On explaining risk effectively, balancing technology and trust and an eye-opener to AI
In our regular video series, we interview the wealth sector’s key decision-makers to discover how they think about life, both within the world of investment and beyond it; what brought them into the business and what keeps them here; and what makes them and their companies tick
For Ben Goss, CEO of Dynamic Planner, the relatively low proportion of people in the UK who actually invest – as opposed to, say, drive a car or travel by plane – is a significant bar to normalising the idea of financial risk and, consequently, a big issue for professional investors looking to explain the idea.
“People do not have a lot of fellow human beings to talk to about investment risk,” he tells Wealthwise editorial director Julian Marr in this latest Choice Words episode. “And, while risk is essentially the chance that something bad might happen, as an industry we have not been great at finding ways to express that.”
Arguing the best way to do so is to use “ex ante returns – but with forward-looking descriptors of the potential for something bad to happen”, Goss offers the example of being on holiday and, for the first nine days, just relaxing on a beautiful beach beside a calm sea. On the tenth day, however, a huge storm reveals the existence of some rocks, just off the shore, which could pose serious dangers to all but the most expert swimmers.
“A forward-looking view of risk would say, Well, actually those rocks are there and, with these conditions, even an experienced swimmer could find themselves in difficulty,” he says. “Historically, however, what we have done as an industry is say, Ah, over the last 10 days, only nine were safe – let’s forget the really extreme circumstances we had on the tenth day and give the customer the statistic of historic volatility.
How can we describe the potential returns – and risk – the portfolio represents when we are taking a forward-looking view of the future?”
“That is where the industry has tripped up a bit, I think, but we are working, with managers, to think very deeply about, Where are those hidden ‘rocks’ in their portfolio? How can we describe the potential returns – and risk – the portfolio represents when we are taking a forward-looking view of the future? How do you actually assess the risk – that potential for something bad to happen?”
Earlier in the conversation, Goss outlines what he sees as the key ingredients that drive a successful wealth management business – starting with recognising the personal nature of financial security and the importance of having someone you trust sitting across the table from you.
Next up, he says, nodding towards the aims of Consumer Duty, is “a laser-like focus on what the client really needs and wants and how much risk they are willing and able to take to get that”. “Institutionally, I guess you would call that ‘establishing the mandate’,” he continues. “That is a way trickier thing to do than it sounds but great wealth managers know how to do it.
Delivering on the mandate
“And then it is all about delivering on that mandate. Financial services is a notoriously difficult thing to demonstrate value in. Yes, you get the report at the end of the period that says how your portfolio has done – but, you know, is that really delivering value after fees for the risk that has been taken?”
The only way to articulate that properly, Goss maintains, is by talking to the client about the progress they have made towards their goals and the progress the portfolio has made, given the mandate. “Our job, meanwhile, is to enable the adviser,” he continues.
“Advisers are uniquely well-placed to build relationships with other human beings – which is essentially what people are buying into with a trust-based relationship – and the role of technology is to help unlock that trusted advice. So remove the drudgery, remove all of that preparation for the meeting and the reporting and the administration that has to be done.
“As an example, we have got what is typically six or seven hours of adviser time – putting the annual progress review together – down to four or five minutes. I was with one firm recently and they were saying, if we can’t do it in four or five minutes, we know we are doing something wrong. This is technology’s job: to help unlock the trusted advice that happens between two human beings – one a professional and the other a client who needs and wants some help.”
A full transcript of this episode can be found after this box while you can view the whole video by clicking on the picture above. To jump to a specific question, just click on the relevant timecode:
00.00: What qualities drive a successful wealth management business?
06.07: How can financial firms set about building trust? And how do they balance trust and technology?
10.52: If you were head of the FCA for a day, what would you do?
13.50: How would you explain risk to someone who does not work in investment?
17.55: What drives your approach to client communications? Should professional investors aim to attract the ‘right’ type of client
21.19: ‘ESG is dead; long live ESG 2.0’ – what are your thoughts on that?
26.15: What was your path into investment – and, if you had not taken it, what do you think you would be doing now?
29.53: What advice would you have given your younger self on your first day in this business?
30.23: What do you see as the best and worst-case scenarios for the future of wealth management in the UK?
31.20: Two Choice Words recommendations, please – one a book; one a free choice?
