morning, everybody. Thank you for joining us. When we did our first one of these in October 2017, I said to everyone in the room, if you come here to update your models, you've certainly come to the wrong meeting, and I won't be offended if you want to leave now. And the purpose of this is not to try and give you an update on financial models. It's to try and help you understand our business.
We've talked a lot about strategy. I have a very strong view that quarterly reporting does not reflect the dynamics of our industry and the strategy is massively important. So the purpose of the day is to try and talk a little bit more about some of the other aspects of our business that we don't get a chance to do on a regular reporting basis. The last time we spoke about things, we spent quite a lot of time on our core business in terms of how we're to increase client longevity, new markets we're going to go into, new channels we're opening up, new products we were launching, use of seed capital, etcetera. And the transcript of that is still available, and we're certainly happy to take questions on that later on.
The purpose today is to look more at the consumer side of our business. This chart is familiar to anybody who looks at our results and we spent quite a lot of time on that middle box and we talk about targeting client longevity. In fact, targeting client longevity is important across every aspect of this, but probably no more so than in the consumer box and that's really the purpose of today's meeting. For me, there's a funny thing about our industry. We obsess about the thing which matters most to us, which is investment performance, right?
It's written on everything and every tin. It's a bit like going to book a train time. When you book a train, all the websites do is don't tell you anything about the experience, they just tell you about the times of the trains. If you book on to a plane website, it just tells you about what the price of a plane ticket is. Our industry just tells you about the performance of the product.
And the irony of that is that to the end customer, what they're much more concerned about is do they get a good outcome? Do we meet their needs? And yet our industry just wants to talk about one thing. So to my mind, getting access to solving the customer problem is a much, much bigger part of thinking than just saying, how many basis points of alpha are going to put on the tin? And that's a fundamentally different thing.
The second is the dynamics of this consumer box are fundamentally different. The longevity of a client on that side of the page is somewhere between ten and twenty years. Look after them well and you'll get a very, very high retention rate. The longevity of a client in the middle blocks on average is four years. So compound growth is much, much easier to achieve if you've got no hole in the bottom of the bucket.
The idea today is to spend a little bit of time looking at different aspects of how we're approaching consumer business. And really, I've lined up a group of our senior management because it's much better that you hear it from what they're doing in different parts of the business than hear it again from Richard and I. I'm much keener that they should have the stage. Just going through quickly. First Peter Hall will sign up in a moment.
Peter joined us from running Tilney's for Primera at the start of the year. Peter has had a long, long career in wealth management at Barclays, running UBS and most recently, the Best Invest into Tilney. And he's in a good position to give the overall view of all of our wealth businesses. James has recently taken on actually, not quite taken on because we haven't quite gone live, but the Lloyd's joint venture. James used to run our UK Intermediary business, knows The UK market incredibly well, and we'll talk in more detail about how we're going to drive value and the dynamics of that business.
Susan runs our Singaporean business, but is also leading the charge on mass personalization for us across the group. Being with us a long time, Singapore, as you know, has been a fabulous success story for us in many ways. And so having her here talking about a digital age is fantastic. Graham may be familiar to many of you. He's our CDO, Chief Digital Officer, and we'll talk about how we're digitizing the business.
And then finally, Jessica Graham is going come and talk about sustainability. And you think, what's that doing there? Actually, I think it's critical because if you think about the point I started with, the notion that all we've done is sell performance. What matters to people increasingly is how we go about generating the returns. And the mass personalization of that gives investment products a meaning.
So to my mind, the coming together of sustainability and performance becomes a much more powerful thing than just selling raw numbers. So how we're to integrate that in with a data driven mindset is going to be critical to that broader consumer piece. At the end of every section, there'll be an opportunity for questions. Richard and I are going be here throughout to take any questions. But unless there's any at this stage, I'll step out of way and let Peter take on.
Thanks very much, Peter. Good morning. As Peter mentioned, I joined Schroders as Global Head of Wealth Management just back in January. And I joined because I believe that we have got a unique and really exciting opportunity in Wealth Management. So it's great to have the chance today to talk about where I believe that opportunity lies and how we're going to capture it.
Peter mentioned the group strategy of getting closer to the customer, and that hinges upon the relative attractiveness of the Wealth Management business. So if we sort of put it side by side with Asset Management, Wealth Management is projected to grow significantly faster. As Peter mentioned, it has much higher longevity. So for us in the Schroders Group, the longevity within Wealth Management at twelve years is almost 3x the level of asset management. Revenue margin, significantly higher.
So for us, 61 basis points as opposed to 45 basis points. But importantly also, because we're closer to the customer and because the customer is much more sensitive to issues of trust and relationship and service, we believe that the revenue margins there will be significantly less vulnerable to margin compression. So overall, an attractive space for us to focus on, and that's what lies behind the group's strategic focus. Within that attractive sector, we already have a strong franchise in The UK. And funny enough, coming into this from the outside, I think a lot of people outside Schroders don't appreciate quite how strong our franchise is.
So targeting the charity space and the high net worth, we have Kasnov Capital. Targeting the affluent segment, and broadly speaking, by affluent there, we mean individuals who have less than £1,000,000 in investable assets. We have benchmark capital. And then later in the year, and James will talk more about this later, we will have the joint venture with Lloyd's, which is going to come under the Schroders Personal Wealth brand. Put all that together, and we will be looking after 65,000,000,000 of client assets with over 700 advisers.
And if you sort of benchmark that within the industry and you think about how does that stack us up against advised wealth managers, then it really puts us in The UK as number three, so behind Quilter and behind St James' Place. So a strong franchise, and that franchise is generating significant profit. So look at last year, combine the Schroders Wealth and the Benchmark businesses, we made pretax profits of GBP 93,000,000. And then on the right hand side, what we are showing there is a notional 50% stake of the twenty nineteen pro form a numbers for the joint venture, which comes to £17,000,000 So it gives you an idea of the totality of the profits that we'll generate. Importantly, while we're generating significant profits, we are also achieving a turnaround in growth.
So I think Richard shared the left hand chart with you at the results presentation. And what you can see there is the annualized net new revenue in the past couple of years having a good upward trajectory. And what's driven that is on the right hand side, net new business as a percentage of assets, which certainly, in my mind, is probably one of the key metrics. For growth, go back to 2015, 2016, we were pretty much flatlining. Go to 2017, 2018, and we were achieving growth rates there of 3.5 to 4.5%.
So a strong franchise, a franchise generating significant profits and a franchise achieving a turnaround in growth. Looking forward, key question, what's going to set us apart? What is unique about what we do? From my point of view, there are five things that I would focus on. The first one is brand.
We have a couple of fantastic brands. Our research shows that Schroders brand is ranked number two in the retail space in The U. K. But with a top ranking for trust and innovation. And if there were two things I really wanted to be top ranked for within Wealth Management, it would be trust and innovation.
And then Casnouve is perceived as a brand which is respected and exclusive. So we've got great brands for each of those segments. And to be honest, I think it's important to have differentiated brands for each of those segments because the brand stretch is too great in terms of trying to cover that broad spectrum with solely one naming convention. Secondly, we have unique sources of new business growth. And importantly, we will have, through the Lloyd's joint venture, access to one in five affluent individuals within The UK.
