Advice Architects Ep. 8 with Chris Gledhill
What is Wealth: Understanding the Aim of Financial Services
What is Wealth: Understanding the Aim of Financial Services
There are few people in the fintech world that can match Chris Gledhill’s broad knowledge and deep understanding of the financial services space. And wealth, in his view, is the starting point of any conversation about the future of banking because, after all, that is the purpose of banking – to help us accumulate and manage wealth.
Like any conversation with Chris, this one ranges from conceptual to practical – and everything in between. Join us as we discuss the diversification of wealth and the redefinition of capital, as well as how to bridge the growing advice gap.
For more information on Responsive AI’s solutions for advice providers, contact us.
Welcome to this week's Advice Architects episode titled What is Wealth: Understanding the Aim of Financial Services. Welcome to Advice Architects. This is Day from Responsive, and today we are speaking with Chris Gledhill, an independent fintech advisor, futurist, writer, and speaker. Chris regularly ranks top global fintech influencer and often speaks and writes about banking and the future of financial services. He has a deep technical and business background, with expertise spanning a wide range of disruptive technologies, including blockchain, AI, APIs, big data, deep learning, virtual reality, crypto, and biometrics.
Chris, great to talk to you again. Welcome to Advice Architects.
Hey, Day. How are you doing?
Good. Thanks very much. At the start of the show, we do a quick questionnaire just to get to know you, so I'm going to jump right into it. What's your job title, and what do you actually do?
I am a freelance fintech futurist. What that means is, I work with some very big banks, some insurance companies, and VCs and quite a lot of startups looking at the future of financial technology and banking and money in general. By future, I mean in the five to 15-year space out. I think anything after that's a bit hard to predict. But between five and 15 years, I can usually get it with about 70% or 80% accuracy.
Amazing. How long have you been doing that for?
I've been doing freelance, I've been doing a whole bunch of gigs, gig economy work, I guess, doing all the speaking, writing, blogging, inviting, consulting. But futurism is something that I've been passionate about for a long, long time. We're talking over a decade, but professionally I've been doing it for about four years now.
Okay, and when were you happiest? When and where were you happiest in terms of your fintech experiences?
Quite recently, I've been having a lot of fun. I was doing all these metaverse workshops with some senior bankers. Metaverse is a fairly new thing that's been bouncing about recently. I thought the best way to educate people is instead of drowning them in reports and white papers on what it all means, I thought, why don't we just put headsets on top of people's heads and give them a bit of a tour of the metaverse? So that's been a lot of fun recently, just basically educating people by doing it.
Same with NFTs and that kind of stuff. I thought it best if we all get round the table and mint some NFTs and create some, rather than just reading about it. I've had a lot more fun doing hands-on workshops with people, rather than just whiteboard, PowerPoint sessions with people.
That's the right way to do it. Why do you care about wealth tech?
Wealth tech's one of those ones where if we're going to disrupt banking, then wealth is probably the place to start because wealth is fundamentally what the whole purpose of banking was designed to coordinate in the first place. There's a lot going on in wealth. I feel like we've optimized to death the 20th century model of what wealth means. If you go to your bank, and they go, "Well, are you wealthy?" What they mean is how much money you got? What's your house worth? What are your investments? They put it all together in a spreadsheet and say that's how wealthy you are.
Whereas, I feel in the real world, wealth, it's a lot more nuanced than that. There's so many different types of wealth that transcend financial wealth. If we're going to disrupt banking in any way, then I think wealth is the place to start.
Amazing. You're starting to jump into the conversation we were having over a pint near London Bridge about a month ago, which we got to the heart of what wealth is and also very much what wealth isn't. As you mentioned in the past, wealth has been a single number tracking on a line chart towards retirement. But recently, the conversation has expanded to health and other categories. Can you walk us through some of the broad spectrum concepts you've seen emerging from the new idea of wealth?
Yeah, so there's a couple of things that I think are changing a little bit in wealth. One of them, like you said, is the diversification of wealth. Beyond financial wealth, there's other types of wealth. I know in Chinese philosophy they have this idea of health, wealth, and happiness, the idea being that there's no point in being the richest person in the cemetery. You have to be healthy and wealthy and happy, and those three things combined is what they count as wealth.
