Heather Hopkins meets Felicia Meyerowitz Singh, CEO of Akonihub. Akonihub is a cash management platform that uses data and analytics to help people maximise interest from cash. Fee tells us why we should be focussing on cash despite rock bottom rates and offers a perspective on what might change in our industry in the coming years.

You can listen to the full interview below.

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Transcript of conversation

Heather

Hi, this is Heather Hopkins from next wealth. Welcome to the next wealth insights podcast. I’m joined today by Felicia Meyerowitz Singh, the CEO of Akoni hub Fee Welcome to the podcast.

Felicia

Thank you, Heather. Lovely to be here on a sunny day at least.

Heather

Yeah. And you’re managing ok through lockdown?

Felicia

Yes, we are. I mean, we’re a start-up. So actually, we’re automatically remote working, digitally enabled and so on, but still a challenging and very busy time.

Heather

Yeah, absolutely. Absolutely. And which I think brings us onto a little bit about Akoni. Because a lot of our listeners might not have heard of Akoni Hub and so the reason that you’re particularly busy is probably different from some other firms that I often talk to you. Tell me first a little bit about yourself your own background, and then we’ll hear a bit about Akoni. If that’s okay.

Felicia

Yes, sure. As you mentioned, I’m CEO and co-founder of Akoni. Akoni’s a cash platform, which is provided on a white label basis to financial advisors, to wealth platforms and wealth managers, as well as to a range of retail platforms. Provide a cash marketplace, either via API’s for an entire fully integrated experience and a whole range of banks and banking products, which increase returns, provide bank diversification and also provide tools for advisors to speak to their clients. We have an open banking tool with a cash planner and prompts for clients which our advisors can use. So overall, our aim is to deliver increased benefits using technology.

Heather

Great, okay. So, one of the one of the things that  comes up on cash cause we think that there’s a structural shift towards advisors recommending larger amounts of cash holdings for their clients and that that was happening before the market turmoil if the last few weeks and in fact and there was also a short term lift because of concerns that were at the top of the market. I don’t think anyone’s worried we’re at the top of the market, whether we’re at the bottom or not, I mean, who knows time will tell. But with rates so low, and in fact, you know, lower than they were just a few weeks ago. Why are you seeing such demand for cash management products?

Felicia

We think it’s two things Heather. The first is that they were already, as you mentioned, a number of firms already looking at cash solutions in the market. And that is partly because of the increased uncertainty and volatility in the markets over the past year, few years. And clients were pushing to have a more holistic view through their advisors and advisors in turn pushing to have that view through the platforms. So that’s the first thing there was already this latent demand. Obviously in the UK Hargreaves, which is the giant on the direct side, launched its own cash platform. advisors don’t want to start losing business because a client is placing cash with Hargreaves and then starts marketing at investment products. So, I think that was already pre-existing, because we are working with a number of platforms over, you know, a period that long precedes the COVID-19 crisis.

The second is, as COVID hit, advisors needed an engagement and a touch point around cash for their clients. They know that clients want to have one view of all of their assets, as close to that as possible. And they need tools for that. So, it’s not only about the increased returns, because obviously in the UK, because of the stranglehold of the Big Four who don’t take care of the clients during these times. You have all the challenger banks who still operates like our highest rate is to 1.8% and that’s in a market way basis is 0.1% So, challenges and that will continue because these banks have got to fund very large books of lending. We don’t see that the challenger rates are going to drop off. Even in Europe where you’ve seen negative rates for the last few years, you’ve always had leading market rate still coming in from the smaller banks or banks chasing liquidity. So, we think that there will still always be a reasonable return. That’s the one thing.

The second aspect is that clients are increasingly looking for bank diversification. And it is really impossible to manage in the current environment where you have to still fill out individual forms every single time you want to move money. And that in time, all that friction is removed by a platform like Akoni. We have an entirely digital on-boarding process, literally three minutes from your sofa, using you know that selfie picture. And we onboard clients, you know, the average UK client, almost instantly in that case. And in this age of digital remote working advisor also looking for solutions that just make things easy for them or their clients. And the third is obviously, just having cash tools. So, wherever it’s useful to having tools, utilising whether it’s open banking, the clients own forecast, the advisors view of their client to utilise those. We’re seeing it across all areas now and in particular for clients who want to keep cash, the advisor gives them and additional touch point.

Heather

Okay. And I think I think about cash in the context of the wealth management industry as being transactional cash where that sort of cash sitting around waiting for the next trade so sort of the slush in the platform account for example, and then the sticky cash that’s the that could be the cash buffer, you know that that’s used frequently for retirees or you know, money that people just want to keep in cash as cash an asset class. So, are you seeing that growth in demand for that transactional cash that’s probably just there for the short run? Or is it that the latter, that sort of what and maybe you’ve got different categorisations that’s sort of how I think about it.