We've got fantastic technology in Benchmark. Again, I'm not sure how much people appreciate the strength of that, but recently, we were awarded the best U. K. Platform position for that capability, which is going to underpin our moves in the affluent space. Through Schroders, we have a multi jurisdiction capability, so we can support client booking, whether that is in the Channel Islands or it is in Switzerland or it is in Singapore.
Increasingly important amongst our wealthier clients where internationally, of course, we are in an environment of a growing level of political uncertainty. And then critically, underpinning the whole thing, we have the global institutional investment capability of Schroders. Those five assets are great strengths. And honestly, I say that coming, as Peter said, from having spent twenty years in leadership roles at the main competitors of us elsewhere in terms of UBS Wealth Management, Barclays Wealth Management and then a private equity business to tell me where we grew the assets from GBP4 billion to GBP24 billion in three years. So a very strong franchise and great strengths.
What I'm now going do is I'm just going to talk about each of the businesses and what are the specific opportunities in each of them. So let's start off with CASNOV. CASNOV has got some fantastic franchises to build on. We are literally number one in the charity spaces, which, as you'll know, typically falls within the wealth management arena, and we are looking after GBP 6,600,000,000.0 of assets there. We have a great family office franchise, and we are looking after 101 families who together have CHF10.6 billion of assets.
And then within this space, we have a great network and reputation with private client lawyers and accountants. I sort of mean the withers and the BDOs of this world. And that's really important because in this space, they are sometimes the trusted relationship, and they are, therefore, an important source of referral business for us. And every industry has its own awards. The one award which you want to win in wealth management is the PAM award.
Why? Because it is the one which is voted on by those private client lawyers and accountants, and they voted us the best wealth manager for the high net worth segment earlier this year. But we've also got a couple of very new and interesting opportunities in the new wealth segment. So entrepreneurs, again, a great franchise to build on from Lloyd's where they look after literally one in four SMEs. And then the Professional segment.
To some extent, it's a very natural space for us. It's a space where the CASNO brand, I think, really resonates. And not surprisingly, it's a brand where we again win the Magic Circle Awards because of our perception. Great opportunities in Casnouve. Different set of opportunities in the joint venture Schroders Personal Wealth.
So here, we are really focusing on the opportunity in the affluent space where there is a growing need for advice, particularly around pensions. Why? Because of the freedoms in pensions and the complexity, to be honest, of pensions. And James will talk a lot more about this later. And how are we going to be successful?
Well, we have deliberately set this up as a stand alone venture with an independent board. Why? So that we can take an entrepreneurial approach to it while drawing on the fantastic strengths of the two parents. It's going to be open architecture, so it can draw on the fantastic investment expertise of Schroders, but actually will be free to identify and offer the best manager in each sector or in each theme for its clients. And then really importantly, we'll have a challenger mentality, and in particular, to leverage innovative digital opportunities.
And it's obviously early days before the JV has been set up to elaborate on what some of those opportunities could be. But I think to give you an interesting insight into the sorts of innovative ways to leverage digital, both in terms of customer proposition and in terms of business model. Susan is going to talk about some really exciting stuff later that we are doing in Singapore. So the third business is Benchmark, different opportunities again. And here we've got a couple of opportunities.
One is to provide and continually develop this leading technology to underpin the innovative propositions that we're looking to build in the affluent space. And then the second one is to represent a different but complementary channel to target the Affluent segment through its award winning network of two fifty financial planning advisers. So as you can see, exciting opportunities but very different opportunities across three businesses. If we look back across the totality of what we have in Wealth, what are the key priorities for maximize its value within the group? So the first one is to strengthen organic growth further.
And as I look at that and based on my experience, there are four key drivers that we need to look at. The first one, of course, is recruitment of advisers, and that takes two approaches. Part of it is homegrown talent and the second one is poaching the best advisers from our competitors. And interestingly for me coming in, if you look at the senior advisers at Casanov Capital, the vast majority of them have been with us for more than fifteen years and started off as graduates. So actually, we have got a really good record here of nurturing top talent.
Second one is freeing up capacity. This is an industry issue. You will all know quite how incredibly clunky and paper based and archaic, really, the wealth management sector is. And what that means is that advisers spend a whole load of non value added time on staff rather than being with the client or focusing on new business. And I'll talk about another priority later in terms of using digital to liberate that.
Third one is culture. So I think within Schroders and certainly at Lloyd's as well, we pride ourselves on a culture of real client care and very, very strong compliance. We need to hold that very precious, but we need to blend it with the sales culture. And there, I don't mean sales in a sort of dirty word. I mean sales in the sense of getting a deep understanding of a client's needs and offering top quality solutions.
And then the third thing is, of course, there's no point getting new clients through the front door and growing assets if we are losing clients through the back door. And so the last piece is about retention. And we do provide excellent client service. We have very good retention stats. Internal client surveys are very positive.
But there are a couple of areas where we offering, and by improving our investment offering, we will improve our retention. So that very much leads me on to the second key priority, which is offering truly institutional quality investment drawing on Schroders' expertise. So through Schroders, we can offer top quality segregated portfolios which are customized to the individual client, which are lower cost than a portfolio of funds and which, by definition, have much more investment story and content than ever can be brought alive through a portfolio of funds. And actually, I believe that within Wealth Management, there is almost going to be a dramatic shift back now towards segregated portfolios of individual shares and bonds rather than portfolios of funds, but not in the way that it was decades ago with the old boy stockbroker getting tips from lunch, where actually people like us who can draw on truly institutional quality, segregated management, will have a fantastic advantage. Second thing that we can offer is sustainable investing.
I totally agree with Peter. It's absolutely critical. And Jess will talk more later about the great expertise that we have in that area. Third one is private assets. It's another strategic priority.
It was that it was the third pillar on Peter's initial charts. Gael Vundelen, as you know, is joining fairly shortly to lead the charge on that. And certainly, amongst our wealthier and more sophisticated clients, there is a growing demand for private assets because of the illiquidity premium. And then last one is we are, of course, open architecture, as I mentioned, but where we choose traders as the best manager, we are able to offer it to our private clients at an institutional rate. Priority three, digital.
Now digital, I see in two ways. So the first one is the innovative customer proposition, leveraging digital, which I mentioned earlier and Susan will talk more about later. The third one is digital in the sense of streamlining and automating what we do. And within CASNOV, we have kicked off a program which is focusing on the two most clunky parts, the process, which are onboarding and client reporting and suitability. And what we're aiming to do through this digital program is to free up 15% of advisers' time through doing that.
Fourth priority is Asia. Now I mentioned earlier that Asia represents about £3,000,000,000 of client assets out of a total of £8,000,000,000 of assets that we are looking after in our international offices. So by definition, starting from that base, it will be a longer term play for it to create significant value within the group. But we're fantastically well placed to build that value here over the long term. And if you look at the approach that we're taking, it actually just mirrors the approach and the business model that we're adopting in The UK.
So in the affluent space, we're partnering with banks. Obviously, The UK, it's the JV with Lloyd's. In Asia, it is partnerships like the one that we have announced with Maybank, which is actually the number one bank in Malaysia. In high net worth, it is a matter of building a top quality team of advisers. And you may have seen recently that we acquired an independent asset manager called Third Rock.
The story there is very interesting because Third Rock was assembled a team of 28 individuals who were entrepreneurial but who would each come from top large wealth managers in the region like Goldman's or Credit Suisse. So it has that entrepreneurialism, top quality advisers who had the confidence to go out on their own. But what was fascinating when we talked to them was how valuable they felt it was to join our group because of the strength of the Schroders brand, which is literally number one ranked in Singapore and Hong Kong and because of the strength of the institutional investment capability that I mentioned earlier. And then the fifth priority is acquisitions. And there, I believe that we have a really good track record in terms of acquisitions.