But actually, I think there's about 12 different types of wealth and don't test me on trying to name them all right now. For example, you go to your job to get financial wealth. You might go to the gym to get health wealth. You might go to university to get knowledge wealth. You might do hobbies and all sorts of things to get experience wealth. You probably listen to this podcast to get that knowledge wealth, other things like that. So there's lots of different types of ways that we accumulate wealth.
Then there's also the idea of linear wealth because at the moment we feel that wealth is like a ... that there's a linear scale. The richest person in the world at the moment, I don't know who that is, Jeff Bezos or Elon Musk or someone like that at the top end. Then at the bottom end, there's some homeless person somewhere who's got absolutely nothing. Then we're all on some linear scale, and we can say, well, I'm more wealthy than you.
But actually, it's much more contextual because, say in London, in fintech, my knowledge is fairly wealthy, but if you put me in the middle of the Amazon rainforest, nobody really cares what I know about fintech. It's really, well, how much do you know about hunting and fishing? Whereas in the middle of London, nobody really cares about hunting and fishing. Actually, the way we gauge what is wealth and what it means to be wealthy, or what is value, what is valuable to society, it very much contextually changes depending on the values of the community that you find yourself in.
Yeah, because I'm on my EarPods. Yeah, I've lowered it down to about 50%. Okay, going back down again. How's that?
Oh, no problem.
There's a multi-variate and contextual sense of wealth now. It's not just one size fits all. Maybe we can walk through some of those categories, at least as you named them, and talk about some of the innovations or fintechs you've seen trying to create offerings that are relevant in these categories or some of the opportunities you would see for banks or wealth managers to take lead there. Obviously, we don't need to talk about the financial side because that's quite well-trodden. Would you like to talk about maybe education as something that is an opportunity for fintech and things you've seen there?
Yeah, sure. At the moment, it's fairly clumsy. There's a few fintechs that pop up and they say, well, we need to monetize other things about people. So we're going to monetize somebody's time. We're going to monetize somebody's data. They say, okay, well you can sign up for our platform, connect all your various social platforms or APIs, and then we're going to pay you a certain flat rate a month to go and farm off your data. We're going to put you on some marketplace and farm off your time. It seems like it's early days.
But what I like to say is that actually, it's people have their day job where they earn their main money, but actually everybody has a whole multitude of offerings, I suppose, skillsets. Everybody's a gig economy worker in some way. If we can find a way where everyone can have just a little portable shopfront showing all of the bits that they have to offer to people or their various skills or all the things they know or their knowledge, that kind of stuff because usually there's stuff that you can offer. At any point in time, there's always somebody who desires that in some way, and we don't do a very good job of connecting that. I don't know, let me give some examples to make it a bit more clear.
I don't know, if you're on a flight from, say, London to New York, half the people on that flight are probably going to New York for a holiday or a vacation or for work, and half the people going there, they're going home. They live there. So half the people on the flight have a really good knowledge of New York City, the best places to go, the best restaurants, the best things to see, best things to do, where to go for this and that. Half the people want that information. So you've already got a marketplace that's readily available. You've got a captive audience of 300 people sat on a plane, and there's no easy way to connect all that up in a sensible way. Definitely it's very difficult to monetize that in a way and have that shared value. Wherever you look in society, there's always those mismatches where there's a whole bunch of people got something to offer and a whole bunch of people who would really need that. We don't have an easy way to exchange that value. So we're missing some platforms in this fintech space. It's not just fintech space, it's social media space. But we're missing the platforms at the moment to properly do that.
We're on the right track. I've seen startups popping up saying, well, you can monetize some time. You can put together an hour of your time, and then we can represent that as some coin. We can put that on some exchange and all this stuff. We're exploring that diversification of wealth and looking at other types of wealth, other types of offerings and attaching, I guess, monetary units to those things. So that's quite exciting. It's one of the hopefully more sensible things that will pop out in the crypto world is the platforms to operate these exchanges of value.
It sounds like not only are we redefining wealth, we're redefining capital. It seems like there's human capital all around us that's not being utilized that can make life better for a lot of people. There's a massive opportunity here to think about those kinds of arbitrages, like people going on vacation and coming home on a plane. You could imagine scenarios like that all day long.
