Page 2 - peterevans Newsletter Q2 1014
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Clearly better: Transparency and the digital investment age

Mobile and tablet devices have facilitated access to retail investment customers for service providers. New 

entrants, such as portfolio builder Nutmeg, are able to steal a march on other digital investment providers by 
positioning themselves in the gap left by the withdrawal of financial advisers following the Retail Distribution 


Mastering the client relationship via digital channels is key to the success of retail brokers and fund distribution 

platforms. The ground is set not only for competition, but a fight for differentiation. As regulators have made 

‘transparency’ their watch word, it is becoming harder for investment intermediaries to avoid being compared on 

price; the one area which still offers a value add is service quality.

Reaching and selling to customers is not only core to execution specialists, it can provide the lion’s share of returns for 

other investment product providers. According to a recent McKinsey report entitled ‘Searching for profitable growth in 
asset management: It's about more than investment alpha’, fund distribution accounts for about a third of an asset 

management firm’s growth, while over the long term, the impact of sales alpha can actually be more important than 

investment alpha.

For example, over the last ten years in the retail segment, firms that have average performance and products, but 

strong fund distribution – which McKinsey calls ‘sales alpha’ – have enjoyed significantly more inflows relative to 
peers with better performance and products but inferior sales alpha.

Retail brokers, fund managers, wealth management providers, execution-only brokers and private banks must 
develop omni-channel digital platforms that will keep the client’s focus either for information or to trade.

There are relatively low barriers to entry to create an app of sorts, however developing a valued front-office tool is 

easier said than done and requires experience of existing tools and apps. In addition the business of investing is 
predicated upon trust and security, which requires a front-end to be well-integrated with sources of data and post- 

trade order processing.

To provide a differentiated service without moving too far away from an easy-to-use interface can place great 

demands upon in-house development teams. The capacity for innovation can often require the support of third- 

party services and the decision for the management team is where to draw the line between in-house and external 

Several factors influence this decision including the amount of control that should be maintained over the project; 
the cost of the project; and the skills that are contributed by the developer. New start-ups targeting the retail investor 

will often retain as much development in-house as possible, while commoditised support such as computer 

processing power is provided by a third party.

For established businesses and business models, holding development capabilities in-house can often be 

challenging. Maintaining resources with a fixed-cost for development that will take place on an ad hoc basis does 

not make for sound economic profitability. Increasingly firms are looking for third party developers who can provide 
strong user interface capabilities, with integration across the front and back office on an outsourced basis.

peterevans is expanding its front-office capabilities so that the firms who rely on its well-established middle- and back-office 
systems can take advantage of the development work it has conducted in the trade execution space.

Managing director of peterevans, Mike Foley, says, “Having worked with a number of clients on front office 
capabilities, we have developed a core of skills across digital delivery and user interfaces that are well-supported by 

our longstanding trade-processing operations.”

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