It's an industry, as you know, where that is often not the case, but I think that what we have achieved with Hawes, with Benchmark, with Third Rock is very, very positive outcomes where we've done them for the right reasons and we're integrating them successfully culturally as well as strategically. What are we going to look for? We will look for acquisitions where we believe it gives us a core strategic capability that we haven't got, where it will accelerate our growth. We will not look at them where we do not believe strongly in the cultural fit because, obviously, Management that is critical. We will not look at them if we believe that it will not generate significant shareholder value, and we will not look at them where we feel that in integrating the acquisitions, we could not simultaneously drive the organic growth that we're looking for.
So those are our key five priorities. What is our overall goal? So our overall goal is to become a top three player across that whole spectrum in The UK. And this, in many ways, is what is unique to us. You get strong players in affluence, strong players in charities, strong players in high net worth.
We are aiming to be a top three player across charities, high net worth and affluent financial planning and doing it by leveraging on those unique sources of distribution, leveraging on those fantastic brands and leveraging on the global institutional investment capability. And the key measure there really is ultimately client assets and then within that, that we are looking after those client assets with a business model as an attractive costincome ratio and with strong underlying organic growth. But in many ways, there is one financial goal. Just as important or if not more important for me is looking at this from the eyes of the clients. And the critical thing for us long term is to be known in the client segments that I mentioned earlier as our target strategic client segments as the people to come to, as the best people to help as their trusted advisers because really that is what is a very emotional relationship, Wealth Management.
It all about trust and it is all about peace of mind. And that is the sort of relationship that we're looking to build. So I hope that's given you a bit of an overview on the attractiveness of Wealth Management, the strength of our franchise. I know whether it surprised some of you, but I do think looking outside in, people don't often appreciate it, where the key opportunities are and then what our top priorities are going to be to maximize its value over the coming years. And now I'm very happy to take a few questions or pass them off to Peter, if anyone has any at this stage.
We wait for a microphone down the front here? We're being recorded. So for those online, it will be a lot more helpful if they can hear.
It's Gerjik Campbell, JPMorgan. Just a few questions. Firstly, when we talk about Asia, clearly, it's a fast growing market, but it's a relatively competitive market. And obviously, advisers there cannot be not particularly cheap.
How do
you think about that £3,000,000,000 you have at the moment? And in terms of is that a profitable business for you at the moment? So really just want to think about growth versus profitability within Asia. So that's the first question.
Yes. So our Asian business at that level is profitable. I agree with you, it is a competitive market. I think what is it which makes us different? It is going to be attracting entrepreneurial talent.
So these were the best advisers who themselves had left the Goldmans and the Credit Suisse's because they didn't want to work at what can be seen as large and rather heavy bureaucratic organizations, but then saw the benefit of being able to leverage our network, our brand, which is literally number one in Asia, and our institutional investment capability. So we're going in there with a unique proposition. And for me, the acid test was our ability to track those individuals.
I think what I would add is that we're very taking a long term view of this, that compensation to revenue for that business is way higher than it is for our ongoing businesses in more mature markets. You'd expect that because they're not on scale yet. So actually acquiring scale and becoming that brand is a very important part of the long term journey rather than just saying we're going to run it on a low cost basis, be very profitable but not very fast growing. The opportunity is the growth.
And just two sort of quick questions. One, are you going to have sort of an adviser school within sort of Schroders and the Lloyds JV or just broadly within Schroders?
I think James will cover that in
a Okay.
And then the final question for yourself is, I know you've already been with Schroders for a short period of time. Obviously, you've got a lot of experience within the wealth management industry. Is there anything in particular you've seen that was very positive at Schroders or anything where you feel that Schroders needs to do better or improve their, whether it's technology or other areas?
Yes. The first thing that comes through incredibly strongly is the long term view. To build a leading wealth management business, you need an incredibly long term view. I think that is absolutely core to Schroders and linked into the family ownership. Whether I have been at banking institutions or private equity backed businesses, inevitably, There is not that kind of time frame.
The investment capability that we can draw on as wealth managers is fantastic. And whether it is that segregated capability or private assets or ESG is amazing. The strength of the franchise in Asia is remarkable. What excites me and what attracted me, and this is very much down to Peter's leadership, is while we are large, there is an entrepreneurial feel to it. And that's exciting and that's absolutely critical for us to be successful.
What do we need to do better? You'll hear a lot today about digital. We have big ambitions in digital. We need to do a lot more in that, and we've certainly embarked in wealth on a significant program there. And when you think about us as a challenger, I think that's one of the key areas where we can stand out.
Peter, I think, would have highlighted one other area when he first arrived, which we're addressing now. He chose his words carefully on private assets. So I think our growth rate in wealth has been hampered by our lack of a really good private assets offering for our high net worth clients. And we're in the process of addressing that. But I think we've had years where we've seen long term client money depart because we haven't been able to plug that gap.
And so being able to have a good offering in that space has been critical. It's probably alongside digital, there's probably the single other good growth opportunity because it creates stickiness for clients as well.
Exactly. Yes, Peter. Absolutely.
David Woj here from Santander. Actually, Peter, coming back to your comment on private assets, I was at the CFA conference yesterday, that's exactly what they were talking about as well. And family offices and private assets is basically where the growth is. Great to hear that. And Peter, welcome to Schroders.
What I would I'd like to ask you is what does a customer of tomorrow look like for you? And how do you think you will acquire them? Will there be more in Casanov or your affluent high or your mass affluent area?
I think we're in a very fortunate position that we have lots of different opportunities. So within CASNOV, we have there are lots of opportunities for us to help entrepreneurs and business owners. And at the moment, there's a really attractive environment out there in terms of business sales. And through the Lloyd's relationship, we have great access to them. As you mentioned, family offices are an area I think there are a lot of family offices at the moment out there which are perhaps of a scale where it's questionable, whether it makes sense for them to carry on doing it themselves.
Well, I mentioned we're looking after 101 families with over GBP 10,000,000,000 of assets. We think we are in a very strong space. And then James will talk more about this later, but the affluent space is a very interesting space because it's still almost dominated by a very, very large number of rather tiny IFAs. And there are an enormous number of individuals who need help in terms of their retirement and their planning. And they don't know what they've got and they don't know what it's worth and they don't know what they need.
And we have an ability to help them and help them in an innovative way as well by drawing on digital channels. So what I like about our position is that there are a range of opportunities, and we're not overly dependent on one.
Good morning. It's Hubert Lam from Bank of America. Just one question on costincome ratio. Your costincome ratio is 68%. I'm just wondering what your target is over time.
How long will it take to get there? And like how many assets do you need to see significant improvement? Because you speak of increasing scale, but also I'm conscious of higher operating costs that you have in technology, Asia, etcetera. So just wondering costincome, what your targets are on that?
Yes. I think over the medium term, we'd see the costincome ratio at a similar level. If we look at the different drivers on it, on the cost side, there are opportunities medium term through greater digitization and through investments in the platform. But as you mentioned, obviously, short term, there are the investment costs associated with that. On the revenue side, while we believe, being close to the customer, that revenues are much more defensible, of course, over the long term, one would expect some element of margin compression.
