Nic Andrew, MD at Nedgroup Investments shares his views on digital transformation in the South African asset management industry, tells us about the vision behind the company’s roboadvisor platform and explains why he doesn’t believe traditional asset managers should feel threatened by new technologies.
How do you believe the South African asset management industry is faring in terms of digital transformation?
My sense is that, when it comes to digital transformation, progress in the South African market is very varied. Some asset managers are doing a really good job while others are falling behind and at risk as customer preferences change. Many asset managers are investing heavily in new technologies but not yet seeing significant return on these investments.
Most of these asset managers are investing in two main areas – firstly: automation to improve efficiency and give clients a quick, secure experience and secondly: innovative technologies that focus on improving the customer experience.
The challenge these firms now face is how to commercialise this new technology by attracting new clients and achieving quicker adoption. In the past this was a challenge mainly faced by technology companies, but now it’s a challenge most businesses face.
Nedgroup Investments recently won the Banker Technology Project of the Year Award for your Extraordinary Life™ platform. What is this platform all about?
We are absolutely delighted to have won this award as a South African company competing in a global environment. We’ve been closely following global roboadvisors over the past years, and with Extraordinary Life™, we’ve aimed to take global best practice and make it even better.
With this platform we’ve aimed to address some of the real pain points of investing, by making the whole process engaging and very easy to use and by showing throughout the process how we can add real value.
For example, if a potential investor visits the platform and indicates that they would like to save for a child’s education, Extraordinary Life™ uses geolocation to find schools and universities nearby, sources the actual pricing of those institutions and works out a realistic, personalised savings goal based on the selected school’s fee structure, the investor’s child’s current age and when the funds would be needed. The savings plan is also optimised for tax efficiency.
Or if a potential investor is interested in saving for retirement, the platform uses AI to guess the investor’s age based on a photo taken with the person’s webcam or mobile camera. This is an optional feature, but it makes the process more fun and engaging and we’ve found it really relaxes the user.
Extraordinary Life™ also uses powerful algorithms to optimise the experience for each individual investor. The end product is a solution that breaks through the barriers first-time investors generally face, like not understanding financial jargon or not feeling confident enough to engage with a financial advisor.
Investors also appreciate the platform’s low fees and how simple the process is – there is no need to fill in any forms and it even electronically FICA’s clients.
Once you are a client, the platform provides them with regular updates, nudges and offers advice on what they can do to improve their probability of success as their savings journey evolves.
Do you believe digital platforms like Extraordinary Life™ is the way of the future for the investment industry? What will this mean for traditional fund managers and financial advisors?
Yes, we do believe platforms like Extraordinary Life™ have a key role in the future. However, we see this happening less at the expense of traditional financial advisors, and rather as a tool to growing the market and filling a gap in the market.
Roboadvisors are perfect for the large portion of the younger generation, that are as yet, unadvised. People who are intimidated by the wealth management space, who don’t trust the traditional system, who simply don’t know where to start – and in most cases have not accumulated enough savings to be attractive to a financial advisor.
We’ve also seen a good uptake in advisors looking to partner with Extraordinary Life™ to service smaller clients, or the children of larger clients. Advisors are confident they can use our platform to provide good quality advice at a reasonable price without significant effort.
In which areas of the asset management space do you see the most room for a complete overhaul or genuinely fresh thinking?
Using data analytics and behavioural science in conjunction with AI to improve client outcomes – no one has really cracked that nut yet, but it does have the potential to genuinely assist clients in achieving better outcomes – and in the end that is what our industry is all about.
Another area that still has a lot of room for development is the use of chat. I won’t be surprised if chat becomes the standard way of engaging and transacting with service providers over the next five to ten years.
For example, at Nedgroup Investments we have built a chatbot to deal with common questions and document requests (such as factsheets, distributions and performance) but we have recently expanded this to include transactional and personal reporting capabilities.
What is the biggest tech challenge your business is facing at the moment?
Our biggest challenge is prioritising and commercialising the new technologies we’d like to introduce.
We have a long list of amazing cool ideas developed by our team and fintech partners. We’re never short of ideas – but the challenge of running a business is deciding what to prioritise, determining which initiatives will increase our efficiency and make us more responsive, and then doing those first.
And then, once development is done, figuring out how to commercialise these technologies and drive widespread adoption.
What’s on the horizon? What can we expect to see from Nedgroup Investments in the next 12-24 months, particularly with the rise of new technologies?
We’ve been on a journey of digitalisation and automation of our processes and we are currently about 50% there. Obviously, we want to increase this to 100% as it’ll have real benefits for our clients in making their interactions with us quicker, easier and more secure.
We would also like to, in the next 24 months, gain real traction in with our roboadvisor platform and break into unserved markets in South Africa. We also want to keep improving our chat service making it easier than ever for clients to engage with us.
In addition, we’re also investing in data analytics to allow us to attract more clients and service them better with personalised relevant information that will help them make more informed and better investment decisions.
Nic completed his articles at Deloitte and Touche (SA) and joined their Corporate Finance team in London in 1996. In 1999, he joined Nedcor Investment Bank and later became Head of Investments. Following the merger between BoE and Nedcor in 2003, Nic was appointed Head of Nedgroup Investments.