Ruth Handcock: ‘As humans, we do not like talking about money’

Octopus Investments CEO discusses doing innovation well, retail access to private assets and the impact of Consumer Duty on value for money

Ruth Handcock chief customer officer at Octopus Investments


Running an asset management business brings its fair share of stress but, as Ruth Handcock acknowledges, whatever her role may throw at her, she is unlikely to have to worry about chopping off a thumb at 3am. This was not always so – long before joining Octopus Investments as chief customer officer in July 2018 and being appointed CEO seven months later, she had a spell working the night shift as a factory salad-chopper.

A more varied CV than most in the financial sector, it also boasts roles as a checkout operative, receptionist, lab technician, consultant, government adviser (for the Ministry of Trade in Sierra Leone working with a charity set up by Tony Blair), chair of trustees (for a charity she set up herself in West Africa), chief operating officer, finance director (at drinks giant Bacardi) and head of customer and chief of staff (at retail bank Tandem, where she was the first employee).

Whether in the sphere of banking or beverages, working with former prime ministers or wielding a knife in the small hours, have any of her experiences in particular informed Handcock’s approach to asset management?

“I have certainly seen a greater variety of business models, and the way we have structured companies in the group has been hugely informed by how I have seen innovation done well and badly in other industries,” she replies.

The latter manifestation often stems from an organisation’s leaders believing they alone have all the good ideas, Handcock continues, adding: “They stick a lot of post-it notes on the wall, pick what they think is the best idea, put it under someone who has loads of other things to think about and expect something to change – and it rarely does. As a result, there has arguably been less innovation in this industry than in others I have worked in.

“What I have learned about how innovation works from other industries is you find a passionate founder, back them to solve a very specific problem – and then get out of their way. So, where we have brought companies into the group, I explicitly chair them rather than run them because I want the person running them to be passionate about the mission they are delivering.

“It is the so-called ‘scale insurgent’ role you often find in the technology sector – founders with visions who have solved meaningful customer problems. Our industry can learn a lot from that. If you allow founders the space, backing and the time to get on with solving big customer problems, you can really change things in a way a more traditional management model does not allow.”

Value of planning

Turning to the particular demands of retail investing, Handcock highlights the “incredibly valuable role” intermediaries play within the Octopus business model. “Our products are deliberately designed to solve quite complicated customer problems so, without intermediaries, I would not feel confident that, in every case, a customer was investing in the right product for them,” she says.

“There is also an interesting trend in the industry where planning, as a competence, is being increasingly valued. We are moving away from the era of investment return being the be-all and end-all, and more towards planning. Talking to a customer and helping them reach the goals they want – that is the fundamental piece most customers are asking for and, actually, most willing to pay for. We are really respectful of that.

“We play our role by providing products that help customers meet their goals, but the intermediary has to have those conversations. Take VCTs, where we are one of the biggest providers in the UK. They are particularly interesting for people who are lucky enough to have capped out of the amount they can put into their pension, want some level of tax relief on long-term investments and are happy to take the high risk associated with that.

“Over the course of a chat with a financial adviser – talking about goals and saving for the future – that product may well have a part to play. But while most people – not everyone, but most people – understand how a pension works, a minority understand how a VCT works. Having someone explain the product and make sure it is going to do the job a client wants it to do is very important.”

With investors increasingly looking to diversify portfolios through less traditional routes such as private assets, Handcock believes fund groups and intermediaries will need to think hard on issues such as liquidity and pricing.

“It is interesting that whereas, in retail banking, people are comfortable with the idea of locking their money away in a fixed-term deposit to receive a better interest rate, that is less the case in investment,” she observes.

“Certainly, people can be very concerned about the liquidity in private market investing. The new Long-Term Asset Fund is a good step forward in attempting to bridge the gap that clearly exists here – how do you better balance retail expectations with the realities of an asset class’s liquidity? That said, fundamentally, there are other ways people can access private assets without being overly concerned with liquidity.

Structural issues

“Does it feel appropriate, for example, that 5% of somebody’s pension might be in private assets? To my mind, that is completely manageable but, as things stand, there are structural issues within our industry – private assets tend not to work on platforms, rebalancing can be difficult and so on – which means we struggle to provide that in a way that is easy and scalable for the average retail investor. And that is a shame.”

Asset allocators also have a big role to play in making the case for private assets, Handcock believes.

“The easiest way retail investors will gain access to private assets in the first instance is for asset allocators to feel more comfortable putting them in managed portfolios or pension funds,” she says.

“That will give retail investors a level of exposure that is manageable across a larger set of assets.