And then also, as you indicate, the growth through hiring of talent has a bit of a hockey stick to it. And therefore, as one embarks on that program, it can result in a short term debt before growth. So broadly speaking, if you net those factors out and you also benchmark us against the competition, I think that over the medium term, that's the sort of level that we will be targeting. So if you look at the driver of value, it is much more on the growth side.
As these benefits come through, the key is to keep reinvesting it and keep running harder and keep investing more because that becomes our advantage. If we can create a low cost digital platform for managing clients, that's a huge advantage if we can bring in new team. So rather than just running up a higher margin, we prefer to invest that back in the business for the long term benefit. We there was a very interesting chart that Peter put up. For two or three years, this business had been about integration.
We haven't seen any net new business growth. And then two years ago, we I remember saying at the analyst meeting, the growth in this business is unacceptable. We're going to move it to a growth footing. And we've seen 3.5, 4.5% growth come through subsequently. And whilst that's not a forecast for any individual year, I think at the same time, we've also made a step change in digital.
And you should expect that run rate of effort to reinvest back into the business to be an important part of the future. Time for one more and then we'll move on to James to pick up any later. One more? No. James, you're up.
I think this is, to my mind, is a very different change of pace because we're dealing with the whole of market and much bigger numbers in terms of affluent clients.
Good morning. Thank you, Peter. We are here today at a very interesting time for the development of Trader's Personal Wealth, particularly as we're two point five weeks away from launch. So time is under we're feeling a little bit of pressure in terms of time at the moment, but I think that's generally a healthy thing and a healthy situation to be in. What I'd like to cover is three things.
I think that this is a fascinating time to be entering this market and I'd like to talk a little bit about why. I think that the market is changing pretty quickly and I'd like to just talk a little bit about the background and the direction of travel in the market. And finally, I'd just like to talk about the steps that we're taking to create the new business and how you can think about that developing and evolving in the months ahead. It's quite clear that when we announced this in October, we generated a really very significant amount of interest both in the conventional media and on social media. Quite a lot of this, we've been standing, I guess, on the sidelines being relatively amused about the fact that some of this has been news flow, but a considerable amount of this has been rumor and speculation, not all of which was true and certainly not all of which came from us.
But I think that it points to the level of just latent interest in entrants into this market. And And as I said, what I'd like to do, first of all, is just to try and figure out why. I think if you look at our targets or our total addressable market, there are, in The UK, roughly 6,000,000 people with investable assets of more than £100,000 And so what I'll talk about in a moment is how we serve those clients. But actually, in terms of our forward looking projections, I think it's quite fair to say that we are going through a significant societal change where I think that, that 6,000,000 people is somewhat understated on a forward looking view. I think if you think about the how people are beginning to approach their retirements, they are working longer, they're phasing into retirement, there is far less reliance on defined benefit pensions.
I think it was two years ago that for the first time in living memory, the amount of income in retirement gained from a defined benefit pension scheme fell below 50%. And I think that's a huge trigger in terms of changing behaviors and changing the pattern of behaviors as people think about that provision in retirement. I think that Peter has already talked about the fact that pensions are a key focus for us. And I think that this notion of people taking greater responsibility for their retirement, for their savings, will naturally drive people towards advice. At the point of retirement, with things like pension freedoms, this is an incredibly complex subject and it is an area where people, I think, feel acutely the need for help and advice.
It's quite interesting that in recent years, the changes in pensions legislation has meant that getting a pension has never been easier. The things the measures such as auto enrolment, but also if you go to one of the direct platforms, you can open a SIP in a matter of minutes. And I think what's fascinating there is that whilst you can get into one of these things, when you've accumulated wealth and you've saved and you're reaching the point at which you want to spend it, then it becomes incredibly complex. And that's not just for the people who are thinking about withdrawing money or retiring, but equally there are an increasing number of people who are coming up against issues such as lifetime allowance. And I think, again, these are areas where you see the behavioral drivers towards advice growing all of the time.
There is the somewhat apocryphal quote from The U. S. That ninety percent of children will file their parent's wealth manager on receipt of an inheritance. And I haven't been able to find where the data point for that is, but I think that what it does say is that as we think about money moving from one generation to the next and how that accelerates in the coming years, I think it's fascinating to think that there is an enormous opportunity as these assets are disturbed and a new generation of people inherit wealth and look for advice and help with what to do with it. And finally, I think if I was standing here as an economist, I would be telling you that this last data point is particularly bad news.
But in an advice business, actually a concentration of people and a concentration of wealth of the elderly segments of our society actually points to the fact that, again, this is a really interesting time to be launching into this market for the first time. Now having dealt with what I would describe as the demand side for our business, I wanted to talk a little bit about the supply side. Now there has been a gradual rebuilding in the number of advisers since the retail distribution review and I think that's generally a healthy sign. I'll talk in a moment about capacity for advisers, but I think about this in a fairly simple way, which is if an adviser has the capacity to serve roughly 100 clients, 26,000 advisers can serve 2,600,000 clients. And I think that if you start to put some numbers around what is colloquially known as the advice gap, I think you can quite quickly establish what that number looks like.
And even if you did something material to push that capacity up, there is still a very large number of people who are underserved by the number of advisers that exist today. So I think that the whilst I think that I would paint a picture of a very strong demand side, I think that we do have some issues with supply as well. This is compounded by the fact that, as Peter said, we are living in a world which is still a massively fragmented and micro industry for advice. With less than five advisors per advice firm, I think that this creates some really big structural barriers to the industry and future development. And that's what I'd like to turn to next.
I think that the advice market today, I would make a case for the fact that it is relatively young. I think that people will increasingly view the retail distribution review as a seminal moment in the development of what I would describe as our profession. And it really did create a profession, I think, for the first time and a profession that can stand alongside the established professions of the legal and accounting profession on a similar footing with a similar qualification and professional standing. But it is at a very, very early stage in its development. And I think that we need to move quickly away from the narrative that your outcome from an advised client is the same as a direct client and therefore the only difference is the fee you're paying.
So please justify what that fee level is. I think there's an increasing body of evidence and I cited some of it here that the number the clients who actually get professional advice end up with a materially better outcome than those who DIY. Now there are a number of reasons for that, but principally, the behavioral issues of buying the wrong things at the wrong time, selling out when you get nervous and there are market events that scare you. I've talked about pensions being complicated, so tax optimization is critical. And then asset allocation being the other driver.
I think that we, an industry and as a profession, need to make a better case for the fact that this is really important and that we can make a massive societal difference as we serve more people with the services that we have available today. I think that the difficulty that face though with a very fragmented market is firstly speaking as one voice. And the second is that in a fragmented market, we are dealing with, still dealing with an enormous amount of issues that drain our capital, such as increasing in insurance costs, and in many cases, just simply the availability of professional indemnity insurance is a significant issue that the industry faces. But equally, implementing regulatory change such as MiFID for very small firms is a huge burden. And what that does is actually limit the ability for us as an industry to grow a new generation of advisers, to really increase the availability of advice because there are very few firms that can actually do that.
The question earlier about whether or not that's a rig that we're taking is absolutely fair and absolutely the right one. And we've made a very significant financial commitment to invest in a new way in a I don't like the word academy, but it seems to have been coined by our industry, but an academy to train advisers and we're in the process of hiring somebody at the moment to lead that initiative for us. Equally, I think that as people evolve and as they think about how they'd like to be served in different ways, and Graeme will talk about the technology implications of that, There is an obvious barrier with a very fragmented market for developing technology and customer experience in a new and meaningful way. And I think that is also something that is significant. It's something that we will be focusing very hard on.
