The wealth industry is the least innovative and must embrace some of the newer tech companies, according to Ruth Handcock, chief executive of Octopus Money.
Speaking at the Lang Cat AdviceTech Catwalk yesterday (June 20) Handcock discussed how the industry was the least innovative because of the shape of it.
She said: “This industry has a remarkably long tail. We have 25,000 financial advisers in the UK with an average firm size of five advisers. It’s quite hard to innovate when there's only five advisers in your firm, everyone's really focusing on the day job.
“Then with the big firms ‘you can't rush wealth’ is something that people often say to me, it takes a long time to build a big firm.
"So when you look at them they've been around quite a while they know what they're doing. The technology is probably quite old by now, that's not their fault, it's just technology becomes obsolete quite quickly.
“But critically, these big firms tend to make nice revenue. So they think 'what is the massive incentive to change? My business works, I'm making money, I don't need to do anything that differently'.”
These two things combined has meant there has been no real pressure for the industry to change but Handcock highlighted that it needed to start innovating more.
“Consumer duty, in my experience, is probably one of the bits of regulation where the FCA has shown its teeth sooner than everyone expected. So it's very clear to everyone that consumer duty is not just something that the FCA put out there to make everyone document things better.
“It is really expecting us to improve consumer outcomes and be able to track them. The way that we value businesses in our space is changing. People are going to start looking more at profitability and how much it costs to run a business as well as just the size of their business.
"Scaling businesses in the space organically is hard and so you've got to find ways of unlocking and growing more quickly.
“Or if you like me, you get obsessed with the fact that heads rolled when Nigel Farage got debanked because that’s not okay. But people not getting financial advice, that's cool, let’s just ignore that.
“The fact that 92 per cent of people can't get help with their long term money, why is that okay? Why do we continue to be okay with this stat? So that's my particular obsession and one of the big reasons why we have to change the way we run our businesses,” she added.
Technology
Handcock said the industry will see more change in the next five years than it has done in the past 15 years, as a result of technology.
However, one of the challenges was the fact the industry does not have many “digital natives”.
She said: “Help is at hand. What we will see is the people who are coming into the industry now will save you, they are the people with new ideas. They're founders who are brave, who will think about breaking barriers. And they can do all sorts of things for you.
