and InvestorBee have the opportunity to sit right at the heart of the industry as a standard by which investment products and advice are measured and benchmarked. We want to create a virtuous circle where we empower consumers to trust the industry and feel confident that they can get a fair deal, every time. While also continuing to help the industry understand what consumers want and how best to meet their needs.

September 8, 2012