Now the second thing was about the structure of our markets and the direction of travel. And what you can see here is quite clearly the impact of RDR moving away from a market that is based on sales commission and one that is based on fees. And you can see this clearly in terms of how businesses are valued and the importance that people are placing in the valuation of businesses in recurring fee revenues as opposed to commissions. But I thought what I would do is just try and give you a flavor as to what that actually is in terms of what fees are looking like and how they're charged. And the next few slides are from a study of advisers that Schroders does every year and just specifically focusing on this issue for a moment.
What you clearly see is that when we talk about fees generically, we are talking about a move overwhelmingly in this market to a fee as to an ad valorem fee model where fees are charged as a percentage of funds under management or funds under advice. Mainly facilitated by platforms, But when we talk about recurring fee revenues, this is quite clearly the model that now dominates our industry. In terms of the quantum, similarly, I think there's been a very significant shift here where traditionally the advice fee model in a commission world was generally 0.5% a year of commission paid by a product manufacturer. And that shifted clearly in terms of structure as I've described, but it's also shifted in terms of quantum with advisers taking a greater share of the client value chain and have been moving through those fee levels. The average is today almost exactly 0.5%.
But there are a number of different models and you will regularly hear people talking about moving into a 1% world for advice. And then finally, the other obvious lever in terms of creating value in an advice business is the average number is the average client that you're serving. I talked about capacity. I think advice is naturally a capacity constrained market. It's a capacity constrained model.
Peter talks a little about how you can get some efficiencies in that model. But similarly, you can only serve a certain number of clients irrespective of how efficient your model becomes. And average client size is critically important. Now we've heard examples where firms in an extreme model are taking are asking clients to find other sources of advice and to leave their business in to increase their average clients and build capacity in that fashion. We think about it slightly differently, is a barbell or a balancing approach to average client size where on the one hand, you have clients who have accumulated wealth, are at the later part of their savings journey and probably decumulating and people who are at a much earlier stage in their savings journey.
And this, I think, is where, in many cases, the pensions opportunity that Peter talks about is really acute as people are accelerating into saving and into their retirement. But it's a model that we look at and it's a metric that we focus on in a very significant way. The final part of the Schroders research here was the perceived impact of technology where advisers are clearly telling us that they feel that technology has a very significant role to play in their business both now and in future. I think that where if you ask about if you ask advisers where they're thinking about this and how they're thinking about it, it's much more in the area of process efficiency and allowing them to serve more clients and removing Graham talks a lot about friction, but it's removing friction. So if you think about not in financial services, but you think about the experience that you have if you shop with Amazon or you take a cab with Uber, a lot of that focus is about removing that friction, making the process of getting the service that you want easier.
I think that there is another lever or another opportunity here, which is about improving customer experience beyond process and then simply how we think about our business model evolving in the future. But I think as we start thinking about the business that we are building today, I think we're thinking about it in three distinct steps. Peter talked about the value of a personal relationship. I still think that advice is, at its heart, a deeply personal relation it's about a deeply personal relationship between two people. If you ask clients what they value most in their relationship with their adviser, it is always the time that they have they are able to spend with their adviser.
It's very rarely about anything else. And I think that making sure that we value that, we invest in our people, we invest in our service standards, we get advice into the hands of people where they live much more readily, I think is something that is critically important to the future of this business. I talked about technology and I think as we move to the benchmark technology, there is an obvious dividend that we will have there in terms of process efficiency, which is using the benchmark CRM and adviser facing technology. And there is an obvious client experience dividend through the Fusion platform and access to your investments online really for the first time for many of these clients. But I think in terms of technology and how we think about the future developments of our business, we are already thinking about that and how our model evolves.
And two obvious examples there are with a partnership with Lloyd's. It would be surprising if I didn't talk about the tremendous opportunities that are presented by Open Banking and the ability to integrate your cash, your savings and your investments for the first time, and we are already working on that. But equally, the thinking that we're doing about how people choose to be served in future. We already have a direct or hybrid capability within our business, which is designed to serve people who don't want or don't value a face to face in person relationship, but still want to talk to somebody and they choose to be served by phone or by Skype or something of that order. And I think that, that today is a very small part of our business.
But as we think about and we test new ways of doing business and new ways of thinking about our business, I think that's an area where we will keep coming back to and we'll keep testing. And finally, I think it's really important that we build solutions and products that are straightforward, that are simple, good value and meet the needs of our clients. And how we're thinking about that is in four boxes. I think it's really it's very, very important to me that this is an entirely transparent model. So we will we haven't announced these fee levels yet, which is why you don't see numbers on these.
But as soon as we do, we will publish them on our website. We will make them absolutely available to anybody who wants them and to be very clear about not just the prices that we're charging but the service that we're providing in each of these areas. Broadly though, the initial advice relationship the initial advice that you get has a range of services and has a fee attached to it. I've talked about ongoing advice already. Discretionary fund management is simply around arranging your investments and making sure that your investments remain on track and aligned with the goals that you've set with your adviser and the risks that you are prepared to take.
And then platform is where the benchmark technology comes in and the cost for custody and platform services. But it's critically important to me that this is done on a principle of transparency and openness. There is a fifth box which will join this in the coming months, which is about funds. And I think there is a significant opportunity where we can launch our own Schroeder Personal Wealth branded funds. As Peter has already said, it's done fully on an open architecture basis, but I think that there is an opportunity to put to build and design our own funds to meet the needs of our customers, but I think that there is also a commercial opportunity there as well.
Now finally, just about the steps that we're taking to build this business. The program team that's been created by Lloyd's to do to help us to do this has been incredibly well resourced and the commitment that they've shown has been really fantastic. We are approaching this first of our five transition steps at the moment where we launch the business, where we put where we transfer the people and client relationships into it. Quite quickly after that and after a fairly intensive period of training, which we've already started, we get new technology in July when Benchmark comes online. And then I've talked about the launch of funds, which are designed to follow that and we have got an application with the FCA to do that at the moment.
And then the latter stages are more to do with when Schroders takes their stake later this year and when we are fully operationally standalone and we've exited the transition service arrangements that we have with Lloyd's, which support the business in its first instance. So I'd like to say thank you very much for your attention. I think this is I would reiterate this is a really exciting time to be launching this business, and I think we have a really amazing opportunity. And if you have any questions, I'd be delighted to try and answer them.
And possibly the most lurid color you could imagine.
It's Jonathan Richards from KBW. A couple of questions for me. In your opinion, what segment of the market do you think is least served with respect to the advice gap at the moment? And how are you positioning the Schroders business to sort of take advantage of that? And secondly, when you think about sort of client evolution throughout throughout their lifetime or earnings period, how are you guys thinking about handoff between different brands, different buckets, whether they start at 100,000 and move up to 1,000,000?
And then how are you thinking about sort of fee harmonization between the different brands? And I guess alongside of that sort of advisor continuity because it is, as you said, a very personalized business. And if maybe you started with someone at Schroders Lloyd's and all of a sudden you're now a capable Casanov client, how are you guys thinking about sort of managing that?
John will take the first one and Peter will take the second.
