“Last year, £170bn was invested in the UK retail market by individuals and around 90% of that was through intermediaries,” he says.
Because of this, he believes the best place for financial technology and the type of methodology Distribution Technology offers is in the hands of the advisers and planners.
Of course, Goss admits, the scales will eventually shift but the majority of the UK’s wealth is currently held by people in their 50s to 70s.
Most has been acquired through advice, and over the next decade it is highly unlikely the balance will switch. Even if the scales shift, he believes the advised model will continue to dominate for some time.
“Even in the US, much of the focus of robo-advice firms is about how to get advisers to use the technology because they have spent millions of dollars in private equity money trying to build up assets from the end-client and have found it very difficult.”
Even so, he expects to see continued growth in the demand for and the availability of model portfolios as IFAs increasingly look to services offered by discretionary managers as the best way to provide the advice part of their business.
“This is a huge opportunity for discretionary fund managers, and those who are successful are the ones that will be able to deliver risk-adjusted performance net of fees.
“That is, after all what managers do,” he says. “They deliver alpha for a given set of fees. I think risk-based benchmarks are a fantastic way of demonstrating that value to clients who are looking to achieve anything from simple wealth preservation to something more aggressive.”
Asked if this increased focus on the outcome of an investment, rather than performance as against a specific benchmark is likely to continue, Goss says: “If by that, you mean a desire to target a level of risk and potential return given a specific set of wealth aspirations then, yes, this is the course the industry is on. It is a huge wave of which we have only seen the start.
He counters: “If, however, by that you mean a rise in lifestyle or target date funds, I am less sure. Advisers and planners have a really important role to play in finding the right answer for clients, which might be a model portfolio, multi-asset or a DFM.”
Getting the balance right
As with all conversations about risk and reward, while Goss sees a great deal of opportunity for the business, there are also threats.
One of the biggest of these is the changing shape of asset markets and the implications that has for risk models. According to Goss, the firm’s hybrid structure helps it deal with such changes in its stride but he admits it is a challenge.
On one side of the business are the software engineers that are focused on developing the technology the firm is built on.
