Ferguson tackles the hot topic of guided architecture

David Ferguson, CEO of Nucleus, looks at the pros and cons of guided architecture.

As ever, there seems to be a lot going on in the world of platforms. In the wider platform world, the current hot topic seems to be guided architecture, particularly as it might relate to Standard Life’s upcoming ‘investment proposition’.

Now I don’t know about you, but I get mightily confused (and perhaps even suspicious) when I hear people on the provider side of the fence talking about investment propositions. After all, when a company such as a life assurer has no customer contact, how well-placed can that company be to help those customers manage their money?

Certainly, they can make suggestions, in a kind of Amazon ‘others who have bought’ or an iTunes ‘Essentials’ kind of way, but guiding (or, even worse, constraining) choice is surely a bad thing. There is a pretty thin line between suggesting and encouraging, and I would hate to see platforms evolving into the latter, for two reasons:

Firstly, in a few short years, platforms (and in particular wrap platforms) have done more to promote transparency in financial services than the life industry managed since the mid-1800’s.

Should guided architecture come with any kind of inbuilt bias, a lot of the positive work could be undone.

Secondly, one of the defining negative issues of the last 30 years has been the persistence of the industry to find a one-size-fits-all solution. It just doesn’t exist. Just as my iMix of favourite tunes would differ

from almost everyone at Nucleus, and my ideal holiday itinerary would not be everyone’s taste, the financial services sector has to recognise that people’s financial circumstances and dreams differ across the board.

It seems to me that the only way that guided architecture can work is if there is an explicit charge for the service. It absolutely should not be marketed as ‘free’, because as soon as it is, it can either be assumed to be valueless or to carry some bias.

Just as we begin to see some light at the end of the transparency tunnel and the RDR starts to gather a head of steam, surely this cannot be the right time to return to the past? I often hear people say that this industry needs to rebuild trust with consumers.

I would contend that the industry has never been in the position of enjoying trust – rather it has allowed itself to exploit ignorance. The only people who are sensibly able to build portfolios for clients are financial advisers or independent investment professionals (including discretionary managers) who are remunerated on a fee basis for the service being provided.

The industry (if that actually means anything) has begun to carve out an opportunity to engage properly with consumers, to deliver an honest, transparent product set and to begin to help society plug the enormous savings gap that exists in the UK.

Here at Nucleus HQ, we are preparing for this by hiring the very best talent in the financial services industry in a recruitment drive that has seen us almost double in size over the last few months. This is a very exciting time for us as we seek to make the most of the once-in-a-lifetime opportunity afforded by the industry changes happening all around us.