Investment Advisory’s Future: Interview with Michael Summerton

The wave of fintech disruption that came after the Great Financial Crisis was strong. Incumbent banks and financial service providers were not in a strong position. And so new companies took the opportunity and emerged. Slowly but surely gaining customers and grabbing market share. Most of that growth was due to superior user experience, surfing on the wave of the success of other mobile apps. What about investment advisory? Alongside private banking, it has been slower to change. But that is changing… We asked a few questions to Michael Summerton, Head of Proposition & Marketing at INN8.

INN8 is an independent investment platform solution inspired by South African wealth managers to change the way investments are done.

What is your elevator pitch?

elevator pitch INN8, investment advisory
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We are a purpose-built, adviser-inspired investment platform that changes the way investments are done. Our platform uses seamless and elegant technology to drive efficiencies in the adviser’s business. So that they can have extra time to do what they do best: provide great financial planning and advice to their clients.

How do you drive efficiencies?

We place the management of all aspects of a client’s affairs in the adviser’s hands. They have control over everything that needs to happen with their clients’ accounts. An example of the simplification of the day-to-day operations is that we don’t require any physically signed documents when an adviser onboards a new client. As long as the adviser has a compliant advice process within his or her firm, the client can participate in a digital process where they agree to the various mandates.

Once a client is onboarded, it is easy for the adviser to process any instructions that have been agreed between them and their client. For instance, a switch that needs to happen after an annual review. Most transactions are straight-through. It means the adviser can go from completing a quick quote to having the client’s money in the market in just under a day without printing a page.

Simplicity…

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Managing a large portfolio of clients is a lot simpler, using the model portfolio facility on our platform. It is efficient and easy for a discretionary investment manager to create, edit and publish a model portfolio to any advisers linked to them. Advisers can select the appropriate model portfolio for their client. If the discretionary manager performs a rebalance, they may do so for all or some clients within a model portfolio, and there is no “window period” concept. So they may send in an instruction any day of the month. There is no interruption to the day-to-day functioning of the platform (like paying fees or living annuity income).

One last example. Clients save money for a reason, and at some point they want it back. With INN8, getting your money off the platform is as simple as getting it on the platform and into specific investments, because of the small cash portion that we maintain for clients.

What is your background, and what is the story behind the company?

I started my career as an Audit Senior Manager at Ernst & Young. After that I joined Allan Gray where I worked in various roles, including Head of Retail Finance, Head of Client Experience and Product Development Senior Manager. In 2017, I moved to Head of Proposition & Marketing for INN8 and the group’s investment platform development.

I love solving problems. That, along with being able to see the practical side and steps required to either solve business challenges or capitalise on opportunities, are my forte.

INN8 was born because it was clear from market research that wealth managers wanted a technology partner that frees up their time so that they can focus on doing what they do best. Being purpose-built means that the platform was built from the ground up with the wealth manager’s needs front of mind. We continuously ask, we listen and then we design.

What do you see as the main trends in the investment industry right now? How are investment platforms evolving and responding to these?

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1.Macroeconomic factors

A macro trend that is impacting the investments’ industry is South Africa’s shrinking tax base. That is coupled with lack-lustre growth in real incomes (and personal savings). We are also unlikely to see significant growth in employment in the short- to medium-term.

This macroeconomic environment places particular strain on the savings industry, where investment managers and platforms operate. You can see this play out in the increased competition between service providers. They are battling for client accounts or, from a platform side, for adviser business. Some of this has been positive. For example, it has resulted in a decline in fee rates. The charge for using a platform such as ours declined significantly over the last two decades. When it comes to the charge for asset management, these days you can get very good quality active fund management for a reasonable fee in South Africa.

This means that advisers are starting to look for clients in new places, often enabled by digital technology. Previously, the cost of setting up a new client account could have made advisers less inclined to onboard clients with fewer financial assets. As INN8 helps wealth managers manage their businesses more efficiently, they could then in turn have extra time to serve more clients and, with lower onboarding costs and cheaper access to products, it becomes worthwhile to offer services to people who previously may not have been in their target market.

2.Offshore investments

A second trend that we are seeing is the steady increase in not just the rand value of offshore investments from South Africa, but also the number of clients that are accessing those products. You no longer need R10m to invest offshore. And advisers are increasingly feeling more confident to allocate a portion of their client’s money to international funds.

INN8‘s truly offshore offering (being domiciled in Jersey) enables advisers to more efficiently assist their clients to access these options. We have all the requisite control and compliance procedures in place, making it easier for an adviser to facilitate offshore exposure for a client’s portfolio. Technology allows us to follow a risk-based approach to compliance and results in easier access to offshore solutions for lower-risk clients.

3.Information

Access to information has been democratised. Ten years ago, you had fund fact sheets that people had to look at and search for the fees in fine print. Nowadays, people can make informed decisions easily as these costs, and other relevant information, are easy to find. Wherever you shine a light there is increased competition and at the end of the day the consumer benefits.

4.Talent

Access to a greater number of talented people has been simplified. One thing Covid-19 lockdowns have taught us is that you can still find a very talented person to work on your team. And they don’t have to live in the same region or even country to add value to your business. Or, in the investment space specifically, to the adviser and their clients’ lives.

Any innovation in fintech more broadly that you are really excited about?

There are some interesting developments at an industry level around distributed ledger technology (an example is the work at FinSwitch). We can see the benefits of capital invested in Silicon Valley starting to trickle down as these solutions become more accessible and broadly adopted in the marketplace. That’s both from the point of view of the technologies invented, and lessons learned along the way.

The cheaper, rapid settlement and reconciliation of unit trust fund and listed security transactions at a lower fee is very good news for clients.

If you can make access to financial solutions cost less using technology, wealth creation becomes more inclusive.

Any plans for the future or product roadmap you want people to know about?

Our offshore platform has been operating for a bit over three years now and the performance has been great. The exciting thing in the next three to six months is that we are rolling out our local platform to a broader range of financial advisers and wealth managers. Watch this space!