Last week we interviewed Pollyanna Harper, Head of iShares UK Intermediary Sales at Blackrock iShares, to hear her views on the industry and the challenges within it.
We all know that Blackrock iShares is the biggest provider of ETFs in the world, but what are your key aspirations for the business and how are you different from everyone else?
There is a fantastic growth opportunity in the ETF industry at the moment. Given that ETFs make up about 3% of equity assets and 1% of fixed income assets across Europe at the moment, our aspirations are to grow this market – we still have a way to go.
Our key differentiator lies in the size and significance of Blackrock as a whole. We have a multi-faceted business which means we can support our clients with a wide array of service models and types of a products and service range to help clients meet their goals. By understanding our clients’ challenges, we want to help them work through these to help them grow their business, by plugging into the relevant products and services that suit their needs.
SO what do you think are the biggest challenges facing the advisers and wealth managers?
I would break this into two parts… Firstly those out of your control. Whether that is keeping up with the volume of regulation, or managing volatility in such an unpredictable world in light of the US election result, Brexit and the upcoming European elections.
Finally, how do you control the controllables? An obvious one is demographic change. There is a prediction that $30tn will move into women and Millennials over the next five years, which means that we need to look at the advice gap and understand the mindset of this new demographic. What do they look like; how they would like to be serviced; and how you can attract this money into your firm? Technology has a key part to play here as you build out your digital proposition to ensure the scalability of your business over the long term while keeping costs down.
As we are talking about adding a digital proposition into your business model, ETFs complement the need for accessible, clear and cost effective online solutions. We are seeing passive being used across multiple digital/robo advisers from a low cost perspective and to give flexibility across different types of asset classes to be used for precision exposures.
How is this driving demand for asset allocation solutions?
From an adviser perspective, business models are becoming much more client-centric as they offer more holistic financial planning solutions and move further away from doing investment management themselves. As a result the importance of using the right third-party outsourcer is becoming increasingly important to ensure they continue to deliver the right customer outcomes – a world where ETFs fit nicely.
So how can iShares help advisers and wealth managers work through these challenges?
Whether we are talking about smaller advisers or our larger institutional clients, our focus is on listening to the client; getting a clear picture of their intended goals; if necessary analysing their current portfolios; and providing a product or group of products to help get them on track. This helps ensure that each of our clients gets the best service possible through our multi-faceted business. Whether that is using our own technology or risk management, or building specific solutions for them.
Surely you can’t offer everyone the same bespoke service. How does this work for your smaller clients?
Every client is different so we look to support them in different ways. Our clients all have their own propositions so we try to be targeting – whether that is helping them build a different solution for their end/intermediated client, or supporting advisers through the holistic financial planning process. This includes support through educational programmes and ensuring they have the best collateral to make sure they are using the right language with their end-clients.
Can you given any examples around how you are working with some of your more strategic accounts?
Given our scale we want to give them an opportunity to plug-and-play. Keeping it anonymous, some of our larger strategic partners are using the Blackrock Portfolio Analytics & Solutions service (BPAS). This allows them to retain their own proposition and investment capabilities, but help them to look at different ways to manage risk dependent on the outcomes that they are putting together. This is effectively an overlay to support their existing business activities by using our proprietary risk management platform, Aladdin.
We want to do more to support distributors, and when we enter into discussions to partner we have four simple questions …What do you want? How do you want to get there? Where are the gaps? How can we support your business to make it work?
The world financial services is changing at a rate of knots. Being a global player, have you seen any innovations about to hit our shores?
We are increasingly seeing providers white labelling their products and services to allow distributors to retain their brand but tap into intellectual property.
There are clearly advantages on both sides of the fence of either being a large player with scale and capability. Or a niche and nimble disruptive player in the market. The key is around how you bring these two worlds together.
Using your crystal ball, who do you think will be the winners and losers in ten years’ time?
The winners will be those embracing change and adapting to the macro environment we are living in from a return and performance perspective. But also adapting to technology and the digitisation of business models – whether that is looking at servicing lower-end clients or ensuring you standing out in a crowded market.
The losers will be the dinosaurs not moving with the times and evolving to a more educational, consultative approach to tackle the advice gap and wealth transfer to Millennials and women.
Is the value of advice changing?
The value of advice is all about the service. We know that fee compression is happening across the board and we are seeing a number of business models using ETFs as a sensible, low cost business tool to use all different asset classes and building them into their asset allocation.
Turning the focus onto yourself… if you were the Chancellor for a year and had carte blanche to change any regulation, what would it be and why?
I would focus on the necessity for financial education starting in primary schools. Financial education should not be the sole responsibility of parents.
What is the best piece of advice you have ever given or received?
Be yourself. Value what you do and the impact it has on people around you.
If you weren’t in this job today, what would you be doing?
If I was in the industry I would be a financial adviser. If I was out of the industry I would be with my children in the park.
If you would be interested in discussing these themes with your peers at A Meeting of Minds, please contact Owen James at 01483 861334 or email firstname.lastname@example.org