It was only a few days ago that I turned to one of my colleagues (I can’t remember who it was. It doesn’t matter, it’s not that great an anecdote and there’s at least a 50% chance I’m making it up anyway.) and complained that “There’s not been a re-price in the direct-to-consumer market for ages now.”. Well, it seems like someone out there was listening to my prayers. And in other news, I’m utterly sick of neither winning the lottery nor Jennifer Lawrence returning my calls.

Anyhoo, this is just my whimsical way of introducing the news that the boys and girls at AJ Bell Youinvest have not only fundamentally changed its pricing structure but also instantly rendered the pricing tables in our recent D2C guide obsolete. BOOM!

New fund switching charges, new core platform charges, new admin charges, new pension income charges. Whoah there! There’s so much going on Steve, where do we even start? Let’s fire all the main changes into a table and try and get a handle on things.


Righto, let’s have a look in turn:

  • The removal of the 0.20% + £200 cap appears at first glance to be a biggie. We all know that 0.25% is bigger than 0.20%, yeah? Especially when it’s capped at £200. However, it’s important to note that this £200 pa cap applied per wrapper. So, if you had a chunky ISA, GIA and pension, then charges were actually capped at £600, see? Important point to make before reaching too readily for the price hike pitchforks.
  • No getting around the fact that the addition of a new custody charge for shares (and by shares, we mean equities, ETFs, investment trusts et al) will cause a grumble or two. There is now a charge where there wasn’t one before and fundamentally, that’s a difficult message if you’re solely invested there with no fund holdings. However, some of this is offset…
  • …if you have a pension and have just seen your annual admin charge disappear. Especially if your SIPP is over £20k where this charge used to be a hundred quid a year. Also further offset if…
  • …you were in drawdown but not taking an income (i.e. had taken tax free cash but not regular income yet) where your £50 + VAT charge for this has now been quashed.
  • The reduction from £4.95 to £1.50 in fund switching charges is a welcome change. It won’t make anyone rich, because (1) arithmetic and (2) switching activity on the fund side is low, but is still a nice little alteration.
  • Lastly, the pension lump charges seemed a bit zesty to us so it’s cool to see them come down substantially too.

So, how does this all affect our pricing tables? Let’s look at SIPP products on the fund side first. (Core platform charges + annual admin charges + 2 buys and 2 sells where providers charge.)

SIPP charges

And ISA/GIA (same assumptions)


Shares have feelings too so here’s how investment in exchange traded instruments through a general account with 12 trades per year looks. We always illustrate this one in pounds only as it highlights that the majority don’t charge a %-based custody charge for equities.


Now that’s an awful lot of information to digest. Ultimately, where you stand on this depends on your perspective. With our provider hat on, if you’re looking to change prices you either make a strategic shift here or there, some customers win/lose but most stay pretty much as they were, or you make a fundamental change that affects pretty much everyone. That’s what Youinvest has done here in an attempt to simplify things across the board and it’s a bold move.

Through the lens of the customer, we can see from the heatmaps that Youinvest has retained its position as a low cost provider pretty much across the board, with pension customers at the lower end among the biggest winners – which we like. So for Youinvest, it’s more about managing the messages[1] on the fringes for those affected in the other direction. All the heatmaps in the world aren’t going to comfort a customer who sees their charges demonstrably increase for the same service. We think, overall, there’s more to like than dislike about the new structure but ultimately, it’s over to the customer. What do you think? Drop us a line, we’d love to hear your views.


Lots of price changes. Youinvest still inexpensive on average. If you invest in funds only then your charges are going up a bit, but if you have a modest pot with a pension then they could well be going down. If you’re in drawdown, then you might well save a bit as some of the admin charges are reducing. If you invest in shares, then you’re facing an additional custody charge that is only really significant if you have a biggish pension pot (but is offset by the removal of the main wrapper admin charge) Phew.

[1] It’s launched a calculator for customers who want to see where they stand. Get it here.

Slurp! Aegon eats Cofunds for BREAKFAST

(Journos reading this – any part of it is attributable if you want it.)

So before we get into this, I need to tell you that the lang cat has been doing a wee smidge of work here and there on matters pertaining to the acquisition (posh) so if that bothers you, stop reading now.

If it doesn’t – wheeee! What a day this has turned out to be. Normally I’d be writing up OMW’s results about now – a third of flows coming through the restricted arm and £225m on replatforming so far, wow – but BAWS TO ALL THAT.