Yes. Well, I think that how this evolves, I think, is really interesting. And Peter and I spent quite a lot of time making sure that when thinking about client segmentation, if we're thinking about the evolution of our client base, we're doing it in a way that, first and foremost, make sure that we put the right products, services and solutions into the hands of our clients at the right time for them. Now I think that if you look at the business today, we've said that our target market is £100,000 to £1,000,000 And I think based on our average client size, that's absolute that remains absolutely right and absolutely relevant. We actually serve quite a lot of clients today who are above £1,000,000 And I think that the thinking we've done is to say, well, actually, if the services that we're providing with Introverted Personal Wealth remain suitable for them, there's no reason why they can't absolutely remain where they are.
But increasingly, as you move up that wealth curve, you end up with a client need for the client just gets more complex. They have more bespoke requirements. They have more bespoke structuring needs. And that's a business that we don't intend to be in. And it's a business where I think we've talked about a two expert approach where we can bring the expertise from Casanov, not to break the link with your adviser, but I think ensure that you're getting the best off.
So I don't think there's in here, if you like, a dis synergy or where we're breaking links. But we felt very we felt acutely aware of the fact that we need to make sure that we're pushing the right things into the hands of our clients at the right moment.
Yes. And then I absolutely agree with James. This has to be driven by client need rather than a rather sort of arbitrary level of investable assets. But I think we're building a very, very good relationship between the two businesses. And to give you an example of that, there was on the Lloyd's side a sort of fairly high end book of clients, about £400,000,000 around 300 individuals.
And over the past couple of months, we have transferred those over to Casnova, and we've double headed the client meetings working together. And it's been an incredibly easy and seamless approach where we have hung on to, I think, 98% of those and a couple of them chose to stay behind. So I think that, as James says, there comes a point where a client need may be better met, say, for example, access to private assets or a customized segregated portfolio, in which case we're in a very good place to do it. Quick view on your first point is that, I mean, inevitably, I think when people talk about the advice gap, that is very much a mass affluent space, isn't it? And so it is very much in the space where sometimes individual clients at that level feel as though they are not being looked after by their existing adviser because they're not profitable enough.
In that space, obviously, the ability for us to provide top quality care profitably through the sorts of hybrid solutions that James is talking about is the approach. And to be honest with you, as I look at competitors, I don't think there's much out there doing a good job in that space.
I think if you go back on that chart pre-two thousand and nine in terms of number of advisers, you get to numbers of 80,000, 90,000. Now you can argue about what their level of qualification, etcetera, but the world was very different at a different time. And as Peter says, it's that segment which has suffered the most. So next question, Good.
Just in terms of the point you made about sort of fees, adviser fees, potentially moving to a new world where we get to 100 basis points or so for adviser fees. Is that at the expense of the asset management fees coming down so you can position to a client that The overall cost view is the same, but we're taking more, but we get a lower product. That's the first question. And then second one, just around sort of integrated flows within the model. How are the advisers incentivizing?
And if you have an integrated flow from the start through to the are they incentivized at a higher rate?
If I could just touch on the first. Part of the whole purpose of this strategy is that asset managers typically take have taken 25%, 30% of the value chain, and that has come down. So post RDR, the windfall of the client has not been there. James, you can pick up the Yes. And I
think we talked a lot about the fact that there's been this inversion of the value chain where traditionally, if you're a manufacturer, you set the price through the chain. And then of course, what effectively the RDR has done is flipped that on its head. And that's really important. I think the we've been really clear on incentivization that we are not moving into a sales culture, and I will fight until I've got the last breath in my body about the fact that anybody who's challenging me that this is some sort of return to a 30 old model of bank assurance and stuff, will reject outright and wholeheartedly. I think that we are talking about incentivizing people to do a great job for their clients irrespective of the services that we need.
Now I also I think that the notion about an integrated model is one where I think it's one size fits all and you must access all of the sort of touch points that we that I put up on the chart. Again, I think that's absolutely not the case. So whether it be a handoff to CASNOV, but equally whether or not a particular service is right, suitable and appropriate for a particular client, that's absolutely critical to our mind and our model. I think that the opportunity as we see it is more can we build the individual range of services, which are individually described and individually priced in order to make sure that where we have client needs, we're capable of meeting them within our group rather than talking about something which is very highly, very siloed and very functionally aligned as to a single solution.
There's one piece that we're missing from James' presentation, and you'll hopefully understand why, is that because we haven't gone live, the detailed financials that you would hope to have to model this out were not there. Peter gave a small snapshot. But it won't surprise you that the number of assets per adviser, flow rate through the adviser population and translating that into new business and the number of touch points coming out of the Lloyds Banking Group are at very low levels. And part of the normalization of this, as well as putting in new technology, a new rate card is also driving the efficiency of the existing business. We can see a transformation in the profitability the business just from doing that before one starts doing these other things.
That's why that it's going to take us one years point to replatform to get it right. After that, then it starts to get exciting. But I would hate you to just go away from your models and think, this is easy, we're to put all the numbers in for next year and the year after. The opportunity here is a five year material EV creation, but it's not next year.
Morning. Serge Rageldin from Exane. One question, please. Aside from the share of profit for Lloyd's, is there are you incentivizing Lloyd's in any way to send over clients?
No, there isn't we have an agreement in place, but there is no incentive to do that. So and it was very clear at the outset that we would not do that in order to make sure that the again, this was about meeting client needs rather than meeting numbers and targets. So there's no incentive in place other than the fact, of course, that we would hope that where there's an alignment of interest simply because Lloyd's have the ownership stake in this business and they, like Schroders, clearly wanted to succeed and to flourish.
Let's take one last question and we'll move on.
So it's Hubert Lehman from Bank of America. Two questions. Firstly, on client advisers. For you to get to where you want to be, what do you say is the mix between hiring people and homegrown talent? Secondly, in terms of hiring and poaching new people, what's the typical cost of poaching good advisers?
And has that changed over time?
So in terms of mix, we've got targets for both and they are blended. I think that we've talked about, I think, some fairly ambitious targets for our academy. And I think but I think it will take a little to Peter's point, it's going to take a little time to set that up and to get the wheels turning. But and equally, where adviser talent is available, then I think that we will be an attractive home for it. And certainly, the level of interest, just latent interest that we generated would already indicate that we've got a lot of interest in people coming to join this business.
I mean, as an example, just an anecdote, which is a non advice role, but we put an advice sorry, we put a role into the market last week and we've got 88 applicants for it, which I think is a relatively unusual position to be in and indicates the level of interest that we've got. We've had a lot of interest from advisers as well.
Shows us the number one brand in the advice market. So if you're an adviser, this is not an
unattractive venue. I think in terms of cost, to be honest, there are pockets of really hot concentration where it's expensive and where we're standing today is where it's most acute. But there is a massive geographic dispersion in terms of the cost of advisers and equally the competition for those advisers. I think that where we've talked where we've baselined our compensation and given that adequate flexibility, I think that we've got enough in terms of the making it financially attractive, but also the other sort of soft factors to make this an attractive place to come, whether or not you're in a place like the middle of London or somewhere else in The UK.
I'm going to stop it there and ask Susan to pick up a little bit more on the technology. Thank you, James. I mentioned earlier, Susan has grown for us over many years the leading business in Singapore. So I'm delighted that she's taken up the challenge of now transforming the consumer experience around the world.