You also mentioned happiness. Do you have any thoughts or ideas around happiness as wealth? Have you seen anything out there, or do you have any science fiction ideas around happiness as a category for wealth that we could maybe even measure or improve on?
Yeah. They have a lot of surveys that come out every year about gauging happiness and how happy does society feel. Interestingly, it's very much a cultural thing, and it's also very much a generational thing. Because if you ask somebody in the UK, how are you doing? You go, I'm all right. I'm doing okay. Not bad, not bad, that kind of thing. Whereas, you ask someone in America, they're high fiving and whooping and they're going on. I'm doing great, buddy, blah, blah, blah. But basically, we're all doing the same, but it's just how you express yourself.
I think the concept of what it means to be happy and wealthy, doing all right is a generational ... My parents' generation, it's very much your home, your house is your castle, and there's like ... If you've got your home and you've got another property and you're doing whatever, it's very much about possessions and things. That's what people feel makes them happy or what at least the society around them, popular culture, has told them that's what you need to be happy.
Whereas, I feel with my kids' generation, I think it's more about experiences. For them, it's all happiness is about doing things, social experiences, traveling experiences, experiencing new things, learning new things, that kind of stuff. That's what makes them happy. It's less about owning stuff and more about doing stuff.
I think that's maybe something that the financial industry needs to catch up a little bit about, offering products and services, allowing for experiences, rather than accumulating things and financing things.
Yeah. It seems like in financial services, the marketing is there. The marketing departments have maybe caught up to this idea, and they're signaling it with affective imagery and language. Have you seen anybody getting close or unlocking that practically or more tangibly?
Yeah. For example, if you look at something like mortgages. A mortgage is a pretty ancient product, but it's essentially financial services will sell consumers a mortgage to enable them to buy a house or a home. But you don't really need a mortgage to get a roof over your head any more than you need a CD to listen to music. It's just the vehicle that allows it to happen. Then there's quite a big conceptual difference between a house and a home. A house is the bricks and mortar, whereas the home is the emotional state of somewhere to rest your head in a shelter.
There are some companies in the financial services space that are looking at what is the product offering, because different types of wealth. There's maybe 12, I think about 12, different types of way to get a roof over your head, at least in the United Kingdom. Obviously, renting and buying are two of the main ones. But there's a multitude of other ways that you could have a roof over your head. Allowing different models that give people that feeling of a home that doesn't necessarily have to be an 80-year mortgage commitment or something like that. They're focusing on what is the core offering, rather than the vehicle to get there. That's something that we're approaching across the board in fintech.
It's not just mortgages. It's loans and accounts and savings and investments and all sorts of things, where the fintech industry has done an awesome job for the past 10 years optimizing to death every single part of fintech, making it quicker, cheaper, better to do any financial thing. We've gotten to the point now you can do your one-click whatevers to open an account, do whatever, do whatever you want.
Now that everything's optimized to death, at least the 20th century banking view, it's now time to look at, well, what does 20th century version of this look like? We've done optimizing how our parents did banking, and now we look at how our kids should be doing banking. So not trying to make banking for how we ... teach our kids how banking works, make banking work how kids think.
Different contexts, different variables, and it sounds like what you're saying too, different pathways. We have to think about the different paths that people have in their life.
One thing we talked about when we were together was something that's the opposite of wealth. We can understand what wealth isn't. You brought up the idea of the financial death spiral as something we want to avoid. Can you talk about what that is?
Yeah, so I guess this is the opposite of wealth. It's particularly pertinent at this time with the cost of living going up and all sorts of other financial pressures on people. It's looking at the people who are falling through the financial cracks. They're dropping out of the banking system.
Certainly in London, there's a homeless problem, and I imagine any major city in the world has quite a large problem with homelessness and people who are having to go to food banks and use lots of the social network or falling all the way through that. But you don't just become homeless overnight.
I used to work with some government agencies in UK, like Department to Work and Pensions, that help out people with benefits. You don't just suddenly become homeless. Usually, there's a 18 months, two-year financial death spiral, where you might lose your job or you might find yourself ... Your family might be falling apart through some divorce, or you might have some gambling or addiction problem, and you might then max out your credit cards, default on some loans, have things repossessed and lose your ... It's only at the end of all of that when you've maxed out your cards and you owe [inaudible 00:16:25] and all the debt people are knocking at your door, and then you find yourself homeless. It's entirely predictable. I'd imagine these days with big data and machine learning, you could quite easily flag up anybody who's on that financial death spiral. They're on a negative trajectory.
