DIY Investor Magazine
| August 2017
12
FROM HISTORICAL PLAQUE TO THE CLOUD
A tourist taking in the city sights of Exchange Square
and the Bank of England may easily miss a significant
blue plaque in Change Alley. This historic plaque
acknowledges the original home of stockbroking.
Whereas today’s investment innovators sit in hubs and
work in the cloud, it was all happening at Jonathan’s
Coffee-House in the 18th century. So how does fintech
(or financial technology) meet with old fashioned
stockbroking in 2017?
Having spent twenty years in traditional investment
management and now leading a startup fintech
business, it’s interesting to see how the old and the new
work in parallel, overlap and compete. Here are a few
views from both sides of the fence and the advantages
for the today’s investors.
Technology has widened access to investments and
brought costs to a fairer level for the consumer. This
is positive for access but it also means sometimes
investors can easily buy exotic and risky investments.
One could argue such low barriers to purchase should
be accompanied by a limited choice of the best assets
- often open architecture or limitless choice are not
always wise for the uninitiated buyer.
An uncelebrated but growing phenomenon in
investments these days is ‘fractional ownership’, where
you effectively co-own an asset with other investors.
Lawrie Chandler
Director, Good Company
Wealth
The proliferation of robo-advisers, property
crowdfunders and the like allow for smaller and smaller
minimum investment levels for consumers, and a
diversified basket of such assets is to be celebrated.
Fractional ownership means accessibility.
Imagine you want to dine at the top table in a restaurant,
but you have to book the entire table before said aloof
establishment will consider accepting your reservation.
However, through a special operator you can buy a seat
at that table alongside other likeminded diners, without
the prohibitive expense of taking all the seats. This is a
good way to think of fractional ownership, where you co-
invest with other people – to access the inaccessible.
‘Co-investing’ is easy with some asset classes, but more
difficult where they are the preserve of the financial elite
or mega wealthy, as it’s more of a closed market.
The operation of some investment markets, like
corporate bonds, can make it feel like the top table in
an auspicious manor house, where you may even need
to know the right people to get the key to get in as well.
Many fintechs operate to democratise such inaccessible
markets.
Fintech firms have the benefit of being able to start with
blank operating models. They are able to use the latest
technology, unencumbered with legacy systems of the
past. To build from fresh is dramatically easier than a
migration exercise for an existing operator.
They also benefit from shorter, lithe, development cycles
to test, learn and change new services with focus
groups and then rollout to the investor community at
speed with the latest solutions.
Incremental development and change seems to be
more the standard in fintech. Service standards are
continuously nudged upwards step by step rather than
in massive leaps.
Traditional operators have the benefit of being
established businesses, with positive cashflows and
masses of clients to see trends and develop them.