Transcript of Choice Words Episode 21:
Ben Goss, with Julian Marr
JM: Well, hello and welcome to another in our series of ‘Choice Words’ videos, where we get to speak to the great and the good of UK wealth management and find out what makes them tick. I am Julian Marr, editorial director of Wealthwise, and today I am delighted to be talking to Ben Goss, CEO of Dynamic Planner. Hello Ben.
BG: Hi Julian. Great to be here. Thank you for having me.
JM: Good energy – let’s keep that going! I normally bring people down to my level but that is a great start! Let’s jump straight to my first question, which for you is, In your experience, what qualities drive a successful wealth management business?
BG: Ah, that is a great question – and a big one, of course. I mean, from where we sit – our purpose, if you like – we talk about being able to help wealth managers unlock access to trusted advice. Why do we exist? Simply because delivering advice and delivering wealth management has historically been really hard – but it’s really important. You know, end-clients value it and want it – and more people want it than get it.
So I guess my answer to that question would be what does it take to really unlock access to trusted wealth advice, if you are a wealth manager? And that comes down to a few things, doesn’t it? I mean, at the end of the day, this is very much a people business. I’m sure, in this conversation, we’ll get on to the role of technology and AI but, fundamentally, your finances and managing your wealth is a peculiarly individual thing.
As human beings, we are pretty risk-averse – on average, we are wired to value avoiding losses twice as much as we like getting gains. That is behavioural finance while, if you think about Maslow’s ‘Hierarchy of Needs’, to use another kind of framework, we have to have the basics sorted so we feel secure – so food, shelter, warmth and so on.
All of which has to be paid for – whether you are in the accumulation phase and thinking about the future or whether you are in the retirement phase and drawing down on your pots. So, fundamentally, that kind of base level of financial security is pretty hard-wired into us as humans – and has been over millennia.
The tried-and-tested way of building trust around the world – not just in the UK, US or Europe, but around the world – is to put one human being in front of another. And we will talk about the role of technology but, for sure, somebody I trust sitting alongside me, sitting opposite me on the other side of the table, has got to be a key ingredient.
Others – I mean, Consumer Duty is all about putting the clients needs first and giving primacy to the things they really want. So certainly, when we think about what ‘good’ looks like, have a laser-like focus on what is it the client really needs and wants? And how much risk are they willing and able to take to get that? It sounds like a simple thing to do but, clearly, it isn’t.
Having a conversation – as with any sort of equation, there are two sides to it. There is what the client wants, or thinks they want, in terms of the lifestyle they are looking to pursue, their goals, putting the kids through uni, retiring, passing on to the next generation – whatever it may be. And there is also the amount of money they have available to be able to fund those things and the risk they are willing to take in order to achieve them.
And holding all of those things in a conversation – probably a series of conversations – with the primacy of the client’s goals foremost in the adviser’s mind, I think, is probably the second thing. Institutionally, I guess you’d call that ‘establishing the mandate’ – but that is a way trickier thing to do than it sounds on paper. And great wealth managers know how to do it.
And then a third thing, I suppose, would be delivering on that mandate. Financial services is a notoriously difficult thing to demonstrate value in. Yes, you get the report at the end of the period that says how your portfolio has done – but, you know, is that really delivering value after fees for the risk that has been taken?
Well, the only real way you can articulate that is by talking to the client about the progress they have made; the progress the portfolio has made, given the mandate; the progress they are making towards their goals – and to try and bring that alive.
And, of course, clients can be very different. If you have an accountant as a client, then perhaps the numbers speak for themselves. If you have an art teacher for a client, on the other hand, then perhaps it is all about the graphics. I was at a party last weekend and somebody asked me what I did for a living and I explained the role Dynamic Planner plays – in almost half of all investment-advice firms now.
And he said, Ah, you produce that lovely line – that graph that shows me that, if I am above the middle line, then I’m OK. That’s the graph that helps me sleep at night. So, for that particular character, it was all about the graphic. But demonstrating value on an ongoing basis is absolutely part of the job, isn’t it? To make sure you are doing a quality job for your clients. That is probably how I would characterise it.
Balancing tech and trust
JM: Very good – and it sets up three questions I have, which I’m just going to quickly reorder in my brain. I think I will shmush two questions together – one is about building trust in the industry and the other is about the role of AI, whether it is an opportunity or a threat. Let’s take it as read you do think it is an opportunity – so how can wealth managers and advisers go about balancing tech and trust?
