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How digital wealth upstarts can succeed

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Matt Fellowes, former HelloWallet founder and CEO, is launching a new digital retirement savings management platform, United Income.

Fellowes, who was also chief innovation officer at Morningstar, talks about the lessons learned from launching one digital startup and what steps incumbents must do to transition to a digital-first market.

An edited transcript of the conversation follows.

You helped found HelloWallet, and now are heading up a new digital venture focused on retirement. What are some operational lessons you’ve learned from being in the digital space?
HelloWallet was business school for me. I learned lessons about all aspects of business, which included hiring, firing, leading, managing, strategy, sales and marketing, contract negotiations, financing, and so on. I’m also an academic by training, so I am constantly trying to learn from others, either through literature or conversations with others in the industry.

There is a long list of lessons I’ve learned along the way. Most of those lessons apply generally to any leadership or management project. But, some that are just focused on the digital space would include, for instance, the importance of public demos, or biweekly or monthly forums for the technology teams to show-off their progress against specific goals to executive leadership.

This drives accountability, but, more importantly, increases technology literacy and subscribes to the expectations of modern, high-quality technology talent. Another is the importance of high technology literacy among those leaders, who can properly distinguish between fact and fiction. Given the preponderance of venture capital money in the market, for instance, there is a high degree of fiction perpetuated in the industry, which can distort strategic thinking.

At InVest, we heard that incumbents have the brand, research and resources to dominate the digital space. How does a fledgling firm compete against a well-financed giant?
I faced the same challenge at HelloWallet, where we had to not only create a new market, but also a new company alongside dozens of copy-cats and incumbents that followed in our path. The keys to success are straight-forward, if not simple: you need to out-innovate incumbents and, research says, time the delivery of that innovation when there is demand for it.

In United Income’s case, we have invented a new approach to money management that is heavily reliant on new data and technology, which every large financial service firm will want and need in the future. The reason is that our technology extends the life of money, which means clients will have more assets and for longer periods of time. We accomplish that by fusing together financial planning and investment management, which allows us to pull more levers to help our client sustain and grow their assets than the rest of the market.

We also use new data and proprietary models to personalize many of the old, and frankly completely wrong, assumptions used in the industry, such as how people spend as they age, when they will likely die, and how they think about risk – all of which allows to ring the inefficiency out of more generic investment management approaches, such as the extant robo method. Most importantly, by building a unique technology that can simulate the standard market outcomes and potential life outcomes, we also can inspire better client decisions, which is a win-win for the client and financial firm or adviser.

What would be your checklist, and the top three items, if you were heading up a large incumbent and tasked with making it competitive for a digital era?
First, the CEO and Board need to be supportive — both financially and politically — for a digital agenda and the leader of that agenda, since some internal leaders will be (justifiably) threatened by that team and can disrupt progress. This is a particular threat in the asset management market because of the unique attention to risk mitigation, which can be used as an excuse for avoiding change and needed leadership.

Second, that CEO and Board need to think and plan globally across the company, which requires the leadership of the CEO or an operating partner that has a mandate to traverse across the entire company. This is particularly important in the financial services market, given the dependency of innovation on compliance, subject-matter expertise, and the (often opaque) stove-pipe technology stacks that have flourished over the years from acquisitions and projects.

Finally, as with any leadership and management project, the agenda needs clear, measurable, and achievable goals. In my experience, quick wins — like what Vanguard, Schwab, or Fidelity did in the digital advice market — are a great way to build confidence as an organization in an innovation agenda.

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