Right now, what the banking system does, not only does it not help people in that position, it seems to kick them on the way down as well. They're like, oh well, you're late on this payment, so we're going to charge you a fee and that. Or you maxed out your overdraft, okay, we're going to charge you more fees on that. It's like they're jumping in there to try and not just exploit you, but kick you when you're down.
Whereas, I would say, there's a pretty good business case that can be made from a banking point of view, but also a government point of view to help people in that situation. So if you spot that somebody is on that financial death spiral, we should be doing an intervention. The government should be working with the banks to say, well, it costs us an awful lot of money once somebody's completely homeless to get them back on their feet. I think I read a while back that is was about 120,000 pounds to get somebody in a homeless position and sort out all of their various problems back into accommodating into a full-time job. There's quite a good business case to say, well, before it gets that bad, why don't we do an intervention? By that, I mean the government partnering with the financial services providers to maybe offer people training and assistance, maybe giving people payment holidays on various loans, maybe counseling services, and other things like that. It's one of those things where banks and financial services companies could totally [inaudible 00:18:05] corporate stewardship, the corporate social responsibility that they all seem to like to talk about, they're responsible corporate citizens. Well, this is a really good place where they could help people out.
Another one is, there's a lot of data that banks have on people's spending habits, what they're doing. At the moment, a lot of that is used to understand customers so that we could potentially sell them more things. But actually, there's other parts of your spending pattern which could actually indicate that there's an issue.
I don't know, if there's an 80-year-old grandma called Mavis and every day she walks out of her flat and goes to the corner shop to buy a pint of milk and a newspaper and a can of cat food. She's done that every day for 15 years. Then one day, she doesn't do that, then that's probably a red flag. That should be somebody ringing up that person's carer or their son or daughter and saying, look, Mavis hasn't financially checked in today, and maybe somebody needs to go and check up on her.
That's the sort of thing that would've happened back in the day when we had physical bank branches and the physical bankers and much more face-to-face contact. But now we're in the digital world, it's very soulless. I worry that there's these physical touchpoints or emotional touchpoints that we're missing out on. I think a lot of that stuff needs to be brought back in some way. It doesn't mean that we have to bring back people in every possible station and roll back the digitalness of what we're doing, but I do think that we could be using the data better to help protect people.
There is a social cost that could be avoided, and it probably goes just beyond that dollars and cents amount. When you think about someone falling through the cracks, that impacts their family, that impacts their future for many years to come. To me, it seems like a good starting point if as a society we decide, well, we're trying to create prosperity. Do you think there's any, within that, any more monetizable pieces? What would they be if there was market interest in there? Where are the pieces of the path that could generate value, not just prevent crisis?
Yeah, it's a good point, and it's a conversation I've had a few times when I've suggested these concepts to bankers. They're usually, well, where's the money in that? It's weird because banks, they're companies, they're corporations. As a legal entity, they are a profit-making organizations. They're not a charity. It's a very good question from an analyst's level, why would we do this? What's in it for us, really?
Whereas from a citizen's point of view, people consider banks to be institutions. They consider it to be one of the parts of society, and they should be there to help people. There's a bit of a mismatch in expectations there. Yes, there's kind of intangible. You could say, well, if the bank helps me when I'm at my lowest, then when I'm back on my feet and I'm doing well, then I'll have some loyalty there. Or think, well, they stuck by me through thick and thin, and therefore I'm going to be a customer for life. But that's quite a hard one to pin down, isn't it? It's very subjective. Also, you don't know generationally whether the younger generation is going to have that kind of loyalty and that kind of customer for life, or whether they'll just chase whoever's giving them the cheapest deal or a free whatever with an account opening. That's a hard one to pin down.
