Our investment in d1g1t — the system you wish your wealth manager was using
It’s extremely challenging to describe what the team at d1g1t, the newest addition to the Illuminate portfolio, have built in a simple sentence.
An ‘end-to-end’ enterprise platform for the wealth industry? Too generic.
A next generation solution powered by advanced, institutional grade analytics? Too technical.
Ultimately, we have found the best way to communicate what the company does is by saying: Imagine the system you wish your wealth adviser was using to manage your money.
The complex task of getting the simple things right
Anyone who has either worked in wealth, or had an adviser manage your personal finances, knows first-hand how frustrating it is when investments are all over the place and you can’t get an answer to basic questions. This is, after all, the likely reason for seeking support in the first place. There are several reasons why, but we believe it is largely due to the architecture of the systems which currently form the backbone of a wealth business.
We’ve outlined our view on the landscape in more detail in a recent post (Re-imagining the wealth management stack) but in brief, the systems currently used by the majority of managers rely on inflexible 1–1 integrations. Users, therefore, often manually re-key large amounts of information in Excel to get a full picture of a client’s wealth. Not only is this error-prone, it soaks up time that could otherwise be spent better managing relationships and makes seemingly simple questions very hard to answer. There are companies trying to solve this with point solutions for specific parts of the advisory process (like risk scores, cash modelling etc); however, this has just added another system to the stack rather than addressing the underlying issues.
When we spoke with d1g1t’s clients and other firms in the market, the feedback we received was that it could take days to respond to client queries using current legacy systems. This is no longer acceptable in a world where we are used to getting things at the touch of a button.
The wealth industry is at a cross-roads and ready for change
As we have seen across financial markets, waves of regulation and cost pressures have impacted the traditional way of running a wealth business. There is also the added dynamic of competition from new entrant, direct to consumer, digital-first robo propositions undercutting fees. The way advisers want to work is also changing. In the US, the share of the market controlled by the brand name Wirehouses has fallen. In contrast the RIAs have seen tremendous AUM growth of 40% since 2005 (vs. 5% for the Wirehouses). It’s a similar picture in the UK. So how do these independent advisory firms improve their efficiency and improve the client experience when they don’t have the infrastructure of a bank behind them?
These are the two operational priorities highlighted in a 2017 FT Partners survey of wealth managers. This is a big problem — one that we do not think can be solved with a point solution. We believe there is a huge opportunity for a new end-to-end platform which streamlines the existing infrastructure and brings institutional-grade analytics to the underserved wealth market. This is exactly what d1g1t does.
A platform that improves efficiency and helps serve clients better
Doing more with less is a common theme across financial markets and wealth is no exception. The core strength and differentiator of a human adviser is their ability to help a client reach their financial goals by managing that relationship through the bumps along the way. They can only do this job and respond to questions effectively if they have the right tools to support them.
The d1g1t platform acts as the glue between the different parts of the value chain. It pulls together information that belongs together across the business and makes it readily accessible so that advisers can run sophisticated analysis for clients on the fly. This brings the portfolio to life and makes the discussion with clients more meaningful than a basic repetition of positions. It allows them to answer questions such as: “What will happen to my portfolio if there is a crash?” or “Will I still be on track to meet my goals?”
It is not only a large efficiency lift at the bottom line, but also helps a firm to grow its book by better serving and engaging clients. It’s not rocket-science, in some ways it even seems too simple, but getting the basics right is this team’s strength.
Backing a team batting for a hat-trick
When assessing an investment, the team is always an important part of the equation. This is arguably even more true in wealth management given that relationships are the lifeblood of the business.
What is unique about the team behind d1g1t is not only have they built businesses before, but also that they have built them together. Dan, Philippe and Benoit, the co-founders, have already gone through two successful exits (Algorithmics which is now IBM Risk Analytics, and R2 Financial Technologies to S&P Capital IQ). This is their third business working together. They have also brought an experienced engineering team that have worked with them in both companies, a major vote of confidence from their employees. This is a group who have successfully built and delivered products to the most demanding banks and funds in the industry. They are now bringing these learnings, discipline and institutional grade products to the wealth market.
We’re extremely excited to support the company with a CAD$3m investment as they expand into the US market, and look forward to working with the team as they set a new standard in wealth — benefitting advisers and end clients alike.
