Exclusive: The former UBS heavyweight injecting a dose of fintech into wealth management

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© Provided by City AM

As the economy is slowly switching into recovery gear, activity in the City and beyond is starting to pick up again. That is also the case for Vestrata, a relatively new fintech player that is taking the wealth management and private banking space by storm by bring machine learning and automated risk metrics into the equation.

The company may be a new name in the Square Mile, its management team certainly is not as it consists of some well-known faces in the City and Canary Wharf: all eight of its senior leadership team members are former executives at some of the largest wealth management firms in London, including JP Morgan, UBS, HSBC and Barclays Wealth Management.

To find out more about this new vehicle, City A.M. sat down with the firm’s chief executive, Mark Le Lievre.

© Provided by City AM Vestrata chief executive Mark Le Lievre, previously head of UBS Wealth Management’s global content management division and former head of JPMorgan Private Bank’s Product and Platform team

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With around three decades of experience in growing and restructuring investment capabilities, Le Lievre is a former head of UBS Wealth Management’s global content management division, where he was responsible for manager sourcing, due diligence and product structuring of traditional and alternatives investments, including funds, hedge funds, private equity and real estate.

In addition, he co-led UBS’ sustainable investing and impact investment initiatives and before that he ran JP Morgan private bank’s product and platform team, where he oversaw product management and the delivery of strategic business and regulatory initiatives globally.

I studied the profiles of your co-founders. All eight of you are former execs at some of the largest wealth managers, such as JP Morgan and HSBC. What do you guys plan to do differently than when you were with your former employers? 

As a startup, we are not encumbered by the complex decision-making processes that accompany a large organisation. We leverage our team’s extensive experience in designing and optimising our platform’s capabilities, and we challenge ourselves to create solutions that directly address the strategic investment, compliance and client engagement obstacles that we have personally faced in executing our senior management responsibilities at our legacy firms. We recognise that each of our legacy firms have their own unique strengths. In constructing Vestrata’s investment solutions and technology platform, we have sought to leverage the very best of our former employers, while actively identifying areas that could be improved upon.

Such as?

Our prioritisation of the execution of senior management responsibilities is particularly relevant given the FCA’s current focus on first line-of-defence. We consistently receive feedback from C-suite executives that confirms our value proposition is constructed very distinctly compared against other solutions available in the marketplace.

Brexit is a fact, the UK has left the EU. Will this impact the wealth management space hugely, particularly in terms of risk and compliance? For example, in relation to the clients you serve across Europe or elsewhere. 

As a result of Brexit, the ability for firms across the EU and the UK to conduct cross-border business has changed dramatically, creating significant barriers for wealth managers and their clients in other jurisdictions. Without a specific licence to facilitate business in the UK, EU firms are no longer able to operate as they were previously could, and for UK firms, the same is true for each EU location.

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How do you notice that in practice, on a daily basis?

Well, it is evidenced by an increase in FCA license applications, with over 1,000 separate FCA licence applications requested by EU firms, simply to enable them to conduct business in the UK so they can retain and support their existing clients. UK firms will need to do the same for each country in which their EU clients reside. Setting up local entities and developing existing frameworks, to comply with the regulatory regimes of multiple regulators, will be expensive, and as such will have a visible impact on resources and expertise.

And what about the current rules and regulatory divergence in the future?

Given that the UK has been subject to MiFID regulation until 31 December 2020, the regulations are still equivalent. It may be that over time, we’ll see some element of divergence, but we expect the UK to maintain a robust regulatory regime with high standards for compliance, ensuring that it retains its reputation as a well organised and controlled country to conduct investment business.

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Let’s zoom in on that other headache at the moment, the pandemic. How are the consequences of the Coronavirus impacting your sector?

Like other sectors, most of the wealth management space had to adapt to new ways of working, which for some traditional businesses took longer to incorporate into their operating models.

Fortunately, we are a start-up and as such we do not have complex legacy infrastructure to deal with. We operate out of a cloud enabled environment and all staff work remotely. Logistically, it was not a challenge for us to adapt.

But what about relationship-building and finding new business?

Yes, wealth management is a personable business, and human contact plays an essential role in managing and developing meaningful relationships. It’s important to be able to spend quality, uninterrupted time with clients to talk through and understand their needs, their end-clients’ needs, how our proposition can meet them, platform features, fee structures and so on. Doing this in a way that still feels personal and interactive has been a challenge, but equally it has highlighted the importance of accelerating digital transformation in the industry, and looking at how technology can facilitate rather than hinder this type of communication.

I take it your clients faced the same challenges?

Yes, many of our wealth management clients and prospects have themselves been consumed by adapting their ways of working during the pandemic. Their priorities were focused on client engagement, BAU activity, and ensuring business continuity. Clients and prospects are re-engaging as we emerge from lockdown and as they accelerate the redesign of their strategic business models.

We expect to see the industry embrace some pre-pandemic approaches to managing wealth and their clients’ needs; Zoom and video calls have been essential, but meeting clients in-person still makes an impactful difference in delivering wealth management advice and ensuring client satisfaction.

So less Zoom, more lunches?

Ha! The pandemic has provided clarity for a lot of operators in the space in how to become tech-enabled, but it’s also proven how essential it is to maintain in-person connections with clients, both in the context of what we do and the industry more broadly. But the pandemic has also shown how critical it is for wealth managers to have a clear digital strategy, to both enhance client engagement and provide the necessary integrity to operate remotely.

Let’s look ahead, life after lockdown, the market post-Covid. What are your thoughts on the recovery process?

The economic impact imposed by Covid has meant that, unsurprisingly, firms are seeking to grow revenues, control costs, and maximise efficiency, all the while trying to remain competitive. As these firms emerge from lockdown, senior management are creatively rethinking their strategic business models, investment solutions, and digital strategy, by asking: Do they have the right combination of products and solutions to meet the evolving needs of their customers, particularly in areas such as Sustainable Investing and private markets? Or, how well are their existing business models protected from a market correction?

What I keep hearing from any investor, wealth manager or asset manager is the changing role of technology, and its increasing importance. How are technological developments impacting your work and the way you serve your clients?

One of the overarching trends we’re seeing is how the pandemic has accelerated the digital experience, and the key role of automation in this context. Before Covid-19, the industry generally recognised the benefits in a back-office capacity while many were sceptical about the benefits in a front-office setting. If anything, the pandemic has opened the minds of many in the industry to recognise how technology and automation can add commercial and operational value.

The Vestrata platform is a cloud-based infrastructure, offering a modular subscription-based model to the wealth manager to enable access to the products and solutions they require.

Prior experience has taught us that the quality of management analytics at most Wealth Management firms is particularly poor

The vast majority of Wealth Managers spend 80 per cent of their time servicing 20 per cent of their client base, which results in limited client engagement with the residual 80 per cent of clients. We have leveraged machine learning and sophisticated risk metrics to be able to review the wealth manager’s entire book of business on a daily basis. We provide the senior management and the client advisor with the ability to easily identify and remediate those client portfolios that are not adhering to their stated investment objectives, as well as those portfolios that are not invested on a financially optimal basis.

The Vestrata platform connects via API gateways to the Wealth Manager’s existing execution, books and records, and CRM systems. Finally, data lake capabilities allow us to model client behaviours, including the client’s propensity to act, and “clients-like-you” comparisons when delivering targeted investment recommendations. This is particularly helpful for clients looking to deliver personalised advice that matches the needs of the end-client.

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