BG: Again, another great question! If I go back 20-odd years to when we started the business, I would go into an advice firm, and I would open my laptop and I would show them this technology. And I remember one very experienced, highly regarded adviser saying, Ben, I don’t need your technology. I’ve got this, he said – showing me a pen – and this, he said – showing me the back of the envelope. That’s all the technology I need.
Now, times have changed. Maybe we are going to go on and talk about regulation – but, certainly, the regulator has technology very much in the forefront of its thinking about Targeted Support and the new range of advice offers that may be coming our way. But we live in a completely different world now – you couldn’t operate an advice firm or a wealth manager without technology. The costs just wouldn’t work – let alone the risk you’d be facing and let alone the inability to demonstrate value to a client.
I think we could take it as a given that all of your listeners would assume you have to be able to hold both of those things: face-to-face – it could be a video – but human-to-human advice, if we are talking about sort of mass affluent and high net worth clients, alongside technology.
And our approach is quite simple – you know, our job is to enable the adviser. Advisers are uniquely well-placed, as human beings, to build relationships with other human beings – and that is essentially what people are buying into when they are buying into a trust-based relationship.
I’d like to come back to what trust actually means in a tech-enabled world in a moment – but the role of technology is to unlock that trusted advice. So remove the drudgery, remove all of that preparation for the meeting and the reporting I have to do, remove all of that suitability assessment – is this portfolio still suitable?
Technology can do that now. You know, we are monitoring £100bn – we just passed £100bn of assets on a daily basis last week, in fact – for very large numbers: hundreds of thousands of end-clients and thousands of advisers. And the technology is able to aggregate that data – from wherever it may sit in back-offices or platforms – and make sure the adviser has got a really accurate version of events right in front of them when they are having the conversation.
I say ‘adviser’ but, you know, another part of our view is that technology is there for the client as well as the adviser and it should be a seamless experience, right? So, if you’re a client, you should be able to see the same valuations as the adviser and you should be able to track your portfolio against your goals on a daily basis – if that is what you want to do. Many people don’t want to do that – they don’t want to get into the kind of daily viewing – but, if that’s what the client wants, then it should be available for them.
So the kind of, Yes, I’ve got to do good reporting – the technology should do that. The administration – I mean, AI is both a threat and an opportunity. I am hugely in both camps but, in terms of opportunity, the ability to take away things like summarising the conversation I had with the client – you know, we can record it, we can transcribe it, we can summarise it and play it back to you and build it automatically into your financial plan. Brilliant! That means I don’t have to spend two hours doing that after having a meeting with a client.
We have got what is typically six or seven hours of adviser time – putting the annual progress review together – down to four or five minutes. I was with one firm recently and they were saying, if we can’t do it in four or five minutes, we know we are doing something wrong. So this is technology’s job, Julian: to help unlock the trusted advice that happens between two human beings – one a professional and the other a client who needs and wants some help.
Drawing the line
JM: I would not want anyone to think you are using the ‘Jedi mind trick’ on me – I promise I was going to move on to regulation next! – but you flagged it up. You mentioned Consumer Duty at the start but, if you were head of the FCA for a day, what would you focus on?
BG: Gosh, that is a great question! I mean, I have been in and around this industry for over 25 years. I remember contributing to the Sandler [Retail Savings] Report in 2004 and saying, Look, there is this huge demand for advice. You know, at the shallow end of the swimming pool, it can be really quite simple and, obviously, as you get more sophisticated, it needs to be more holistic.
But I think the challenge or the sort of fence the FCA – or whichever regulator it has been in that 25 years – has stumbled over each time, every time, is where is that boundary? Today, Targeted Support is being mooted and looks like an extremely exciting opportunity, I believe, for the industry to provide common-sense good advice, with a small ‘a’ and guidance, with a capital ‘G’ to very large numbers of end-clients – and I think that will just provide a rising tide for all boats, frankly.
I think it will flood into a vacuum that is needed. Right now, it is very difficult – or some firms will say it is very difficult – to answer basic questions: Should I top up my Isa? Should I top up my Sipp? Should I take a bit more risk? Well, we have to do a holistic fact-find to find that out. It shouldn’t really be like that and I think Targeted Support – the proposals as currently drafted – clearly intends to get into the ribs of that challenge.