Fresh from scarfing up BlackRock’s DC book, Aegon now takes on the platform industry’s biggest problem child – Cofunds. In no particular order, here’s what I think (important to say that no-one from Aegon or Cofunds has seen this before publication, by the way).

On balance I think this is a Good Thing. I can hear the naysayers coughing up a lung already, but none of that matters too much. Haters gonna hate. The only thing that does matter is that Cofunds desperately needs investment in its tech infrastructure and – for reasons known only to itself – L&G hasn’t been willing to put that in. Aegon is willing, and that’s welcome news for 800,000 clients and 17,000 users in 6,000 firms on Cofunds.

Cofunds’ retail book and the IPS book which has Nationwide et al on it will shift, over time, to an ‘upgraded’ version of GBST’s Composer platform (note: GBST is a client of the lang cat, we’re conflicted ALL OVER the place on this). This will give users increased asset ranges to be sure, but much more importantly it’ll allow a far more integrated pension proposition and it’ll get rid of a lot of the swivel-chair processing that’s a fact of life with Cofunds and FAST at the moment. It’ll also make GBST the biggest platform tech provider in the UK, just ahead of FNZ.

Is £140m the right price to pay? It seems to me there is no really meaningful way to price a business like Cofunds; Aegon isn’t buying it because it loves the profit stream, the tech or even the proposition all that much, I don’t think. It’s buying it to complete a huge transition project that Adrian Grace and team have been working on for the last 5 years. In much the same way that Standard Life worked hard to try and change its DNA from lifeco to ‘long term savings and investment business’ (repeat until blood runs out your nose), Aegon is transforming itself to a platform and protection business. The divestment of the annuity book was a big part of that story. It’s a hell of a transformation – and now that the building blocks are all there, the challenge is for Aegon to make it work.


This is a fascinating moment in the platform industry’s journey. Every commentard including us has chirruped that platforms are a scale game for years, but scale has sort of meant somewhere between £10bn and £20bn depending on what kind of organisation you are. Aegon/Cofunds’ £98bn-ish is split across retail, institutional and workplace, to be sure, but to me it clearly redefines what scale means in the retail market – now somewhere north of £50bn.

It’ll be really interesting to watch outflows – anecdotally a lot of the offs from Cofunds we’re hearing about are about advisers moving to restricted or vertically integrated propositions. That’s one of the potential challenges to any scale player that doesn’t have its own version of Intrinsic or 1825. Hard to see it really denting the numbers in this case though.

One thing we’ll all be watching very carefully is the institutional book (to be clear, the pure insto book for wealth managers and so on, not the IPS book). Aegon has no heritage in looking after stuff like this, and Composer doesn’t either really, in the UK at least. So expect the insto book to stay pretty much untouched for a while; there is an open question for Aegon to answer as to whether it can run this huge book successfully and maybe – gasp! – even make a turn or two on it.


Talking of tech and so on, this is clearly going to be the mother of all replatforming projects. Aegon’s got plenty of experience in moving stuff from the back book to ARC, but this is a whole new bucket of entrails. Cofunds has done all sorts of business over the years; much of it very low value (there’s big stuff too) and joining all the dots will be a huge deal. I think it’s a good thing that David Hobbs is staying to run it, and it’s also good that Rich Denning, ex Selestia and Novia, is doing the ops on the Aegon side. Everyone is going to have to have on their very best replatforming pants; I’ll come onto this below.

It’s worth mentioning that Aegon says the transfer is planned to be done with the minimum disturbance in terms of contractual arrangements. What that means is that terms and conditions will of course change colour, but according to Aegon no-one is going to be charged more than they are just now, no-one will be forced to change investments and so on. The pension scheme for those in the Cofunds Pension Account may be a bit trickier to deal with, but the principle is that advisers shouldn’t have to do a suitability review.

They – you – might choose to, and that’s perfectly right and proper, but there won’t be a contractual need to. That’s a hard line to walk – I think SL and AXA are probably trying to walk it too – so we’ll have to watch carefully and see how it pans out.


So strategically this all works. Cofunds gets an owner that actually wants it and Aegon gets to be the biggest kid in the playground. But does it work as well from an adviser’s point of view?

17,000 users woke up today as Cofunds users; once this all goes through and the transition takes place they’ll be Aegon users (even if the Cofunds brand name stays). Not everyone’s going to be happy with that. Aegon has form in terms of making advisers grumpy when it comes to back books and client relationships. That kind of thing has to be put firmly in the past and Aegon is going to have to work hard to gain and keep the trust of many advisers who wouldn’t select it normally and in fact didn’t select it at all.