Well, good morning. I am very privileged to be representing Asia to share with you some of the very exciting digital pursuits that we are undertaking in our part of the region. But before I get into that, I would like to give you a quick overview of what our business in Asia looks like. Our footprint in Asia is one of the best in the industry. We are represented across eight countries in all the major financial markets in Asia.
And if you include our joint venture with Axis Bank in India, then we are in nine countries in Asia. Over the last five years, we have grown our AUM at a CAGR of 7.8% to reach just under GBP 91,000,000,000. And last year, we contributed as a region GBP $477,000,000 to the group's revenue. Our investment expertise in investing in Asian markets has a very long track record of over forty years, and we are well rated by consultants in our region. We employ over 900 staff in the region, of which 12% are investment professionals.
Over the course of last year, we did two transactions and entered into one strategic partnership. The first transaction is that we took a strategic 20% stake in a digital technology wealth technology provider called Reinvest. Now the rationale is to enable us to broaden our service offering to our distributor clients who are actively building up their digital advisory tools. The next is that we signed a strategic partnership with Maybank. Peter Hall has mentioned about that.
Maybank is the largest banking group in Malaysia. Out of every 10 Malaysians, there will be seven Malaysians that will have account with Maybank, right? In partnership, we not only are providing the regular investment funds and the DPM portfolios from Kasenov to be distributed by Maybank in Malaysia, we are also working with them to deliver a B2B2C digital wealth advisory platform targeting their Islamic and conventional customer deposit base. Now the third acquisition is ThirdRock, and Peter has mentioned the rationale for it, so I would just skip it. Next, I would like to share with you the very fast evolving landscape in the financial ecosystem in Asia.
First is technology, it's not new to any part of the world. The digital revolution is very much enhanced by the mobile connectivity network and the extensive availability of data. So across Asia, we are seeing a lot of tasks being automated and also business models evolving. So the financial ecosystem is not spared. Next, Asia is home to more than 800,000,000 digitally very savvy millennium.
Now this is a group or a generation that thrives on global connectivity and is very demanding of the immediacy of service offerings. Now in investing, they are very cognizant of cost comparisons, and they would also want to express their individual preferences such as their support to impact and sustainable investing. They also have a very positive progressive attitude towards transacting, and they would also demand positive user experience. Also across Asia, our regulators are recalibrating their approaches to support digital technology and fintech solutions. This is because they want to actually have better and more efficient choices for the consumers.
So we saw the sprouting of a new channel of distribution in the form of robo advisors. And just before I left for London, the Hong Kong SFC has announced the approval of two digital banking licenses, one to Alibaba and the other one to Tencent. Now you know that these are the two institutions that have created the momentum for digital adoption across Asia, and they are now setting their sights in providing digital banking services and wealth advisory services. Although currently, they are only managing money market fund, and I'm sure you have heard of the world's largest money market fund called Yuebao, managed by Alibaba. Now in time to come, as they acquire more clients and they learn more about wealth management, they will be making or they can be expected to make a greater impact.
Additionally, the regulators in across Asia are also talking about Open Banking. Singapore and Hong Kong have already announced their OpenAPI framework and Japan, Australia and Korea are set to follow. Now Open Banking will envision an environment where open flows of data permitted by customer can be aggregated. This will potentially lead to increased competition and also the demand for more personalized services. So our incumbent distributors are all reacting to this.
What they have been doing is that they have been building digital wealth advisory platform to enhance their client servicing and also to scale into segments of their clients that are currently underserved. On top of that, for their RM channel, which is the relationship managers, in Asia, we call them RMs rather than advisers. For their RM models, they are also building digital tools to help the RMs become more efficient so that they can move up the value chain of wealth advisory to focus on discussing life goals and retirement planning rather than on transactional sale of investment products. And with Open Banking, the banks are also exploring tools and solutions to help them offer personalized services to the end customers. So how should we, as asset manager, reinvent ourselves to remain relevant in this digital age?
Now this is the reinvention journey that we in Asia have set for ourselves to develop a strategy for the digital age. First, we started off by looking at enhancing our own internal productivity using technology. So we were the first in the group to actually roll out RPA, Robotic Process Automation, to automate the repetitive process of our daily work life. And this is to free up resources to be able to focus on doing digital projects. Next, we started to identify what are the technological capabilities that we will need to actually help our distributor clients transform.
We saw the need to actually have a wealth technology provider, and that's why we took a stake in Reinvest. And we started to look at the value chain of wealth advisory and identify interesting points where we can develop digital tools to help enable our distributors. So we started to develop a chatbot. We're in the process of developing digital training, and we are leveraging on the group's InvestIQ, which is a client profiling tool to actually offer to our distributors. And finally, if platforms are proliferating, it actually opens up an opportunity for us to provide solutions to this platform.
So we are learning to transition from a product provider to a provider of advisory solutions. And through this reinvention journey, this is what we have built up in terms of a service offering, a framework for our clients. And this is on top of the strategic investment capabilities that we already have. So the first is platform as a service offering that we can offer to our distributors and then advisory as a service offering. And finally, in the world of open banking, we will be innovating AI tools to be able to continue to enable our distributors in that environment.
And with this service offering framework, we proactively go out and engage our distributors beyond the B2B relationship of a product provider that we already have with them. And in so doing, we are able to develop a B2B2C relationship with our distributors and that would actually enable us to create a longer term and more sustainable relationship with them. Now these are the service offerings that we can offer to our distributors in terms of platform building. We invest as a digital technology provider. It is able to provide our distributors with front end account opening or client onboarding even to the point of execution for our distributor clients.
They are also able to build digital robo for distributors who wants to actually build self serve models. And at the back end, they are able to build account aggregation models and also client reporting models for distributors. So we have been taking reinvest around to see our clients and they have been winning deals through us opening doors for them. The next is Strode Go, a chatbot that we have built to enhance our client servicing for our distributor. Now this is a chatbot that can actually offer real time fund information and market information to the RMs.
And on top of that, the chatbot is able to compare our own fund information with that of our competitors. So we learn the word coopetition, cooperating with our competitor to win. And in the Phase two of Stroders Go, we will actually be pushing out the Stroders thought leadership through that platform. Now digital training is what we are currently developing. Now if you imagine what the branch traffic would be like in this digital age, that has significantly reduced.
Now as part of our distribution agreement with our clients in Asia, we are obligated to provide training to the RMs of our distributors. Now if branch traffic has come down, the RMs are not going to be in the branches for you to train them. So we felt that by developing this tool, we will continuously be able to reach out to them and continue to own their mindshare in terms of the products that we are offering as well as our obligation to train them. So on this platform, there will be Investment 101 training, which we will we will be gamifying the investment concepts. There will be product training and there will also be a facility or utility that will track CPD hours.
This is the continual professional training hours or development hours that is required for the RMs to continuously renew their license every year. So we have actually sounded our distributor clients up. They are very excited about this too and are waiting in anticipation. Now for solution to advisory as a service, the group already have model portfolio service solutions, which are risk based. And this is actually leveraging on the or built from the strategic asset allocation and the tactical views of our multi asset team.
And this is open architecture. So the client can specify the universe and we can provide that model portfolio, burst that universe. Okay. Peter mentioned that in Asia, we
are
pioneering something called the mass customized solutions. Now this is the life goals solutions that Peter is referring to. This solution will be able to cater to the changing life goals of an individual. As individuals, our life goals never remain static. It changes over the time.