You know, it is a 250-pages-odd document, so we’re still working our way through it, participating in industry consultations and so on, but there was a call the FCA was on this morning and, at the heart of it, is a question. So I am answering your question now! If I was head of the FCA, I would focus on, Where are we going to draw the line between guidance and advice?
And that really pivots around, How much personal information are you going to gather in that process? Are you going to gather a risk profile? Are you going to gather more factual information? Because the regulator is essentially saying, Look, in our policy sprints, we have found, the more personal information that is gathered, the more likely it is the client thinks they have been personally advised. So I would focus on trying to thread that needle, Julian.
Mapping a portfolio’s ‘hidden rocks’
JM: Fair enough. I want to talk a bit about client communications but I am going to touch on one of your specialist subjects first. I think we only have about two hours of camera battery so we cannot let you go on too long! But how would you explain risk to someone who does not work in investment?
BG: Great question. Risk is the chance that something bad might happen in the future. And, you know, we get used to risk in all sorts of walks of life – you get in the car, drive down the road, there’s the chance you might get pranged by somebody pulling out quickly. You get in an aeroplane and, while it is a very remote chance, there is a chance something bad could happen.
So, in most or many walks of life, Julian, we get used to risk. I think the issue with investment risk – if I was talking to somebody in the pub – is that so few people actually actively invest outside, that is, of a pension. If you were to imagine the UK population on a soccer pitch, only those people towards one end, the penalty area – I’m not a soccer player! – make up the proportion of people who invest.
So it’s not like watching the game on TV, where you then go down the pub and talk to your mates about what happened. Because relatively few people actually invest – unlike getting in a car or going in an aeroplane – you don’t have a lot of fellow human beings to talk to about investment risk. So I think, while risk is a chance that something bad might happen, as an industry we have not been great at finding ways to express that.
And we feel, very clearly, that we have the best way we know about and that is to use, in the industry parlance, ‘ex ante returns’ – but with forward-looking descriptors of the potential for something bad to happen. Probably the best way I can describe that is, Imagine you are sat on your summer holidays on a beach, with a beautiful, calm sea in front of you, sandy beach, birds flying overhead.
And you think, This is beautiful and I’m on holiday for 10 days. And, for nine days, you get just beautiful, calm weather. On the ninth day, you are looking back and, for nine-tenths of your holiday, you have had a really calm, beautiful and apparently very low-risk situation. But, on the tenth day, a storm whips up and what you didn’t know is there are actually some rocks just off the shore a little bit, which can cause swimmers real issues, if you didn’t know what you were doing – if you weren’t an expert.
And, you know, a forward-looking view of risk would say, Well, actually those rocks are there and, with these conditions, even an experienced swimmer could find themselves in difficulty. Historically, however, what we have done as an industry is say, Ah, over the last 10 days, only nine were safe – let’s forget the really extreme circumstances we had on the tenth day and give the customer the statistic of historic volatility.
That is where the industry has tripped up a bit but we are working, with managers, to think very deeply about, Where are those hidden ‘rocks’ in their portfolio? How can we describe the potential returns – and risk – the portfolio represents when we are taking a forward-looking view of the future? And we do that in increasingly sophisticated ways. We have a 75 asset-class model now that – particularly as managers begin to think about things like private markets and private debt – focuses on, How do you actually assess the risk, that potential for something bad to happen?
A more transparent world
JM: Oh, very good. So, widening that out, the question I usually ask here is, How would you describe your approach to client communications and ‘cultivating’ the right clients – by which I mean someone who can come along on the full journey the professional investor was hoping they would come along on?
BG: I think that is a great question again. People learn, and like to be supported, in many different ways. As I just said, for some people, it’s all about numbers. We have, for example, an app called Tram that will basically serve, you on a daily basis, This is the progress against your goals. This is the progress against your risk. Here is the latest news.
As an example, one of the things it does is it shows you where in the world you are invested and, on ‘Liberation Day’ on 2 April, we saw a real uptick in people looking at that map. People wanted to know, Am I in the US? Am I in China? Obviously people using Tram – right now – are self-selecting as people who really want to have technology aid their experience with their adviser. It’s not a replacement – it’s a complement.