You could say, well, look at who it's costing. It's costing society, but it's pretty much costing governments when people fall for that financial death spiral. So if the governments and the corporations work together to say, well actually, if the government sponsored a program where we can do interventions, then there is a pot of money somewhere that at the moment's dealing with people who fall all the way through the cracks. There is a business case to be made for a corporate-government partnership where they take some of the money and fund an early intervention. There's a bit of sense in that.
I guess it goes to the whole corporate social responsibility thing is, well, what is the point of that? The point is that ever increasingly, according to a lot of data from a lot of reports, people increasingly care about the values of the companies they deal with, and they want the company they deal with to share their values and share their community values. So if banks and financial institutions are able to do these interventions, to work in this responsible way, then this is something that they can hang their hat off. They can use this as a marketing piece. They can tell their customers about it, or prospective customers, that this is how we are.
Because at the moment, particularly in the UK, if you look at a lot of the adverts from the banks, this is what they're telling people. They're using very emotive terms. They're using very emotive imagery, talking about how they're with you for life or how they're a companion by your side, all these kind of things. But I'm not sure that's really borne out in reality when you look at actually how they behave when people are struggling. So I feel that this is, yes, there's marketing reasons, there's government helping society reasons, there's consumer customer loyalty reasons. There's a lot of those reasons. It's not easily to stick in a spreadsheet and say, this is how you're going to fund the program. But you sense that there's a business case to be made here.
It certainly would give them a lot of credibility as institutions that steward capital and stability of our societies.
Okay, I had a bunch of conversations in the UK about this bugbear of the advice gap. People kept saying the advice gap, the advice gap, the advice gap. Specifically in the UK, can you describe for our listeners what you view the advice gap to be and the state of the landscape?
Yeah. We've got a lot of people who are considered wealthy, and I don't mean astronomically wealthy, like yachts and whatever, but a lot of people who are doing pretty well off. They would have financial advisors. They would have a wealth advisor. They will have a touchpoint, a personal person, a liaison, or whatever it is. They will have people who they speak to help manage their portfolio, their wealth.
You have people who are struggling. There's charities and there's Citizens Advice bureau and things to help people who are really struggling with their financial services.
But there's a large swathe in the middle, where there's a lot of people who don't really seek any formal financial advice. They will go to their friends and family maybe for, shall I do this, shall I do that? It's not seen as something that generally normal middle class people are accessing, is a formal level of financial advice.
Quite often, when you take out complex financial products, there's the boilerplate tech that says, well, you do need to speak to a financial advisor, hire yourself an IFA, independent financial advisor, before you proceed on these various things. I'm not sure how many people actually go ahead and do that.
I think there's a massive case to be made for helping people with advice on their current financial situation, but also aligning their financial framework with their expectations of how their life is going to pan out in the future. That's maybe something that it'll be a fintech platform's going to help with. It's something that maybe better use of data can help with. Or it's something that maybe some of the newer AI-based chat bots could help with. But there's definitely, we're not using the data of a lot of people like you as well.
I've seen a few where they've popped up like ... Say you are going to university for the first time. You're going to, I don't know, Oxford University to study whatever, and it's a three-year course. Well, your financial world is going to be pretty similar to somebody who was doing exactly the same course at the same university maybe a year before you. So the bank could help you and say, well, here's a readily-made budgeting plan based on people like you in your situation living in this kind of accommodation with this kind of expectations for a lifestyle. This is ready-made what you can expect your spending glide path to look like.
There's a lot of that stuff where banks can use data on people like you without revealing confidential information. They can aggregate the information and help people in similar situations. We would adapt budgeting or managing expectations for how their lifestyle should be going.
What do you think are some of the reasons or causes for the shape of the advice gap and why there's service at the ultra low end or the problem end and then just at the high end?
I think it's, again, it all comes down to money because it's all about money, unfortunately, in this industry. At the high end, it's wealth advisors coming here to advise people on how to spend or save their wealth or invest their wealth because they take a cut in it. They've got a fee. They've got whatever. So that model pays for itself.
At the bottom end, you've got various governments and charities who are funded or they raise funds to help people at the bottom end.
