In this conversation with Jo Kite, a hugely experienced marketing leader, we cover risk and the role, capacity for loss and the role of guaranteed products. I love Jo’s phrase “a new respect for risk.” Her thoughts on the future of platform propositions and the opportunity to bring equity release, annuities and other guaranteed products into the mix are fascinating. You can download a copy of the report we mentioned on the Ascentric website here.

Listen to the full conversation below:

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Transcription of conversation.

Heather  0:35

Hi, it’s Heather here. You’re about to hear a conversation I recorded with Joanne Kite. Jo is the head of Proposition and Marketing at Ascentric and has loads of experience in proposition development across platforms, workplace settings and pension businesses. We talk about how the industry has responded to the crisis and Jo shares some fascinating thoughts about our new respect for risk and the need for a capacity for loss assessment to be a core part of retirement planning. We end the conversation on guaranteed products and the opportunities for advisors and their clients of having annuity, equity release and other products on platform. I think her views on the future of platforms and where they might go are really interesting. So be sure to listen to the end. Enjoy.

Jo, thanks for joining us on the podcast.

Jo  1:22

Thanks for having me, Heather.

Heather  1:24

And Jo, you are Head of Proposition and Marketing at Ascentric which is owned by Royal London and have held roles at Willis Towers Watson, Standard Life both in the workplace saving side and the platform. But can you give listeners just a bit of an introduction to yourself?

Jo  1:41

Yes. So, I began my career at Aviva, which was commercial union then, back in the day and my first project was looking at a mono charge pensions arrangements. They were the dark days where we had four charges on our pensions and one of my first jobs was to look at introducing a single charge on the pension. And the industry has obviously moved on loads and loads. But I think designing propositions that really meet customer needs and offer a really strong value for money for customers, through their advisors, has probably been the common thread through my career. And it’s taken me to lots of different organisations and cultures and lots of different marketplaces, a lot of the time and workplace or platforms. But it’s been a really interesting journey over the years.

Heather  2:24

So, we’re talking during lockdown, socially distanced in our own homes, where I wanted to start with just to get some thoughts from you on how the industry has responded to the COVID-19 pandemic and how Ascentric in particular has responded.

Jo  2:40

Well, I think Ascentric, we’ve kind of surprised ourselves really, because we’ve been through a re-platforming exercise over the last couple of years, we’re already kind of up on our toes and therefore all the learning through that exercise and all the kind of teamwork that we’ve done, sorted us in really good stead so that when this came along we were able to respond really, really quickly. So we managed to move all our team off site quickly, redesign our processes, we kept our phone lines up and running, and all the way really through tax year end we managed to keep all our payment processing, new business processing response times in really, really good shape. So, we were really, really pleased with that. I think generally, the industry did a really good job. I mean, risk is central to what the industry does.

So, we’re a well-capitalised, well managed, risk focused industry, so we should be able to respond to these kinds of crises well. And I think generally we did; I know a few companies had to close their phone lines for a week or so. But generally, I think most companies have come out of it pretty well. And I think the next thing that companies then moved on to was really understanding how the business processes could be made more streamlined for advisors. Again, I think Ascentric’s done really well through this. So now, we don’t require paper signatures on anything anymore. Over 80% of documents in our E signatures. And again, I’ve seen a massive shift in the industry overall on that. So, I think that the kind of day one response has been really good. I think there’s still a lot longer to go on the outcomes.

Heather  4:14

Yeah, I keep on referring to Bill Gates’s comment that it’s the end of the beginning. So in chapter one of the pandemic, or the first paragraph, time will tell but I agree, I think the response has been faster and better than probably a lot of people would expect it if we had done scenario planning for a pandemic where people wouldn’t be able to work in disaster recovery sites but everyone would be working from home. I’m not sure people would have thought it would go quite as smoothly as it did, I agree. And I know no paper signatures and use of E signatures, you guys did come out really well in a report that we just did, comparing that across different organisations, but a lot of change. It’s interesting as it’s happening across all sectors, across medicine, through food supply, everything and its amazing how quickly tankers can turn when they’re faced with a lighthouse.