But I don’t think there’s any need for immediate action. No-one knows  what the post-takeover proposition will look like yet. I’ve got theories and so will everyone else, but that’s all they are for now. If we phrase this deal as ‘massive company sells massive platform to massive company’ then that’s about as much as we can work with just now.

In just the same way as the AXA/SL deal, there is no immediate change (regulatory approval hasn’t even come through yet). Clients are not in jeopardy. Advisers reading this who hate Aegon – fair play to you, but this is a time for cool heads. Maybe have a moan on the comment boards or something. Oh, you already have…


As ever with things like this, I’ll sign off with a point addressed to the Cofunds / Aegon management.

Lads, you’re allowed one (1) day of back-slapping on getting the deal done. It’s a good deal, I think. Once that’s over, it is absolutely incumbent on you to make sure that advisers and their clients – not your clients, theirs – are kept up to date and treated with courtesy and respect. The transition from old tech to new will be huge, and thorny, and full of unexpected bumps in the road – just ask anyone who’s tried it. Don’t try to gloss the difficult stuff; suck it all up and be really honest with advisers. It may cause pain in the short term, but it’ll be worth it.

Rates. How low can you go?

Cash accounts on platforms interest (ha!) me. Whilst no one really should be using a platform to be fully invested in cash in the long term it’s clearly an important facility to have. Strategic asset allocations often require a small cash holding, and most clients like the comfort blanket of knowing they can flee to (relatively) risk free assets if they get spooked.

There is an argument that platforms are becoming increasingly commoditised, all offering the same stuff, and whilst at a high level there might be some truth in this deep down in the operational detail it most certainly is not. Platform cash accounts and facilities are one of the best examples of this, both in the functionality on offer and the rates paid.

We’ll explore the functional side another day (call us if you can’t wait. We’ll be by the phone.) but as rates are cut to a record low we’d like to highlight the rates that platforms are currently paying (or not)

Provider Rate paid Charge levied?
Aegon 0.40% Yes
AJ Bell 0% No
Ascentric up to 0.15% No
Aviva 0.10% below base rate Yes
Cofunds 0.4% below base rate No
Elevate 0.4 to 0.65% Yes
Fidelity FN 0.4% below BOE on ISA Cash Park, 0% on Intl Bond Bank Account. Pension 1% below subject to 0.25% min Yes (on pension)
James Hay 0.00001% (15/16ths of 1% below base) No
Novia 0.15% Yes
Nucleus 0.17% to 0.73% (varies by wrapper) Yes
OMW 0.35% Yes
Standard Life 0.30% Yes
Transact 0.3% (average) Yes
ZIP 0.30% Yes (except ISA and cash account)


Prior to today’s interest cut the above shows the rates various providers are paying on cash, held in a cash account, wrapper cash or cash facility, and whether a charge is applied. This pre rate cut position highlights a wide range of approaches and customer outcomes. We’ll be updating this chart as and when platforms update their rates, but it’s clear that for most customers it’s not going to be good news. Indeed, some customers could find themselves paying a charge for holding an asset with zero return. Any platform with customers in this situation would do well to remember their treating customers fairly obligations, and ensure the customers are provided with clear information explaining the changes that the rate cut have brought on.

As for the future? Who knows, but if rates go any lower could we find ourselves in a scenario where clients are charged extra (above the normal platform charge) to hold assets in cash? This remains to be seen, but away from the excitement of rate changes impacting savers and mortgage holders it’s clear the platform investor is also going to feel the pinch.


A (slightly resentful) welcome to Scalable Capital

So you go off on holiday, all happy because your new guide to direct platforms and robo-advice has launched. You come back, and some rotten sod has gone and launched while you were away and spoiled all your tables and that.

The rotten sod in this case is Scalable Capital. To be fair, we’ve known it was on the way for a while, but too late for us as we went to press with our guide. Sods. But you can’t hold a grudge and so I’ve been taking a bit of a closer look; here are a few thoughts.

First off, it’s important to say that SC isn’t a robo-adviser in the way that any of the Parmenion-powered propositions or, say, Betterment in the States are. There’s no advice here; but there is discretionary investment management. Sort of like what you got from Nutmeg before Nutmeg started offering regulated advice.

Also available in English.