Felicia

We actually see demand across three distinct spaces. The very first is cash that’s actually held within a wrap, like a SIPP or SSAS. It’s unlikely to be shorted. It’s within a portfolio which will be held on an ongoing basis. And, we are currently the only firm that can take cash from wraps, whether it’s a SIPP, SSAS or an ISA. So that’s the first aspect of it and that’s really linked to our legal and regulatory proposition around that type of cash.

The second is around individual money. So, what we call cash under influence, where the advisor may have sight of it, through discussions with the client or through using another platform, but currently is not providing any sort of advice on it. So, we provide the tool that brings that into that advisor’s assets under influence. And in turn that expands what the advisors, you know, able to offer to those clients that wouldn’t have even been included in an offering previously.

And then the third is fairly unique in the sense that it comes back to the wrap providers where the trustees have really seen that they’ve got an obligation, either as a wrap provider or as a wealth platform under the retirement outcomes rules where they need to provide a cash solution, because the cash is currently sitting at one bank, the clients within that breath has got more than £85,000. And the trustee has never informed the client, you know, it’s just part of the standard terms. So actually, being able to say, you know, dear client, we see you’ve got 350,000, I mean, one of our wrap providers has got an account of 3 million in cash in one of their wraps. 3 million, and is in one bank, so they really want to be able to reach out to those clients and say, do you want to at least spread that so you have some banks diversification, and then relating to the solutions around retirement drawdown for the four pathways, one of those pathways being a solution for cash, the platforms and wealth managers want to have solutions for that. So, we’re seeing some sort of fiduciary view coming from the distributors

Heather

My understanding is that platforms can’t act as the trustee for the cash because of rules that were brought in, in the last financial crisis. So, so they can’t aggregate the cash held in those individual platform accounts. To put that cash together to deposit it with banks, it has to be deposited in the individual client name is that

Felicia

All of our accounts are in the individual client name. And even the platforms that we’re working with in the wrap space, what they’re doing is they are advisor led, so they’re saying the advisor needs to make this decision with the client. And we will obviously sign if the advisor has signed.

Heather

Okay. And, one of the objections that I hear on this and I think it’s a fair one is, with advisors and platforms charging based on assets, so a percentage of assets that doesn’t really work with cash. So, I’m interested, does that charging structure need to change? Do you think, to be able to take that broader picture of people’s wealth? Or are there different business drivers, then revenue for looking at cash.

Felicia

So, from an advisor’s perspective, we actually have two very distinct groups of advisors. One with the advisor doesn’t want to own anything, they just want to have a solution that is for the benefit of their client, because they feel that cash has been so neglected for so long, and there’s so much potential on it at the moment. So that’s the first and obvious point. And the second is where the advisor does want to earn, you know, part of a fee. And really, we’re seeing 50-50 on this, I would have liked to have seen more one way or the other for a distinct trend. But we’re not seeing anything specific.

Currently, there is a cash under management fee, which is very basis points driven much lower than obviously what an advisor will charge their client for the investment portfolio. But where we see things moving towards is a more bundled platform fee type approach, because of the tools that are provided, so that where a platform might provide the solutions to all of their advisor clients, it’s bundled in with all of their other services and advisors or wealth managers can select. Which one do you want, do you want these added tools relating to cash planning, do you want to see a risk rating? You know, because we use Fitch provides something called Fitch financial implied ratings FIRs. So, then you can actually compare banks using a consistent rating method instead of you know, trying to second guess where each bank is. And so, we also see we’ve already had inquiries from three of the platforms who we’re working with on value-based decision making. So, around ESG, and currently none of the ratings agency provides ESG ratings on banks. So, we think that that will also grow. So, as all of these trends come from consumers, we think that in turn will push the solutions out via the distributors

Heather

It’s really fascinating. And one of the things that we’re really passionate about this idea  is that financial planning has moved significantly away from investment advice to financial planning. And that’s been a big shift over the last few years and it seems like the last the last leg of that is, is on the cash holdings. Advisors will sometimes say that they’ll use NS&I or something for the cash holdings. But that lack of visibility means that it puts a lot of emphasis on the annual meeting and the annual review meeting with the client, which in our view, should be obsolete. I think particularly if you think about what’s happening at the moment, people’s goals, objectives, priorities, financial situations are changing dramatically at the moment, and the idea that you have a financial plan that you review once a year, makes sense for some people who circumstances aren’t shifting rapidly, but actually, at the moment, I think it’s really brought into sharp focus the need for that to be a living, breathing, adaptive thing, and it is not a document haven’t figured out what to call it yet. But that sort of shift to thinking and, one of the things I’d love to get your view on is what you think needs to change about the wealth management industry, so that people really take account of cash. And maybe it’s even beyond cash. And that’s, of course, the focus of Akoni Hub. That could be from advisors, platform, product providers, tech, you know, across the board, what would you like to see change in the industry.