Jo  5:05

Absolutely, I think these were all trends that were likely to happen anyway, in our industry, I just think they were going to take years, you know, the ability to remotely work, or the E signatures and stuff, you know, it was all coming, but it was just coming very, very slowly. And it’s just been a massive catalyst and massive acceleration, which I think will be really positive.

Heather  5:25

Are the changes that you’ve seen that you would expect will endure as we come out of out of this crisis? Are there changes that you think will endure in the industry?

Jo  5:36

I mean, I’m sure remote working will endure and I’m sure electronic processes will endure, which are the two big things we’ve seen so far. I think the other things that will be given some headwind will be straight through processing data. So, at the moment data is often trapped in various systems. And it’s a common complaint that if only our systems could talk to each other than everything would be so much more efficient. So, I hope that this gives some real headwind to that. And that the industry really gets themselves together so that we can get our systems all talking to each other in a much better way to really help the client and take some cost out of everybody’s processes.

Heather  6:19

That issue of opening up data is something that I know you and I are both really passionate about, we were talking before we hit the record button for this podcast. And I certainly hope that we’ll see progress on that there’s definitely the will from advisors, it’s whether we can find a way forward and align everybody’s commercial interests. On platforms, do you see any medium to long term impact on platforms and advice businesses of the pandemic that you think people should be thinking about?

Jo  6:45

I think it’s affecting everybody’s business model. I mean, you’ve got falling asset values falling flows, more client demands, changing customer needs and attitudes. And so, every company be they a platform or an advisor is going to respond to that predicament in different ways. There might be a dash for cost savings in some businesses. For me, actually, it’s a real opportunity to invest, and to invest in the right things and to change things for the better.

So, I generally predict a flight to quality. So, I think clients are going to have a flight to quality in terms of their advice. Some advisors will come out of this really, really well, having really helped their clients through and some advisors won’t. So, there’s definitely opportunities there for the stronger advisory firms to pick up additional clients. And I think the same is true of platforms, some platforms will respond to this in a really, really positive way. And they will see their flows respond positively on the back of that. And some of them will be challenged have to take costs out or whatever, and maybe suffer as a result of and you may see some consolidation on the back of that.

Heather  7:58

I think that flight to quality is really interesting because I absolutely agree, and you know what defines quality I think is up for debate because some people sometimes confuse that with size, with scale. And that can be important. And so, one of the things that we’re thinking about is what that looks like for consumer demand for advice and investment products. And do you see them going to larger firms? Or is it size irrelevant in a flight to quality?

Jo  8:26

For me, it’s all about value. So, it’s important to understand what the client really values and therefore to meet their needs with a proposition that really suits their needs. And I don’t think it is one size fits all. So, I don’t think will emerge out of this with one type of advisory firm. There are clients who want a low cost, simple solution with some online chat and some bots that respond to their query straightaway and you know, and that to some consumers will be fantastic value for money and really, really brilliant. Equally, there’s some customers that want someone at the end of the phone, someone they can go in and talk to, in a nice office in a different way. So, for me, it’s about understanding your segment, the clients that you’re trying to attract, and really meeting their needs in the different ways that you need to meet them. And I think in all cases, you just need to understand what’s really valuable to them and take out things and costs, that’s not adding any value and really focus on what’s important.

Heather  9:28

We were talking, again, before we hit record about the, you use the term a new respect for risk. And I was really interested in some things you were saying about that. Can you elaborate for our listeners on that?

Jo  9:41

Yeah. So, and again, this is back to my days in workplace where advisors have been running attitude to risk surveys for a long time. And in fact, in our recent CRP research, which I know we’ll come on to, over two thirds of advisors do attitude to risk surveys, and they’re very helpful, but at some level, they’re a little bit like personality test, do you like risk? Do you want to be taking risk or not taking risk? Whereas really, I think, can people afford to take risk. And that capacity for loss is equally important yet it probably isn’t given equal billing when we’re dealing with our clients.