Also available in English.

In terms of design, SC looks predictably lovely. I haven’t been able to open an account as I’m not stumping up the £10k you need to do so, so I’m depending on filmed demos and so on that you can find pretty easily online. The dashboard looks very similar to other robos – again, Betterment came to mind – but with a nice dark colour scheme. Everything’s well laid out and if we were car journalists we’d probably be saying that all the controls fall easily to hand.

One thing that may surprise some who view online propositions like this as a way to get people interested in dicking around with investments is just how little dicking around you can do. This appears to be quite deliberate – SC wants you to trust the process and be hands off from there. You’re really buying into an investment management philosophy with Scalable; I’ll cover that more in a moment.

In terms of the basics, it’s GIA-only for the moment, with an ISA to come and no doubt once SC works out that all the readily accessible investable wealth in the UK is in pensions, a pensions wrapper too. Incidentally, look carefully at the next set of announcements from Nutmeg to see whether the addition of pensions has made a difference to its key numbers (the ones it discloses anyway).

Charges are 0.75% flat for the service and 0.25% for the CAREFULLY SELECTED BASKET OF ETFs. No lock-ins, additional charges or ulterior motives so far as I can see.


OK, so that investment philosophy. Unlike anyone with sense, I’ve read the 32-page Scalable Capital investment methodology white paper from cover to cover, and what you get seems to my simple mind to be three core components:

  1. Value at Risk, Expected Shortfall and Maximum Drawdown as the drivers of asset allocation, modelled forward via daily Monte Carlo simulations. These lead to 23 risk categories, labelled by VaR. As SC says, ‘an investor choosing risk category 12 wants to limit downside risk so that an annual decline of more than 12% should occur on average only once in 20 years’.
  2. ‘Risk clustering’ – basically (this is a gross oversimplification) a technique that suggests that it is more possible to predict risk than price based on current conditions. As a result, rebalancing moves from portfolio weighting and Markowitz-style modern portfolio theory, to a risk-driven approach. It is well scientific and that.
  3. Discretion – it’s possible for the team to step outside the algorithm and change asset allocation when weird stuff is going on. SC has been vocal on saying it made 12% for investors over Brexit; a claim which will certainly come with a few footnotes.

Whether Scalable Capital is for you, then, depends on whether you like this different approach to the more common portfolio management / auto-rebalanced techniques offered by many of the robos. Do you believe that VaR driven management is a good way of optimising allocation, or do you think that it exposes you to sub-optimally priced trades and in fact can accelerate a race to the bottom? Do you think that Engle’s risk clustering framework is a goer, or are you all Markowitzy? Are you happy that the humans can trump the machines, or are you suspicious of meatsack bias?

Almost certainly, unless you’re an alpha geek, you don’t care. On that basis, and if you have £10k or more to invest, Scalable Capital looks really interesting to me. We’ve written before – not least in the Guide – that the robo market looks like ‘different restaurant, same menu’ – a bunch of pretty websites with broadly the same ETF proposition under each one. Scalable is a new twist on this, and that’s welcome.

In common with all these types of propositions, distribution is the thing that will make the difference. SC may well be being built to sell; in the meantime I suspect it will struggle to find big value pools to attack (although its retargeted adverts are already hunting me round the web). That may not matter to its VC funders, but in a world where you can buy Vanguard Lifestrategy through a decent platform for just over 0.5% all in, there’s a lot to prove. We’ll look forward to watching it play out.

front page imageIn the meantime, if you want to read Leith’s leading independent platform consultancy’s analysis of the online investing market, along with many pictures of aggressive cats, just click the pic and download to your heart’s content – it’s free.

A right old robo romp

robochairman large

The sun has finally made an appearance at lang cat HQ this week (with some thunder and lightning thrown in for dramatic effect) which means not just one, but TWO great things: summer has finally arrived here in Leith and our free annual guide to direct platform investing has been let loose on the world once again.

The platform market had been looking a bit sleepy in our previous 2015 guide, as the dust settled from all the post-RDR pricing changes. But our third annual guide is coming back with a terminator-style vengeance as we turn our attentions to robo-advice in the aptly titled COME AND HAVE A GO: RISE OF THE MACHINES.

The number of start-ups and new launches currently hopping on the robo-advice bandwagon make this area of the market look like a pretty big deal. But, in reality, ordinary investors are not quite so caught up in the robo-hype, with the majority of people still just trying to wrap their heads around what robo-advice means, let alone actually investing with one of them.

