GK: Transformation is the phase which describes what is happening in asset management and in organisations such as Schroders. The key areas we really focus on are within.
People often ask me what digital transformation means and how best to organise yourself. We divide digital transformation into four key areas; customer experience, operational processes, business model re-design and people organisation. Each one of those has great opportunity in helping us increase our customer understanding and address how our customer touchpoints are the key focus points for customer experience.
In terms of operational processes, it’s about process digitalisation and productivity enhancement in all of these processes. With the business model, its thinking about how the digital distribution of our products is changing, how we create those products and digitalising that process. As an investment management house, its about understanding how we can take the best of digital transformation taking place in the wider world in terms of computing power, artificial intelligence, machine learning, data science and how we can apply those to create a modern digital investment that really reflects the increasing speed of business, the increasing scale of the business we want to achieve.
Finally, digital transformation starts with people and we need to make sure we have the right culture in place, that we reflect the knowledge that is within the organisation and make it easier to share and then the people have the ability to develop the skills needed for the future organisation. All of this is underpinned by analytics, data science, innovation and adoption of emerging technologies which creates a key challenge for a 200-year old company needing in incorporate significant shifts. The question is, how do we facilitate digital transformation without breaking anything because we’re looking after people’s savings.
We’re not Google, we can’t just pivot on the day and say “today were going to invent Google Glass”, [innovation] has to be an evolution. How do we get the pace of that right so we are shifting in the right way that we need to but importantly that we’re being true to our client’s wishes and making sure we’re not doing anything to risk their life savings.
FTC: Where do you stand on the ‘human vs. robo’ advisor debate as it pertains to investment management. Do you favour one approach over the other?
GK: I am more interested in a hybrid model because computer plus human beats ‘just human’ and ‘just computer’. I think the reality is we’ve been through the hype cycle on this, so many organisations are shifting to a hybrid model and I think the concept of building Ironman suits rather than Terminators, it is one that we believe to be very true.
FTC: Back in March, the SVP of platform engineering at Intel highlighted artificial intelligence as the technology behind the next major revolution set to impact humanity in a similar capacity to the invention of the wheel and discovery of fire. Other huge proponents of artificial intelligence and its likely impact on everything from relevant search engine results to job creation include Facebook’s Mark Zuckerberg, Google’s Jeff Dean and IBM’s Ginni Rometty. In your opinion, is the transformative impact of artificial intelligence real or is the hype in danger of outpacing reality?
GK: In any discussion concerning artificial intelligence, there is a large amount of hype. I think by 2020 we will start to see the true reality of what the actual impact of artificial intelligence is going to be. I share the view that it is the 4th industrial revolution. I think that being able to apply even the most sophisticated artificial intelligence typesets is still pretty basic compared to the human brain but it definitely had a role and will take care of some of the mundane heavy lifting everybody has to do to get the job done today.
In the foreseeable future, it will be a significant convenience and productivity enhancer because it will take away those very basic data gathering, data manipulation, fact finding, aggregation and summary of information tasks. It will be very potent in these spaces for the next few years and then we’ll really start to see the benefits of that.
Already on out own mobile phone, applications of machine learning are helping our everyday lives and this will accelerate in our working lives.
FTC: It was recently publicised that UK fintech investment has attracted more than $1bn in funding in the first half of the year, over a third more than the same period in 2016, painting a rosier picture for funding post-EU referendum. Can incumbent financial institutions take any comfort from this trend when weighing up investment in the sector?
GK: We have a private equity firm – Adveq who are part of the sponsorship of this event and one of the reasons why we are jointly involved in this is because we’re both sides of the coin. Schroders is very interested in being clients of fintechs and we think we’re really good clients because we’re willing to participate early on in their lifecycle and encourage and mentor them. Likewise we have a private equity arm that can actually help give them some funding and some fuel to help drive the product forward. With those two elements combined, I think Schroders is a great partner and a financial institution avidly watching and participating in the fintech space and we’re especially pleased to see that [the fintech industry in] London, where our headquarters is based, is growing. I think there is a great wealth of ideas in London and it is great to see this blossoming. On so many occasions, I have met small companies who just needed a cash injection to get them to the next level and it’s great to see it actually happening.
FTC: Schroders were quick of the mark in funding robo-advisors reflected by a 2014 investment in Nutmeg. In your opinion, what is the best-of-breed model for fintech dealmaking; joint ventures and partnerships, investments or acquisitions?
GK: For Schroders, we approach partnerships on a case by case basis. It really depends on the nature of the platform and the business that we’re talking to. It’s not all about investment and we were one of the first financial institutions to publicly state this. For us it’s all about being a good client and I think for some organisations, the best thing a company like Schroders could do is be a good client. By being a good client, I mean work with the company and understand that they are a start-up and the challenges they face. Understand that sometimes the big corporate environment is not always designed to be able to on-board small innovative start-ups easily within a timeframe that is helpful to a start-up so have to adjust these practices to get them on-board.
I think this is what we do most often and I’d like to think we’ve helped a number of organisations this way and on their journey by giving them open feedback, helping them understand the reality of applying their product or service into a big organisation. Secondly, there is always the opportunity for investment but you have to be conscious that you’re doing it for the right reasons and that you’re doing it in a way that is supportive of the organisation.
Nutmeg is a good example. We’ve not only been able to partner with them, but also able to show them how distribution could work on a bigger scale, some of the growing pains that they will inevitably encounter as they scale which help them on their journey. We also partnered with Benchmark Capital last year and have a stake in their success. We’re able to benefit the likes of Nutmeg and Benchmark Capital with our decades of experience from working in the investment marketplace and knowledge gained over the years.
FTC: 2017 will be both Schroder’s and Schroder Adveq’s first visit to FinTech Connect Live as co-lead Investech Partners. As the UK’s largest fintech exhibition, what will be the core message you would like to communicate to our audience at FinTech Connect Live and what aspects of the event made it a must-attend for you this year?
GK: FinTech Connect Live being the largest and most innovative in its approach made the event a must-attend. I think the key message from Schroders is that we are possibly unique in our ability to invest as a client, invest as an investor and help startups understand and navigate the investech space. We have been in this space for 200 years and we have one of the widest reaches across the globe in terms of the markets we’re in, the breadth of investments and the different types of products we have.
We are a great partner and reaching out to fintechs and having an opportunity to demonstrate that to them, and show that we are willing to be apart of that ecosystem, recognize the relevance of the ecosystem, are already working hard to show how we fit into that and how we could add to the overall benefits for all of us by being part of a cohesive team.
Thank you to Graham Kellen, Chief Digital Officer, Schroders for taking the time to answer our questions!