In the middle, it's a hard sell to go to somebody and say, well yeah, you want to choose a credit card or you want to choose a car loan or you want to pick a mortgage. But we'd also, at this point in time, we'd like to stick an extra fee on top of all of that as well to get some advice. People feel like, well, that's an expense they're not necessarily willing to pay, or they don't quite see the value in that. It's maybe the price point and who's going to fund that piece of advice is a difficult one because it's quite hard to wrap that into the particular financial product itself because in a way [inaudible 00:27:44] everybody's trying to be the cheapest. So there is that advice gap because it's just, well, who's going to pay for that advice?
It's interesting because you talked about how fintechs and fin technology has optimized all the 20th century stuff. Now, it's kind of all the same. Everyone's talking about personalization. Then in this advice gap is most users, which is the bulk of a lot of it. It just seems ironic that that's not the prize people are going after, at least from where I sit.
There's generic advice. There's plenty of generic advice. There's enough websites all over the place that'll say in this generalized situation, here's what you should be doing. Should you rent or should you buy? Should you lease a car or maybe buy a car? Should you do this? Should you do that? There's lots of places that will give you generalized advice, and you can go and read all you want about that. But that personalized advice, that's the stuff that takes time. That's the expensive bit.
That's where technology could get in because obviously if you've got open banking where you can start hooking into all your [inaudible 00:28:48] historical financial situation, you can pull it that in there. You can hook into other data sources, maybe across your social media, maybe hook into your utility providers, your mobile network operator, your government services. There's a whole bunch of other data sources that we could start hoovering up.
Then if you can hook all that into some pretty decent data management system and [inaudible 00:29:08] on some AI-driven chat bot over the top of that, then you can go to your chat bot and ask it the basic questions that you might go and ask maybe your friends or family or parents or somebody about. That's where you can start getting the personalized advice. But that's one that we're only just this year coming to terms with. Well, how's this AI-driven advice going to work from a regulatory point of view, and who's responsible when that goes wrong? That opens up another ballgame when you're starting looking at, well, if I can go to my chat bot and say, well, given everything you know about me, should I lease a car or buy a car right now? It's a tricky one.
But once we get over that regulatory hurdle in terms of things like algorithm explainability and liabilities and all these other things attached, then I think that will make things a lot easier for people because it won't be a case of banks or financial companies presenting somebody with a whole bunch of options saying, here's 12 different types of credit card. Which one do you want to choose from? You could go to AI and say, well, which one's best for me? Honestly, which one do you reckon? It will tell you, and you go, okay, I'll just go with that.
It's an inversion of the model to offering advice or choice on a product, to actually looking at a person and trying to help them with their path.
We're close to the end of the episode here, and we always do a deep question at the end. Here it is. If you could get banking and government stakeholders in the UK to do or understand just one thing to solve the advice gap, what would that be?
I think it would be to go speak to some real people. When I've worked for some big banks, some of the most interesting activities I've done was when I've gone and worked in a bank branch for a day and sat there and actually interacted with real people.
I think there's a danger here, where government and bankers, they are normal people, but they are in the upper category of earners in society. They're in the 5% to 1% of people. They're doing okay. They're doing usually more than okay. I think it's a case of getting out there and speaking to some real people. Rather than sitting in a boardroom, in an office somewhere looking at slides with customer persona types, go and find these characters and speak to them and have an open chat with these people. I think then that'll be a lot more eye-opening. Rather than trying to make the assumptions that you know what somebody who's on a financial death spiral feels or needs to know, go and identify these people who are homeless, who've fallen through the cracks, who've got drug, alcohol addiction problems, whatever. Just have a chat with them and try and work out what would really help and what is not helping right now for them.
I think they'd be very surprised. I think they'd start coming up with solutions very rapidly if they immersed themselves. It's back to where I started, where I talked about the best way of learning these things is just not reading about it and looking at PowerPoints, actually going and doing it. So go work in a food bank for a day. Go and work in a bank branch. Go and work for a homeless charity. Go and interact with some of these people and just ask them, how's it going? What's working for you? What's not working for you? Why aren't you doing this? Or why would you be doing this? Just see what they say. I think that that kind of insight is worth millions of pounds thrown at some very expensive consultancies and agencies trying to understand the problem.
The future of fintech is right outside your door. Chris, thanks so much for coming on the show. I really loved talking to you today. You're thinking about the future in a way that's humanizing and better and righteous, and I do appreciate that. So thank you for talking about that today with me.
Thanks very much.