“Another issue is daily pricing, which makes it harder for private assets to sit in pensions. That is a technical problem that could be solved in collaboration with platform operators, but it does not mean the fundamental idea of having private assets within a broader managed portfolio is not a good one. Allocating a portion of a Sipp to private assets could be ‘Wave 2’ – once the asset allocators have figured out ways of dealing with the asset class.

“Yes, we have seen Sipp providers move away from allowing private assets because the regulator has found it hard to make sure the right decisions are being made – and I am sympathetic to that. You absolutely do not want customers in assets they do not understand or have liquidity issues with. Still, it is a shame for people who have intermediaries to help them make the right decisions and who now find it much harder to access that asset class.

“Where asset allocators are passionate about private assets, we find it is generally because they think they will deliver meaningfully better customer outcomes – whether it is because they believe they can achieve better returns or less volatile returns or even because they think it is a better way to deliver sustainable investments. That is a significant trend that could encourage people to think differently about private assets.

“So, it is not like there are no options to help you untangle this area of investment – I just think you have to be at the stage where you believe you are going to deliver something customers want. If you persuade yourself of that – which I think you absolutely should be able to do – then it is incumbent on you to figure out how and where to go for it.”

‘30-year missions’

Octopus is a private company – majority-owned by its founders and employees – and, says Handcock, intends to remain that way. “The founders make no secret of the fact they want to remain private for evermore. And while you can only make comparisons with other places you have worked, compared with the private businesses I have come across, we take better advantage of our structure than most.

“We think in terms of 30-year missions, not three-year plans, so we enter areas of the market we think we can succeed in over the longer term by fundamentally changing the way the industry works. Seccl, the investment-tech business we bought three years ago, is a great example of that as it is encouraging financial advisers to own their own platform.

“That is not the sort of meaningful change you are going to create overnight – and in fact you would need a 20-year horizon to look at a sector like that. So not only do we have that advantage, I also think we take that advantage more than most private companies, which in turn means we should be able to disrupt and make genuine change happen in our industry better than we could under a different ownership structure.”

While we are on the subject of investment technology, how and where can asset managers make better use of tech? “All over the place,” says Handcock simply. “There is far too much inefficiency in our industry that the customer ends up paying for. Increasingly, to be a leader of a financial services business, you need to understand technology – in a way that, 20 years ago, I do not think anyone would have acknowledged.

“If you do not understand how software is built and changed, how can you make the right decisions about how your organisation should look in five years? Technology has a huge part to play in efficiency and in customer transparency, too. The harder it is to get data out of your organisation, the less likely you are able to deliver clear data to your customers.

“It also has a huge part to play in strategy – although that much has always been more accepted. Still, one of the exciting things about Octopus is our belief it can be a strategic advantage to have parts of our business that excel at technology. I mentioned Seccl and having a part of the group where all we do is software – in order to help others who are less confident with software – is a huge string to our bow.

“It allows us to transform the industry, reduce prices for customers and deliver more innovation because we have a set of people who, when they get out of bed in the morning, think of nothing else but building brilliant software that can deliver efficiency at a much lower cost. So, technology has a much bigger part to play than most asset managers give it credit for – or most have the confidence to address in their day-to-day business.”

All this ties in with Handcock’s belief that asset managers have a responsibility to deliver enough information into the hands of intermediaries so they can help customers make the right choices. “As an industry, we have probably spent too long bamboozling with complex data and small print, which does not help anyone,” she says. “There is a role for transparency here.

“There is a role for – exactly as Consumer Duty puts it – understanding as opposed to disclosure. There is a role for data and there is a role for stories, too. That last point tends to be underestimated but humans often understand better through a story rather than through data. And we have got to provide intermediaries with all that because, otherwise, how can they do a good job?”

Quickfire Q&A

What is the best piece of advice you have ever been given?
If you look back at the past year and you haven’t done anything that scares you, it’s time to make a change.

What would be your ‘top tip’ to Portfolio Adviser readers to help them run a better business?
Understand technology.

What single issue should most concern professional investors at present?
At the moment, the UK economy and resulting volatility.

Does anything about your job keep you awake at night?
It is usually people-related – the retention of talent and ensuring people feel motivated and are doing the right things are the tangles I think most about.

What most excites you about your job?
The disruption and change. Given our ownership structure, we have an amazing opportunity to meaningfully change the industry.

If you were head of the FCA, what would be your priority?
Making sure Consumer Duty works because it is such a big piece of regulation – and also standardisation in ESG and sustainability reporting. That is a role the regulator can play whereas the market will struggle to get there by itself.

