If history has taught us anything surely it is that specialisation and automation works. Ever since the invention of the Spinning Jenny kicked off the Industrial Revolution, we have continued to reap the rewards of repeatable, consistent automation. Nobody would dream of buying a home-made TV so why do Bath’s Christmas shoppers assume that home-made jam or scarves are somehow superior to their mass-produced equivalents? Quite apart from the quality of the merchandise, there’s also the practical consideration of what to do if something goes wrong with one of these products. With a single distribution outlet that pops up for just two weeks every year, it’s not a very convenient returns process.
The reason I mention this in the context of a Financial Services blog is that I see traces of this “artisan” thinking in the Investments Industry too. Old, established wealth management firms and private banks are frequently found operating old, established processes on old, established technology and will insist that their clients prefer it that way and that they value the personal touch over shiny new technology. It’s true that many wealthy individuals prefer to look their adviser in the eye before entrusting them with their finances and equally true that emotional intelligence is a key attribute of the best wealth managers. But that doesn’t mean that the whole investment value chain has to be manual.
I think there’s a real opportunity in the HNW market for someone to combine the uniquely human ability to develop and understand relationships with the power of industrial-strength operations to handle the mechanics of investing. That means genuine Straight-Through-Processing from end to end and not just for a few simple transactions. Transfers that happen in days not weeks. Reconciliations that don’t rely on spreadsheets. And processes that don’t depend on a few key people.
Back to my Christmas Market analogy - what I’d like is the twinkling lights, mulled wine and smell of roasting hazelnuts with the security of knowing that anything I buy has been safety certified and manufactured to industrial tolerances. Whether I’d ever brave the crowds to get there is another matter…