So again, back to the CRP research, I think only around a third of advisors were using a tool to assess capacity for loss. So, we were probably all getting a little bit complacent, the market dipped up and down a little bit, but I think generally, everyone will just start thinking about respecting risk a little bit more, and that might be investment risk, that’s mortality risk, etc. And some of these risks are quite binary. So, you know, we look at investment risk and lots of different scenarios. But really, when you’re going to live or when you’re going to die is quite a binary outcome for people and actually, there’s only so much scenario planning you can do for whether you’re going to die next year or actually 30 years hence,  they’re quite different outcomes for people require quite different financial scenarios.

Heather  11:07

Yeah. And I think it’s become much more real for people because they’re hearing about people like them who have loved ones who have died. And it makes it much more urgent. And it’s always hard to make that need for a long-term plan, urgent. And some of the conversations that we’re having with advisors, they’re hearing from clients who A. maybe have a bit more time to get their paperwork in order. And so they’re taking a little bit more of an interest in it, but also there’s maybe more of a sense of urgency to sort it out and around risk the conversation becomes real because that hypothetical question, How would you feel if you lost 20% of your savings? It’s hard to answer that hypothetically. But having seen the news and a lot of investors wouldn’t have lost 20% but seeing the news at 10 and seeing how the markets have shifted each day, reminds people of the fear of loss. And it seems like people are making responsible decisions. They’re not exiting the markets out of fear, at least advised customers.

Jo  12:11

Yeah, for a lot of customers, if you are just investing for return in the long term, in many respects, it’s kind of part of the ride. And if you’ve been through your investment strategy, and you’ve thought through your risk, it is just part of part of the experience, and actually, in the long term may have very little bearing on people’s final outcomes. But I think it will really show where people who are in retirement and have got limited means potentially where some of those decisions have been made around their investments and whether to take guaranteed income or not, that will really kind of focus the mind for some clients.

Heather  12:58

In that research that we did, for the benefit of listeners, we did a report for Ascentric on centralised retirement propositions, which has been a big topic because I think we found that it was about 60% of advised assets was for clients seeking retirement advice. It was about half of advisors have a centralised retirement proposition. And 71% plan to have one in place in their firm by 2021. So by the end of this year, it would be really interesting to see how that moves on because the thing I was really encouraged by in the research was that, there was two things, it was that advisor said the reason for having a centralised retirement proposition was for client benefit. So, the main benefit of having it was actually for the client. And that’s great because we all know that there’s business reasons, there’s business efficiency, there’s having agreed processes, having a standardised approach, but it was really about the client benefit and that came through really strongly which I thought was great.

The other thing was that it’s a framework. It’s not a rigid approach to advice. And I think some people feel like the centralised investment proposition, you get a list of which you can choose, the centralised retirement proposition is different it’s really a framework within which you offer advice. And investment choices are an aspect of it, that was really encouraging to see that because the objection to using a CRP is really about, I don’t want a sausage factory approach. And we heard that from advisors, that they don’t want to take that approach of just putting everyone in, they want to have a bespoke personalised relationship with their customer, and a CRP doesn’t inhibit that.

Jo  14:40

I was really pleased that it didn’t come out as being an alternative investment proposition and that it did come out as being something much wider than that with lots of kind of different tools and elements. Because back to our earlier conversation, we need to be looking at cash flow modelling, capacity for loss, what if scenarios, etc. So, it was great to see that coming through in the responses. And I think, for advisors who aren’t using CRPs, as you said, their concern was that it would mean that they weren’t able to tailor their specific offering to individual clients. And I would actually argue the opposite. I think,  if you sit down, and really objective think about what are all the elements that you need to consider for your clients, and pull together a process or a methodology around that, you then work through with clients, I think that enables you to be more objective around individual clients. And, as advisors said actually the reason for doing that is then better overall client outcome and I genuinely believe that, advisors that sit down and think about what they should be doing with their clients holistically and then apply that as a process will actually end up with better overall client outcomes.

Heather  16:04

Absolutely. We still saw that use of guaranteed products was really low, my hunch had been that use of guaranteed products was low because of clients having DB pensions, but actually even when there was no guaranteed income, use of guaranteed products was quite low. I think you have some things you wanted to share about as well.