So it only seemed right that this year’s Guide went back to the basics of robo-advice, stripping out the usual bore-fest of industry jargon along the way. Anyone who has ever asked themselves questions like ‘what do robos actually do?’ will find the answers here.

Investors also need to ask themselves some serious questions before going down the robo-route, most importantly the level of control that they like to have over the investment process as well as the degree to which they are happy to accept responsibility for investment decisions and outcomes. To make this part a bit easier, we’ve even thrown in a (not-so) scientifically-based, fun-filled, quiz designed to test out a person’s robo readiness.

The rise of robo-advice adds yet another option to the direct platform mix, making it more important than ever to help make things a little simpler for investors going it alone. With this in mind, we’ve added robos to our now (sort-of) infamous #heatmap on platform pricing and other handy tables, to give a better idea of how our automated friends sit in the wider direct platform market.

Other familiar sights include our coveted Lang Cat Direct Platform Awards, which has seen Hargreaves Lansdown nail the top spot once again as Platform of the Year but surprises elsewhere from Parmenion, which claimed the accolade of Platform ‘Hero’ of the Year (yes, we know it’s not actually a direct platform but all will be explained in the Guide).

A small reminder here for anyone who wants to go even further back to the very beginning of direct platform investing that our original Guide covered everything you need to know to start out in direct platform investing. These basics still apply today so readers can dip in to this earlier guide if they need to fill in any blanks.

At the end of all this, our lovely readers should hopefully wind up with a better idea of which platform can best meet their needs, whether it’s a robo, or not, as the case may be. Either way, you’ll have to read it to find out. The only thing left to do then is insert yet another conveniently placed link to our page for COME AND HAVE A GO: RISE OF THE MACHINES. Happy reading and, as ever, we’d love to hear what you think.

10 years of treating customers fairly

July 2006 is not a month to stir the memories. England had just been knocked out of the world cup on pens, the best-selling album was the High School Musical soundtrack (fist pump of solidarity with all the parents who endured that one) and according to Dr Wikipedia one of the most significant news events of the month was George Bush greeting Tony Blair with the phrase “yo Blair”. Surprisingly, Wikipedia doesn’t record one of the most significant events for financial services. July 2006 was the launch of the FSA’s Treating Customers Fairly initiative, and ten years on the six outcomes still cut to the heart of the challenges and opportunities facing firms. So, a decade on, how has the industry fared against each of the outcomes?

Outcome 1: Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture.

Overall, a lot of improvement here, albeit from a very low starting point. I would question how many consumers feel confident that all of financial services has customer outcomes central to the corporate culture, but there are certainly an increasing number of examples where this is the case. How a firm treats its employees, and the culture this generates is arguably the biggest contributory factor to the quality of the customer outcome. If there is one outcome we’d like to see firms really focus on, this is it.

Outcome 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly.

This is an area where there needs to be considerable improvement. All too often the customer “needs” are identified internally with the results being a repackaged version of an existing product line that people hope will sell better than the first version. We see little evidence of genuine customer research to understand their wants/needs/personal traits, and then developing solutions and services to meet these needs. This needs to extend to marketing as well. It is very rare to see a firm clearly state who their product and service are, and are not, suitable for.

Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.

Generally ok with this one. The way individuals access and consume information has transformed over the last decade, and financial services has had to at least attempt to recognise this. For most firms it is possible to access information online, and whilst the quality and accessibility of this info can vary it is at least there.

Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their circumstances.

Big tick in the box for this one. Financial Advisers are now much more professional and qualified than ever before, and 4 years on from RDR they are increasingly confident in a fee based world. Alongside TCF and RDR arguably the most significant work the FSA undertook in the last decade was the focus on suitability. A personal recommendation will now be at a level of risk the customer is willing and able to tolerate, and the suitability of the costs involved will also have been assessed. Customers who only encountered advisers over a decade ago will see a huge improvement if they work with an adviser now, and with the demand for advice increasing as a result of the pension reforms the advice sector has never been in better shape.

Outcome 5: Consumers are provided with products that perform as firms have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect.

This is a hard one to assess. As mentioned above in outcome two, firms need to do a lot more to set expectations and clearly state what type of customer products are, and are not suitable for, however it’s probably fair to say that service is gradually improving across the sectors. Again, technology has played a part here enabling online self-service to be the norm, but most firms we encounter at least recognise the need to offer acceptable levels of service.

Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

More work needed here I’m afraid, and with the release this week of their work into cash savings the FCA clearly agrees. There have been some improvements in the last decade, especially in the banking sector, but the barriers are still there. Exit penalties still exist in some pension products, and we are hearing talk that even 4 years after RDR re-registration of assets between platforms/asset managers is still not as slick as it should be.

So, overall a mixed bag. TCF was a hugely important initiative and it has delivered a number of improvements but more work is needed. When we work with our consulting clients it’s still noticeable how the six outcomes often give them the answer to the problems they are wrestling with. If you are embedding each of these outcomes into your firm, and especially outcome one you won’t go far wrong.

Ten years in we would urge firms to reconsider their approach to TCF, and to step back and review how they are addressing each of the six outcomes above. Is our view above accurate? If not, we’d love to hear your comments below.

Learning the language of risk

I recently spent a couple of days with one of our PR clients, Paul Resnik from FinaMetrica. For those who don’t know FinaMetrica, they specialise in helping financial advisers and their clients understand investment risk tolerance through tools and educational material.

One of the things we discussed was the language of risk and the fact there was a good deal of misunderstanding out there which was potentially having a detrimental effect on client outcomes.

First. Let’s get one thing out of the way. Paul hasn’t asked me to do this blog. I’m doing it because I genuinely find this stuff interesting and I enjoy reading all sorts of views on risk issues. I’m fully aware some of you reading this will think otherwise, but there it is.

Now, I’m a bit of a simpleton. I hopped, skipped, jumped and clicked my heels out of school at 16 to seek gainful employment. So the thought of academic journals on the science of psychometrics applied to investment risk sends me running for the hills.

However, one thing that Paul has drummed into me over the years we’ve worked together is that risk tolerance is a personality trait that is relatively stable over time. I had at first thought risk tolerance was revealed by behaviour – but I’ve been convinced otherwise.

I’ve just put this very question to twitter (yes, I appreciate the irony of testing the science of psychometrics via one of the most unscientific means imaginable). What I found didn’t surprise me really. The split of opinion was pretty much right down the middle. 48% of those who took the poll (thank you to the 69 people who took the trouble by the way) said risk tolerance is a personality trait. The other 52%, like me at first, think it’s revealed by behaviour. I’m a layman in all of this, so I’m not going to say 52% of people are wrong. But I will explain how I reached my conclusion.


If I don’t understand something – it happens a lot – I always try to break the problem down and simplify it in terms I get. This is what I did for the language of risk. The resulting story has nothing to do with investments directly, but everything to do with the psychology of risk.

Here goes.

My tolerance to public speaking (risk tolerance)
I have a very low tolerance to public speaking. In fact, I hate it. I get very nervous. I avoid it when I can. In my 25 years in financial services I’ve had to give presentations to large audiences and sit on panel debates and at times I’ve even been required to front up big news and manage crisis situations on TV and radio. Every time I’ve hated the experience. This is probably why I have ended up in PR where it’s my job to put other people in the spotlight while I skulk in the shadows. This aversion to public speaking is hard-wired into my DNA. It’s a personality trait. Yes, training and experience over the years has helped. But I’ve accepted it’s not one of my natural strengths.

Attitude to public speaking (attitude to risk)
This is pretty much the same as my tolerance, and it’s evidenced by the fact that I have, when needed, spoken in public. But I’m separating it out here only to illustrate how my thinking has developed. My attitude to public speaking is pragmatic. I know that at times I will have to do it to achieve certain goals, even though it’s way outside my comfort zone.

Requirement to speak in public (risk required)
Let’s say, just for illustrative purposes you understand, Mark Polson decides to fire me for real one of these days.

I find myself on the job market. So I go to Nicki, a recruitment consultant. I talk to Nicki and tell her about myself. I tell her my target salary is £75k a year. I also tell her about my tolerance to public speaking, and my attitude to it.

Nicki does a grand job in finding me five potential roles. At one end of the scale, there’s a job that pays £50k a year and has no requirement to speak in public. At the other end of the scale, there’s another job that pays £100k but requires me to be on my feet speaking publically the majority of the time. I now understand the public speaking requirement. I can make an informed decision.

Capacity for public speaking (risk capacity)
The job in the middle is the Goldilocks one. It pays £75k and it may be necessary for me to speak in public very occasionally. Ok, I can deal with that. If I had chosen the one at £50k I would have quickly realised it wasn’t for me when I struggled to pay the mortgage and put food on the table. Due to financial necessity I would have been back on the job market within months. If I’d taken the job at £100k I would have bailed because I’d be a nervous wreck within days.

