Practice Profile: Where digital meets personal

It takes around 10 to 15 minutes for a new client to create and customise an investment portfolio and receive a statement of advice with Melbourne firm Nucleus Wealth.

They are able to look at what the firm offers and have an SOA generated electronically within that short period, with a phone call shortly afterwards from Nucleus. In contrast, the conventional process to onboard new clients ordinarily may have taken advisers three or four weeks; meet clients, prepare their SOAs and move their money across.

Nucleus head of operations Tim Fuller says the whole process has been sped up at his firm, "but that's the beauty of the whole thing".

"And then, as an adviser, I'm ensuring that everything's done properly," Mr Fuller says.

"You're just manually checking everything and spending more time speaking to clients about what an investment looks like. And then if they want to go ahead, they just jump online and do it themselves."

Mr Fuller spoke at ifa's Business Strategy Days in March about how advisers can combine digital and personal advice. While the uptake of robo advice has been slow in Australia, Nucleus has presented a case of a successful blend of human reassurance and automated investment. It has only operated for three years, but the firm has 500 clients, with many being remotely based, some as far as the UAE and US.

Nucleus came to fruition in 2017 at the hands of Mr Fuller, together with head of investments Damien Klassen and chief strategist David Llewellyn Smith.

Mr Klassen had worked more than 20 years in financial markets, and had discussed with Mr Lewellyn Smith the potential to create an investment firm to invest in the themes that both men had pursued independently for years, according to the Nucleus website.

They both had worked across many of the major financial institutions. Mr Klassen had worked across Schroders, Queensland stockbroker Wilson HTM (now Wilsons) and independent researcher Aegis Equities, while Mr Llewellyn Smith continues to run MacroBusiness, a prominent investment blog.

Meanwhile, Mr Fuller started out as an engineer, working for a number of years during the mining boom in the Pilbara region in Western Australia before he found himself having to go home to Melbourne and suddenly in need of a switch of career.

With no mining in Victoria, he decided to complete an MBA and had a fresh start as an adviser with AMP, doing the Horizons program in 2011. After a year with AMP, he worked with Mercer for three years, across both its phone-based advice and as a workplace adviser, visiting and speaking with corporates. He also worked at Melbourne boutique firm Akambo Private Wealth.

He came on board to form Nucleus in 2016.

"A big element for me was at that point, I'd been in the game for six or so years, [and I] was really having an opportunity or freedom to build what I thought was a better solution for clients in the investment world," Mr Fuller says.

"So by jumping into more of a facilitary role [you have the capabilities for] putting together portfolios and using technology to take advantage, to give you efficiencies and lower your costs."

"There's obviously a lot of administration costs built into advice. If you can start fresh and build systems and build procedures that minimise a lot of the admin headache, then you don't wear on that bottom line which means your fees can be a lot cheaper.

"Everything that we do generally has a scale approach to it. If we do something, can we do it a hundred more times easily and cheaply. We have that focus whenever we put together offerings."

He calls it the "scalability factor", the ability to replicate their procedures.

Providing advice remotely and operating as a firm without an office to maintain and meet clients in has reduced many of the firm's overheads. Mr Fuller does not travel to meet clients either, noting in his city of Melbourne, driving can be particularly time consuming. When that time is removed, he can use it for other tasks.

"That lead us to the online realm and being able to put together a compliant but also comprehensive sort of piece that would allow a client to get a really good picture of what an investment looks like from their lounge room as opposed to having to come into the city," Mr Fuller says.

"It sped up a lot of the legwork in onboarding a client [compared with] most typical advice delivery methods."

Where much of the initiation process is automated, the ongoing relationship afterwards can see a lot of human contact. Mr Fuller says he spends a lot of his time on the phone speaking to clients.

"All the information in a conversation where they ask questions, it's all available online, it's all available in webinars and podcasts, it's all available through the portal," he says.

"But I think there's a gap in the market which we think we're filling in quite nicely, which is that people will only accept so much information online, before they build up a level of trust.

"There's only a small percentage of our clients who go through completely online. There needs to be some human element, whether it's a half hour phone call prior to the onboarding, whether it's them going through the whole onboarding and they're hovering over the submit button but they just need to speak to a human.

"They just need to know that there's somebody at the other end that's alive and that's what we're trying to do."

There are a number of providers in the market that solely rely on robo advice, where their model is built on online-only platforms, where they may be harder to contact. And then at the other end of the spectrum is high contact, what Mr Fuller describes as a "face-to-face, hour-long meeting, know everything about it, very broad, very comprehensive advice".

"What seems to be missing in Australia is that middle ground, where if people can get enough information or speak to a person for long enough, they actually breach that trust gap where they might hand over a couple of hundred thousand dollars to be invested," Mr Fuller says.

The firm offers a personalised portfolio. Clients, if they desire to, can build a portfolio using a self-directed method. Nucleus also offers a limited advice path where the client will be taken through a standard risk profile, where they answer around 14 questions before they're given a score and an appropriate portfolio.