Jo  16:29

Yeah, I am a fan of what guaranteed products can bring to people and I think it suits different clients in different ways at different life stages. So, maybe not when people are 60 or even when they’re 70. But in later years when you’ve got issues around cognitive ability, etc, guaranteed products definitely have their place. And I think there’s a couple of barriers, things like annuities and life insurance have a bad name a bad reputation, they see it as someone taking all their money, rather than actually seeing it as a society project, where effectively you’re socialising risk, they’re actually very social products where you’re trying to share risk amongst a group of people.

And I think if we can get back to some of those original ethos is around what was behind insurance and some of the reasons why annuities work that they do for people. And I do think you can talk to people and explain them to that, but they’re much more appreciated as products. And I think the other barrier is just in the technology in the way that platforms are set up in a way, at Ascentric where we’re very fortunate to have a large number of third party products on there, but  generally some of these wider products and I’d include equity release in this as well going forward, that ability to bring all these kinds of different solutions to people’s later life planning all together in one place. And help advisor’s kind of plumb all that together, I think will be really, really important going forward. And I do think that’s a bit of a barrier at the moment.

Heather  18:14

That’s really interesting because it expands the role of the platform doesn’t to take that that wider picture. Do you see that as the product sitting on the platform? Or is that a data integration? Or is it too early to say?

Jo  18:25

You know, I think from a client point of view, I think the data integration should work so seamlessly that actually, it shouldn’t make any difference to the end client, whether it’s all on one platform or not. So therefore, I think whether it all ends up on one platform or not, will really depend on  where the capability is, and where it’s most efficient to have these things. And I think platforms have proved that there is efficiency in grouping together different products in one place and being able to move money between different products very seamlessly and have a kind of single investment proposition.

So I think the jury is still out, on whether adding risk products in or equity release products into one platform will drive sufficient efficiencies that becomes the dominant model or not, technology is increasing hugely, but I think for me the most important thing is that there aren’t barriers there for advisors and clients using the full broad range of solutions that are available. And I think anything that platforms can do to open that up, because certainly at the moment when I speak to advisors a lot of the reason why they don’t use things like equity release is that it’s on a different stack. It’s kind of dealt with by different people somewhere else and if we can break that down then I think that’s a positive.

Heather  20:01

We did something recently on cash management and talked about whether that should be integrated into the platform or sit on platform. And with cash, the returns are so low that often, it’s less than the platform and advisor fee combined. And there’s all sorts of technical reasons why it’s hard to break up the fee. But there’s some benefits of sitting on platform because then you can have it within the tax wrapper. And so, who the ISA manager is really matters from tax point of view. And so, for products that should sit within a tax wrapper, there’s a lot of reasons to suggest actually should be within the platform.

Jo  20:35

And I think it gives you opportunity to design both annuities or equity release problems, solutions that are a little bit smarter and integrate into your other assets. So, if you go back to something like the one account, which was basically combining people’s current accounts and savings with their mortgages, whilst there wasn’t a reason why your mortgage in your current account had to be in the same place actually by using the same technology and bringing those two offerings together, there was a real tangible benefit for the customer. So, I think that ability to kind of offset between something like an equity release, some guaranteed income whilst also having a pension pot or an ISA or GIA, if you can be quite acute about these things. I think there genuinely could be an end client tangible benefit.

Heather  21:23

Absolutely. Great. I think that’s a really good place to end because it shows some opportunities for the direction of platforms really clearly. I really appreciate that Jo, thank you.

Jo  21:33

Great, lovely talk to you. Thanks, Heather.

Heather  21:37

I hope you enjoyed that conversation with Jo, I know I did. Jo is hugely experienced and her thoughts about the future of platforms and the opportunity to bring equity release, annuity and other guaranteed products into the mix are fascinating. You can download a copy of the report we mentioned on centralised retirement propositions on Ascentric’s website. I’ll also put a link in the show notes. As always, we’re open to discussion for speakers and topics. Thanks