To jog this along a bit, let’s now assume I aced the interview and landed the job that matched my requirements and capacity.

Public speaking behaviour (risk behaviour)
In my first week in the new job I find myself talking to a group of recruitment consultants. It’s a big audience and I recognise no one other than Nicki; my very own recruitment consultant who helped me land this new gig. Only she and I know that I’m hating every minute of this. To everyone else, my behaviour (the very fact I’m on my feet speaking to them) indicates that I’m comfortable doing what I’m doing. They would all be wrong. They have incorrectly assumed my behaviour is an indication of my tolerance to public speaking. It’s not. My behaviour is an indication of the compromises I’ve made along the way, including my attitude to public speaking, my requirement to speak in public and my capacity to do it.

If any one of those recruitment consultants were to assume my tolerance (my personality trait) based on my behaviour in that one moment, they’d probably end up matching me to the wrong job.

My discussion with Paul and the results of my twitter poll have convinced me there is some confusion out there on the language of risk. Perhaps creating some non-academic examples will help aid understanding.

Of course, I’m happy to present my ideas to you and your teams any time you want. I love that kind of stuff.

Weekend reading

Lots of interesting stuff over the weekend, so for those of you with a life who didn’t spend the weekend reviewing the personal finance press, here’s a quick round up.

Friday evening started with a bang (#langcatlife) with the FT front cover on pension fund transparency. Much more to come on this, building on the excellent work coming from Andy Agathangelou & the Transparency Task Force. Henry Tapper’s views on this subject are also well worth reading.

Saturday morning saw the Telegraph getting stuck into pensions, off the back of Andy Haldane’s clickbait comments the previous week. The Guardian also wrote about the complexities of pensions, and challenged the previously held “rule of thumb” of 4% withdrawals.

The Mail on Sunday broke the news of M&G reducing their charges for direct investors. This has been widely reported elsewhere in the trades this morning, and is further evidence of the price pressure that most of the industry is facing. We expect this to be a big theme over coming months, and no one is immune. We know of one firm who are about to launch a proposition for under 50bps, for advice, custody, investments, the lot. Loads of coverage in the real world press on pensions, charges, and the need to take control of your financial future. The times are a changing….

Finally, and on a lighter note, the seven unmistakable signs of a shit brand consultant. Note to anyone involved in a “robo” proposition…check the millennial point….

Have a good week

DataViz: A fresh look at financial services

If the definition of insanity is doing the same thing over and over again and expecting a different result, then financial services has gone well and truly mad. Having joined the industry around two months ago, this has been my overwhelming impression of the tired-old lines and scary figures that the industry constantly churns out for the supposed benefit of savers. I’ll continue to be brutally honest by pointing out that most ordinary people already find personal finance issues pretty damn dull, with younger generations in particular becoming increasingly disengaged when it comes to their finances. So why continue to feed them the same information over and over again when it’s clear that something that we’re doing just isn’t resonating?

Information can often be overwhelming, so it’s not surprising that many people feel turned off by this type of communication. Take the constant drone from the financial sector telling people like me (#TeamMillennial) that we’re not saving enough for retirement and that if we’re not careful we’ll be destined for a poverty stricken dotage. Yawn. I expect I’m not alone when I say this type of communication has the opposite desired effect. I just turn off. As I say, I’ve not been in the industry for long but I’m already exhausted by these lazy numbers telling me I need to save hundreds and hundreds of pounds every single month, in order to support myself when I eventually stop working. All too often, these figures are so high they feel totally irrelevant to someone my age, leaving many like me with the impression that they must have somehow been plucked out of thin air. The result? Yet another disengaged potential saver scared off by numbers that, in isolation, appear totally unachievable. It’s true that people my age may share the same priorities – saving for a deposit, wedding or starting a family –  as older generations but we also face specific challenges such as crippling student debt and hefty house deposits. The industry should be presenting financial figures in a way that actually reflects our real lives and aspirations in this way, suggesting positive alternatives and encouraging good behaviour instead of the usual scare stories, wherever possible.