And we are living, increasingly, in a technology age, in a smartphone age, in a digital age – and therefore having those tools in your kitbag, for clients who really want to be able to connect with you in that way, is very important. Some people are very happy to come in for an in-person meeting once a year – and that is the journey they are going on.
I think we can all see, though, the direction of travel – we are moving towards a much more transparent world. If I look at the demographics of the last million people who were profiled by Dynamic Planner, they are getting younger – so I think that is an exciting thing for the industry. People are accessing and approaching advice earlier – we can see that.
But, equally, those people who are, as you say, on a journey are getting older; typically, the risk profile of older people will reduce slowly over time; they will want to take less risk with their money; and therefore, actually, the nature of how you are supporting them, the nature of those conversations, the nature of the reporting that you’re doing will change.
Risk-targeting becomes much more important, say – particularly if you are in drawdown with a constrained pot. Making sure you are talking to the client about some of the peculiar risks – sequence of returns risk, for example – they face and that you are able to report on to them how they’re doing, even in a down-market, is really key. So I guess I’m saying, you know, greater tech adoption is happening across all demographics but, clearly, where your client is in terms of their objectives and how they like to be supported will vary from person to person.
Challenge worth fighting for
JM: Good stuff. I am going to touch on ESG and sustainability briefly – and do so with the provocative statement-as-question, ‘ESG is dead, long live ESG 2.0’. What are your thoughts on that?
BG: It is a nice way of putting it. ESG is really important. We profile tens of thousands of end-clients for our adviser customers. I am not sure what the latest numbers are – it is probably in the six figures now – and we know that sustainability, as we would call it, is important ‘a little’ to ‘a lot’ to about 70% of people. So more than two-thirds of people think that, with their investments, they would like, essentially, to do more good than harm. It’s only 30% of people who really don’t care – it is returns at all cost.
And that is a sophisticated instrument we are using there – it’s a psychometric instrument. It’s not straight, Do you care or don’t you? It’s helping make some quite careful trade-offs that you need to make when you’re thinking about a future and something as complicated and as complex as sustainability. So people care. I think that’s the first point, Julian – and so there should be an ESG 2.0 for sure.
Obviously, SDR labelling has somewhat not, one has to assume, met the aspirations of the regulator. Last time I looked, which was a week or two ago, I think there were fewer than 100 solutions or funds that have been so labelled – and there was the decision not to go into MPS, which is obviously a huge part of the market.
I guess, if I was to use your numbering system, with ‘ESG 1.0’, on the demand side, I think we were getting there in terms of helping clients have really good conversations with advisers and saying, Look, this is really important to me and I want to make an impact. Or, Actually, this is somewhat important to me but, you know, returns have to take precedence. We were getting there – and are getting there.
I think it is the supply side – and the articulation of the sustainability of a solution on the supply side – that is so difficult. Now, one of the reasons it is difficult – the reason it is difficult – is there are lots of different ways of delivering sustainability. I had a number of conversations with our asset management customers and all houses have different views as to what sustainability means to them – quite rightly.
You know, it’s not difficult to argue whether a tech stock is or is not sustainable, right? You need to look at Scope 1, 2 and 3 emissions – and, as soon as you get onto Scope 3 emissions, you’re in a completely different world. It’s not difficult to argue both sides of, Actually we need fossil fuels – how else are we going to build the wind turbines or the electric cars?
So these things are complicated, they are multifaceted and, I guess, the analysis that was put in front of advisers – in terms of the deep analytics that the great analytics houses do, both in-house, but externally as well – it is really complicated for the average adviser and certainly the average client, to be able to assess, you know, what does this sustainability ESG rating on a peer basis actually mean? And how does it relate to the fact I would rather do more good than harm?
So the shame is the SDR labelling system hasn’t quite taken off as I’d hoped – because I think we need a simple way of articulating the manager’s view, within reason, on what the objectives of the fund and, I hope, portfolio are. It can’t be simplistic but it needs to be simple enough to understand.
And I very much hope we can find, as an industry, with the regulator, a way to make that happen – because the prize is really great. If you talk to managers, of course people care about the planet. And it is just good business to care about having a sustainable business – and that is a challenge worth fighting for.