Felicia

What we’d like to see change which we are seeing changing already, because we can see even trends that we’re working on, which will take three to five years to become mainstream, but there’s no doubt that they will become mainstream – is coming back to what you were saying is having one view, and not an engagement point once a year, but personalised prompts whenever market circumstances change, bank rates change, your personal circumstances change, and really, that can only be accomplished at scale with technology. And for us, that’s really one of our key points at Akoni is that we use data to provide all those prompts, data about you, data about your choices, data about the cash products that are available in the market data that comes via open banking, if you’ve chosen to use open banking tools, and we then prompt you, the end customer or the advisor, we  have a multi-channel solution and it can go to an advisor, it could go to a relationship manager or to go directly to a client. And whenever those circumstances change that you’ve set up those variables for, we will then prompt you to make a change relating to your cash or whatever other the particular scenario that has been set up in.

So that’s the first thing is we really believe in clients want to go to one ecosystem, one marketplace for all of these solutions with a curated choice of providers. No client wants to see a bank product from 350 banks. You know, there’d be 10s of thousands of products, but what they want to know is that they are not having only one choice, or no choice in many cases. And for us that is going via for distributors that already exist in that sense, the one thing about Akoni is we don’t compete with any of our advisors or our retail channel distribution clients, our partners, we don’t offer our products directly to individuals like you and I. And so, and we also offer a full range of solutions. So, we have some white label advisors, accounting partners, who provide solutions to both individuals, businesses and charities.

We have a full range of tools and solutions for all of those. We have a range of solutions that work for banks for their particular clients, where they can curate their products, and obviously differently for wealth platforms. And again, for small advisors. Everything we do is totally white label because that’s where we think is, we are in a marketplace within someone else’s marketplace, which is typically why, you know, now our brand hasn’t been out there because we’re sitting behind the scenes.

Heather

Okay, so that adoption of technology, I think is I agree that’s

Felicia

We are using the data because more and more data is becoming open, it’s not going to stop. It’s not stopped with open banking. And that is what’s going to prompt this democratisation, essentially, of what we have historically, a treasury solution is only available if you’re a global multinational with a treasurer. Now, if you’re an individual, like you and I, or a small business or small charity, that is totally changed. And it’s all down to the data and technology, obviously, what’s the regulated structure around the potential structure rather.

Heather

And I think that emphasis on technology and data is so important because that the idea that people can self-manage, I think becomes harder to fathom as you bring in all these different elements and that curated choices really powerful but still with that guidance from the expert, the financial planners are making the broad view and so just to wrap up when we find you and I are we’re in lockdown we were talking about the things what we’ll do immediately after  earlier and but you know what lasting impacts do you anticipate as a result of the Coronavirus pandemic and I realise looking to the future is really dangerous and difficult and easy to prove wrong in the long term, but what lasting impacts do you anticipate?

Felicia

I think there’s going to be much, much less office working. Like one of our bigger clients, which holds cash on behalf of many, many individuals have said that they are likely to cut the rentable, the lease by about 800,000 a year, it’s coming up for renewal in July, and they’re going to cut it. Because now they can see how easy it is for many people to work from home. So that’s the first, just the nature of working from home is going to change. And how people adjust and adapt to that is very important that communications, you know, maintaining morale across your team, while you’ve got a lot of remote working, and as well as building relationships in different ways. So, we think that that’s going to be the first change. And that’s another reason that technology is so important, is that you have to be able to say, we’ve got to take away all of these forms that need to be filled in.

We have open data. So, banks, yes, they do sometimes still require forms to be filled in. But if you can use a platform like Akoni, or a digital bank for all of your anti money laundering, know your customer checks, then that’s what you should be doing, because that’s how clients on whole are going to be. And then it also the one point I wanted to mention the wealth effect of that massive transfer of wealth that’s happening to the next generation, the next generation does everything on their phones. So already, you know, you have a lot of comfort with digital remote concepts. So that’s the first change.

I think they’ll also be general caution in resumption of normal business activities, because entire sectors have been decimated. You know, I have friends who are looking at retraining from historically very professional and protected income type sectors, because they just can’t see how there’s going to be a recovery within the next three to 12 months in their particular sector. So, what do they do? And I think that environment will mean more {Audio not clear) more caution. And we all have to be able to respond well, both economically and in terms of tech solutions, but also on a personal level.

Heather

Yeah, absolutely. And it’s that it’s that marriage of the personal and the professional changes that are so important to think about. Fi thank you so much for sharing your, your insights with us today. And fascinating and we think a growing area of wealth management and a really important area that advisors and platforms and others should be looking at. So, thanks for taking the time to share your views with us today.

Felicia

Thanks for that.