What advice would you give to someone starting out in investment today?
The same as to anyone starting out in any career – never forget your behaviour is as important as your skill and competence.

B Corp and after

Given Ruth Handcock’s experience in other sectors – not least retail banking – what is her take on culture and brand in asset management? “They are synonymous and absolutely critical,” she replies.

“Does worrying about whether we are treating customers well keep me awake at night? Never – because we have a culture where people get out of bed caring about doing the right things for our customers and other stakeholders.

“Customers are increasingly going to care about the behaviour of companies – and, anyway, it is hard to say you are a sustainable investor unless you can first say you behave sustainably as an organisation. In an industry where trust is so important and there is – more often than not – an asymmetry in understanding between customer and provider, having a brand people trust and that stands for the right things is critical.”

Handcock suggests arguably the most consequential thing Octopus has done in terms of culture and brand is to have become certified as a B Corp. “B Corp status shows you treat all of your stakeholder groups equally. It is like a badge of honour and, when we began the process, the idea it could help us sell more because it lets customers know we care was, of course, a motivation.

“Ultimately, though, it has had an inordinate impact on the way we operate as a business, and it now runs through every all-company presentation we do. Every time we make a decision, we think about our B Corp values and make sure every aspect of that decision is entirely in line with doing the best thing for our customers, our employees, our shareholders, our community and the environment.”

B Corp certification aside, how would Handcock suggest an asset manager set about building an appropriate culture. “An organisation’s culture is created and maintained through role-modelling and rituals. Role-modelling involves making the right decisions and taking the right actions – even when no one is watching. If you have leaders who are doing that, it sets the tone for an organisation – and then you reinforce that through rituals.

“Those might be rituals on how you treat your customer – so, if someone in our customer team learns something about a customer on a call, say, they will refer back to it later. That way, the conversation is not just about a valuation or whatever, it is about the customer as an individual – how they feel, understand and make their decisions.

“You have to give people the freedom to do that and then ‘hero’ the best behaviour. There is a story from before I joined about a member of our customer team who, on their own initiative, read out an entire brochure over the phone to a blind customer, as no Braille version was available. No one told them to, but they knew they had the freedom to do that and it was the right thing for that customer.”

The hurdle of understanding

How would Handcock define ‘value for money’ in the context of asset management and how does Octopus seek to deliver it? “At its core, value for money means delivering something that brings the investor closer to their goals,” she replies. “And that, by its very nature, is a complex question. To what extent are those goals about financial return? To what extent are they about sustainability? To what extent are they about risk?

“Then the amount you pay towards each of those goals should be aligned to how much it is delivering what you need. Three years ago, we bought investment-tech business Seccl – it is a custodian that can underpin adviser platforms and other investor propositions – and the reason we did that is because we think too much money is spent on administration versus skill in investing money.

“So, do I think there is a role for efficiency – for lowering the cost of people rekeying between systems? Absolutely – customers should not have to pay for that. Reducing the cost of the infrastructure is one of a number of very vanilla measures of value for money. However, how you judge intermediary fees and asset management fees is much more complex.

“What I would say is that, over the next few years, Consumer Duty is going to force us all to make judgments about whether our products and services are value for money. That is as it should be but, as that happens, we will discover how different businesses are making that judgement and I would expect there to be a huge array of different ways of looking at this – and of justifying the resulting conclusions.”

One aspect of the FCA’s new Consumer Duty principle Handcock highlights is “the obligation it places on the whole chain, regardless of where people are in that chain”. “As a product provider that could be really hard to implement because there is an expectation we look at end-customer value – and yet there is an intermediary in between and clearly we have no control over their pricing,” she explains.

“Consumer Duty should force people to look much more closely at value, however, and it should make a difference simply because more questions are going to be asked. And while you might see it as a bit of a depressing comment on our industry that the regulator felt the need to codify the idea of Consumer Duty, I think the bigger reason behind it is that, as humans, we do not like talking about money or asking about fees.

“When we sit down with a financial adviser, we can find it slightly awkward to say, how much am I going to pay you for this service? And hopefully, what Consumer Duty can do is take things to another level: not necessarily more disclosure – which I do not think is always the answer, by the way – but greater understanding, which is another theme of the principle.

“If people can understand what they are paying, they can start to make their own judgments about whether it constitutes value for money. That is where we still have to reach as an industry – and it is not because of a lack of disclosure, it is because we have yet to clear the different hurdle of understanding. If Consumer Duty gets us over the awkwardness of asking, that will be brilliant. Time will tell.”

This article first appeared in the November edition of Portfolio Adviser Magazine

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