Hooked on investment tech
JM: Excellent. More personal question now – what was your path into this business? And what do you think you would be doing if you had not taken that path? I know you live for this so obviously you cannot conceive what else you would be doing!
BG: I was doing a degree in environmental science and geography when a great friend of mine said, Come down here – he was working at a very big US asset manager that will remain nameless – and you can make some money for the summer. So I did and that firm put adverts in the Sunday papers and on the London Underground and people called up to invest in their Peps. And I was one of those students you got at the end of the phone who gave advice, actually – the company was fined a lot for what happened that summer. A lot.
Then I went back to my studies and it wasn’t until later, when I was at PWC as a strategy consultant, that a partner walked in the room and said, Does anyone know anything about Peps? And I put my hand up and he said, Right, you’re on this job. And I then worked with a number of banks and insurance companies, really, helping build distribution strategies – typically with technology involved somewhere.
So I worked with Direct Line. I worked on the launch of Egg, which was one of the first, if not the first, internet banks. And I was hooked, Julian – I thought, This thing called ‘the internet’ could be a huge transformer for access to advice and the ability to deliver trusted advice at scale. And I’ve been hooked ever since.
I have to say, you look back to the 1980s and you look at what happened in 1987 – and, you know, as I got on in my career, I did live through 1987 and through 1991 and, ultimately, through 2008 – and you look at what happened to people who had invested through those Peps and those newspapers and how some lost up to 40% of their portfolios. People who could ill afford to lose that money.
And then you look at the world we live in post-GFC and 10 years-plus after RDR – people are in risk-profiled, risk-aligned, internationally-diversified portfolios. You know, markets versus Liberation Day are back where they were and risk profile 5 and 7 are in the money on a 12-month basis. So, you know, I think we’re doing some good in the world. I think people are better off as a result of the kind of work we do.
JM: And, in an alternative universe, you joined that nameless asset manager?
BG: Oh, no, no, no! I’d be a farmer. No, I’d be a farmer. In fact, my wife has just bought some sheep so I may still yet be a farmer!
JM: I presume you have some land for them – they are not just grazing in the Goss sitting room!
Kindness counts
JM: Very good. Brief one now, What advice would you give your younger self on your first day in the business?
BG: Work hard, be ambitious and be kind. The most successful people I know are generally very kind. They will give their time and they will give their attention, money and resources to others. And I think that gets overlooked, actually.
Rising tide for all advice boats
JM: Nice one. Last two questions. The first is back to business – what do you see as the best and worst-case scenarios for the future of UK wealth management?
BG: I think we are potentially in for boom times. The demand for advice is inexorable. Unlocking it, which I think the regulations will help with, actually, will create a rising tide for all boats. We live in a very volatile world, people need advice and it is our job as technology partner to open it up and unlock it – but I think there are significant opportunities.
I guess, worst case, the FCA doesn’t grasp this particular nettle and we don’t move forward as we could – and that would be a great shame for ‘UK plc’ as well as ‘UK population’.
AI-opening experience
JM: Very good. Last question is for a couple of personal recommendations. One would be a book – it does not have to be investment-related, although it can be – and the other is a ‘free hit’, just passing on general happiness to people.
BG: Yes. So the book is So Good They Can’t Ignore You by Cal Newport, who is a great writer on work. The title comes from a quote from the comedian Steve Martin. He was asked, How did you get where you are now? And his answer was, By being so good they can’t ignore me!
It’s a book written for teens – so maybe one for your kids. I’ve certainly given it to mine because there is this idea that actually, in life, you should live your dreams and follow your dreams – and it doesn’t always work out like that. Actually, a lot of people who are most successful and most happy had to work quite hard to be really good at something before that happiness came. So it is a great book.
JM: And the free hit?
BG: Do an AI course – that would be my suggestion. You know, 18 months ago, I did the IBM intro to generative AI and, when you understand how this stuff actually works – and doesn’t work – it is eye-opening. And clearly, as technologists, it is really important for us to understand – and we have a big programme delivering AI into Dynamic Planner over the coming weeks and months – but it is eye-opening for anybody who is using ChatGPT or whatever choice of model.
JM: Very self-improving choices. Excellent. Thank you, Ben – and thank you for your time today.
BG: Thank you – it’s been great to talk.
JM: And thank you, as always, very much for watching. Please do look out for further Choice Words videos as they are published.