"For me, it feels a little bit more comprehensive than the other ones I've seen in the market," Mr Fuller says.

"The basis of that is that once people are investing more than $200,000, and our average balance is over $200,000, we can actually blend together a series of portfolios and get a more tailored risk adjustment.

"We're trying to approximate a full advice sort of outcome with the robo technique, as opposed to just saying 'OK, you're balanced, you're conservative, you're balanced, you're growth', and just having a handful of different portfolios to put people in."

However, the digital risk profile can only go so far, with the process having checks in place.

Mr Fuller comments, "I'm very mindful of the fact that risk profiles, especially delivered online when there's no interface with the client, can only go so far. What I mean by that is, there's a number of safety elements in our risk profile which will actually stop the online process and move it offline."

The system has a danger score that will build up with certain answers until the person's risk profile may be flagged. Mr Fuller says it becomes triggered when individuals aren't fully informed in their responses - because they cannot receive advice and make decisions if the information isn't available to them.

"If I was sitting in front of you going through a risk profile and I said 'Oh, how would you feel if the markets went down by 20 per cent?', and you said 'I don't know', I wouldn't just roll onto the next question and I wouldn't just give you advice," he says.

Reflecting on the online system, Mr Fuller adds, "Effectively if you had answered, 'I don't know', to any question, it can't provide advice at that point. We have to take it offline and have a conversation. This is a robo and advice piece where there's a human element to mop up where a typical online-only solution would fall down.

"As an adviser of many years, it's very easy to imagine how online-only is going to cause problems and so we've got to build out our offering to get around them."

Clients who need more than an investment service, who are after a broader and more comprehensive service, are referred to other advisers. The firm is not aiming to take over from full-service comprehensive financial advice.

The customisation for its portfolios goes right down to an individual's preference for ethical and environmental, social and governance considerations. Mr Fuller says there are many other options in where "what they're actually doing is selling their ethics", with pre-formed filtering screens and investment themes.

"We don't need to try and think ethically because we allow them through the system and it's part of the onboarding. The clients will actually own their own ethical tailoring," he says.

"So rather than going, 'OK, we're ethical, here's 30 things we're going to exclude', we say to the client, 'We won't exclude anything unless you tell us to and we can built it from the ground up'."

The Nucleus team compiles a portfolio that it thinks will get the most out of the markets. Each flagship tactical portfolio can have up to around a hundred holdings. Clients can then tailor their ethics based on a series of screens - they have 28 different filters to choose from, that will then knock out stocks that don't comply.

Mr Fuller says, for example, a client may feel strongly against climate change and carbon emissions as well as ammunitions manufacturers, but may feel ambivalent about issues that investment products commonly screen against, such as alcohol, tobacco and gambling.

"At the end of the day, it's still a legal pastime and it's really up to the decision of the purchaser," he says.

"In that scenario, a lot of those mainstream or ethical options may not be suitable because there's a whole bunch of those things that would already be included. For us it's about saying, 'Well, if you're ambivalent about tobacco, don't exclude it'."

Nucleus aims to attract sophisticated retail investors, individuals who have experience in the market, understand it, who are comfortable with giving money over the internet - a common hurdle for bridging a trust gap.

Providing remote advice presents opportunities for advisers to leverage technology and explore new ways to deliver their service such as through video calls.

Once you move away from a "come in for a coffee and a biscuit before I'll talk to you relationship", Mr Fuller notes, the convenience for clients creates potential for a continued reach digitally.

"If you're very easy to use and people don't have to tear into the city and if they're getting what they want out of the relationship, they are going to be more incentivised to refer their friends who are perhaps whinging about how they don't see their adviser anymore, because it's too hard to get into their office," he says.

"So I think there's quite a bit that people can do there but you've got to have an open mind and you've got to get used to it.

"For me it's interesting, we've got about 400 accounts and nearly 500 clients at the moment and I've probably only met 20 of them face to face. I've probably spoken to 450 of those clients at some point during their journey with us."

The future for advice, Mr Fuller says, is online, with consumers expecting to be able to receive many services digitally. With open banking on the horizon as well, information will be more readily available in financial services, with the pressure now on banks to provide more forward solutions.

"The investment world just has to keep up," he says.

"I really look forward to seeing what comes out to better the client experience, if there's a better dashboard, and more information, and more transparency in finance. The online method's the way forward for doing that.

"[But] I think there's always going to be a place for face to face or at least human advice in financial advice. 

"It appears to me like there's a lot of the robo advisers out there are computer guys that are trying to do finance, if that makes sense. So they're basically very savvy, very smart individuals in the IT world having a go at the fintech space."

But Nucleus' differentiator, he says, is the opposite.

"We're a bunch of finance professionals, advisers, investment managers, that are using technology to do what we want," Mr Fuller says.