How do I suggest we do this? Data Visualisation. DataViz, as it is often referred to, can communicate financial matters in a language that younger generations (actually ALL generations) can understand by presenting a much wider context in a way that is both easily digestible and engaging. Having studied maths at university, I’m one of those weird people who start to smile when handed large sets of data. So you can imagine my excitement when I was given the opportunity to attend a DataViz workshop given by David McCandless in London (@mccandelish). By applying some sort of wizardry David transforms otherwise dull information into eye-catching graphics and intuitive diagrams that tell beautifully simple stories and stand out against the influx of data we are faced with on a daily basis. For anyone who doesn’t know who he is, his work is definitely worth checking out

An example of David's work

An example of David’s work

DataViz is all about creating images to help people understand the world. A visualisation might be created for any of a range of purposes: to inform clients and help them make a decision, to raise awareness of important issues, to highlight data gaps or purely for entertainment. Whichever it is David’s workshop guided us through some steps to help us get to the end product.

So, what makes a good data visualisation? As with many things it can be easiest to start at the beginning, with a question, then develop your concept to lead to a goal or the answer. Ideally here the ideas will start to flow and we can begin to sketch our design. But, it is important to keep in mind that however good your ideas and designs might be, they are nothing without robust data to back them up.

This journey can become frustrating as your data might not want to tell the story you had originally envisaged. Or perhaps you’ll stumble across a hidden message and end up with a completely different outcome. Data visualisation has a wonderful way of leading you down one path and then suddenly revealing another direction you could take.

A common misconception is that it’s just us data geeks creating these graphics but in actual fact there was a well-balanced audience of journalists, researchers and a sprinkling of the more technical programmers at the workshop, all equally enthusiastic to harness David’s creativity. The process actually works so much better with a combination of people from different backgrounds.

Whatever happens along the way, and however you find yourself at the end visualisation, it’s hard not to get caught up in the excitement that something memorable can be created which, for financial services, could also mean the difference between engaging savers or shutting them off entirely.

Don’t believe the hype

I’m pretty sure Chuck D and Flavor Flav had other things on their mind beyond platform due diligence when they penned their 1988 classic, but hey, it’s a great record, and its central hook is certainly worth remembering at the moment.

The platform world is changing. The Axa Elevate move broke earlier this week, and it is our understanding another similar move is also about to be announced. We are also aware of at least two other bidders who lost out to Standard Life for the Elevate book, and it seems pretty clear that part of the attraction from SL’s point of view was to buy the assets simply to stop their competitors from doing so.

Standard Life have stated that they see the platform market splitting into “buyers and sellers” and whilst we don’t necessarily think the market will be that polarised (at least in the short term) there is no doubt that a large amount of platform assets are going to shift around over the coming months. Some of this is happening naturally, and the gap between net & gross flows for some platforms and the fund industry generally is pretty wide. However, the hype is still focussed on what happens if/when your platform changes ownership and the supposed need to take an almost obsessive view of a provider’s financial strength.

Every platform, irrespective of their financial strength is required to have a plan demonstrating how, if the need arose, they would wind down their business whilst still treating their customers fairly. This extends into capital adequacy provision, and the larger providers will have their plan regularly reviewed by the FCA as part of the normal close and continuous relationship. The upshot of all of this is that, if a provider decides to exit the market, one of two things will happen. They will either be acquired or they will exit. If they exit, these plans require them to treat customers fairly and ensure customers are not in any way disadvantaged by the change. The regulatory protection in this scenario is pretty strong, and especially so for larger providers.

Returning to the Axa/SL announcement, 160,000 customers have invested their hard earned via Elevate. SL quote an average case size of “£80 to £90k” so for these customers it’s a not insignificant event. However, for these customers, what exactly has changed? Their money is still invested, the charges are the same (for now at least; we’ll be watching to see what happens there), and they will still have the support of their adviser. If they pick up the phone to speak to Axa staff they will find the same people are still there, and whilst they might be nervous about their own futures, they will be delivering the same level of service as they always have done. Even if/when the merger is approved and completed, is it really anything for customers to worry about? Standard Life PLC is one of the largest companies in the UK, and whilst the detail of any migration (if indeed there is one) are still to be confirmed I find it hard to believe Standard Life will be doing anything other than treating these customers fairly.

The merger has been reported in the real world via the Telegraph, FT, City AM and others. It’s noticeable that there are no comments from customers on any of these articles, and the last mention of Axa Elevate on the Money Saving Expert forums was around 3 months ago. Early days yet, but there is no evidence of any customers being worried about the move. Those hyping up the need to move assets and/or change platforms would do well to remember this, and focus on the potential customer outcome.