So this illusion would be able to cater for that and adapt as an individual moves along his life journey, right? And if you think about the world of Open Banking, right, when data individual data becomes available, this solution would be able to take data and adapt itself as it goes along. So and on top of that, we are also building within this solution the ability to cater for individual preferences. Remember, I mentioned that the millennials love to actually assert their individual preferences, and this would be able to cater for it. And with technology, this will become individual portfolios for each client.
Now the group also have a client profiling tool called InvestIQ, which I think I mentioned earlier. Now this is a client profiling tool that is built based on behavioral science. It is designed for investors to actually better their better understand their own personal investing instincts. The tool was put on our Internet and there were 40,000 tests that has been completed globally, and it is available in 17 countries and 15 languages. And we believe that by offering solutions or advisory solutions as a service to our distributor, it gets us one step closer to the end clients because we will be able to understand the end clients' needs better.
Now as open banking comes about, we are all ready to be thinking about innovation in the space of AI and machine learning. So we will be leveraging our data science team and our robotics teams and together with Graham Callan, who will be talking about our other digital group digital pursuits, we will be looking at innovating in that space. Now how successful have we been in using this approach to engage our clients? Here are some examples. With InvestIQ and Financial, which is a part of Alibaba, has taken up the tool.
And three months into the deployment of the tool, 600,000 tests has been done, okay? This is a fantastic branding exercise for our Asian business into the domestic Chinese markets. Additionally, Citibank in the region has entered into a partnership to actually take the tool and use it as a conversation starter with their clients. And back in Singapore, a bank is currently seeking regulatory approval to use the tool as a complement to their traditional KYC in order to risk profile their client in their on their digital self serve platform. And in terms of developing advisory solutions for our clients, I mentioned Maybank earlier.
Maybank in Maybank's case, we are developing wealth advisory solution that is able to accommodate the Sharia restriction principles in the solution. And with another bank in Singapore, we are actually developing a LiveGo solution where they would be providing us with the data in order for us to actually customize. For Stroders Go, we have rolled out to 11 intermediary clients in Singapore, and the region is looking at deploying the two on a broader basis. And for digital training, we are expecting to complete the development of platform at the end of the year, looking to roll out early part of next year. This is a sneak preview of what the LiveGo or mass customized solution would look like.
It will combine the investment capability of our multi asset team with LiveGo forecasting tool and will be digitally delivered across to each individual clients. So we believe that solutions like this would truly put client at the center of the proposition. And in Maybank's case, we are using the preference model of the LIVEGO solution to actually optimize the portfolio based on the prescribed restriction that the Sharia principles have. And this would include a limit on leverage ratio, prohibited financial instruments, prohibited activities, purification is actually a philanthropy and also exclusion of interest taking deposits. Now we believe that our approach or our strategy of a B2B2C approach will actually harness our strategic benefits over the long time, right?
This will enable us to actually get closer to the end client by delivering customer solutions that are focused on solving client specific needs. It will also improve our longevity with our distributor client because we will be embedding our digital tools and solution early onto their digital platform as they are building it. And internally, these tools will also help us improve our own efficiency. So tools like Strode Go and digital training cuts down a lot of our resources in terms of client servicing and training. That's the end of my presentation.
I'm happy to take questions.
Thank you, Susan. There's quite a lot of work in progress here, so and there's quite a lot of sensitivity about names and things. So you'll have seen lots of referrals to vague things that are going on. You'll understand that we don't want to put up exactly what we're doing with many the distributors and name the distributors at this stage. But any questions for Susan?
Thank you. Mike Werner here from UBS. Just a quick question on the InvestIQ platform that you have. When you provide that to your client base who then go and implement that in their own digital platform, are you able to see the data that is coming in from those client responses from those tests that you mentioned, the 600,000 from Financial? Or is that kind of the data of the client and not accessible from Schroders perspective?
He's the technical guy.
You'll hear it from Graben at moment.
It depends on the client relationship. We obviously want to get the statistical values in to make the financial work, but we don't see the underlying data. On most cases, the client keeps retention of that data, but we just get the statistical model results that we need to fully anonymize, they help refine and improve the model.
And I guess in terms of the feedback that you have gotten from those clients, that actually been integrated or how does how is that integrated in terms of the service and products that you will provide or you plan to provide going forward?
I think Susan showed that it's part of a holistic approach of moving across the value chain. We
we're able to So
the ir question, which will then run some behavioral science on, etcetera. So for them, it's really easy. We absolutely set out to recognize that the way risk profiling works in most organizations doesn't take into account the true personal situation or the biases or the true risk nature of the individual. So we wanted to address that and we can deliver this product we're building.
Thank you.
Anyone? Excellent. Susan, thank you. We're now going to stop for a quick cup of coffee and resume in fifteen minutes, if we could.
So yes, I think I'm very impressed that everybody came back. Actually, I think several years ago, the thought of talking about a technology discipline after a break would have cleared the room. So thank you. So what I'm going to do today, as Peter says, is really talk to you about the journey we've been on. I think today, the great thing you've seen is when people talk about digital, the first question they generally ask is what does that mean, what does it do.
It generally, historically, has been a very technical discipline. But what you've seen today is really the outcomes that the journey we've been on over the last three years have enabled us to do. And really, part of the thing I would like to discuss with you today is that transition from just being technology to becoming an enabler and then the future state of us really becoming a value driver. So over the last three years, Schroders have spent a great deal of time really understanding the trends, the technologies that are available to financial services as a whole and to other industries and really trying to understand which of them we should be harnessing, which of them are hype and which ones that we should be maturing our own capability of being able to deliver. And as you can see, you recognize all of those, and we're at varying degrees on each of those.
The ones that I think we are now recognized through awards of being voted the Digital Asset Manager of Asia for being voted by The Living Group as the number two globally in terms of digital intelligence. We've managed to harness some of these and really start to drive them into the core of our business. Going forward, over the next three years, the sorts of areas we're starting to think about is the next generation, the next follow on from robotic process automation, which we're calling and is called in the industry as intelligent agents. There is so much hype around artificial intelligence, but we will be looking at the true advances in that in terms of deep learning. We've already seen the new interfaces, conversational interfaces in terms of a chatbot, the APIs needed to drive technologies and delivery of extra services to our clients such as InvestIQ, and then also how that will power the platforms that actually drive the wealth management business that you've already had explained.
One of the other things we're looking at is as we become a data driven organization, it's really important that we constantly keep giving our users and our colleagues the very best visualization tools. And over the next three years, we expect to see an emergence of much more three-dimensional visualization of data because as you start to get more complex and the search for alpha increases of trying to find those insights that nobody else can find, a two dimensional view is not enough. So we will be exploring that going forward. But it's not just about technology. What it's also about is thinking across the whole organization.
So one of the key things over the last three years has been that digital has gone from just being a distribution and a marketing support function to working right across the organization. Everything we do, we break into it has to comply with one of these four pillars. It either has to improve the customer experience, it has to improve our operational processes, it has to challenge, evolve or refine our business model. And also, one of the key things that's often forgotten, which I'll talk about in terms of digital strategy, is how do you change the culture of the organization to be able to accept the new ways of working, the new technologies? How do you create that innovation culture for people who are at the grassroots of the organization to be able to identify the things they could be doing differently and how do you make those happen?
And then also, how do you provide people with the skills to understand and really leverage the technology or the new capabilities we're putting in their hand? And the key enablers for that inevitably are analytics and data science. Becoming a more data driven organization means that you can find the insights and you can see some of the problems a lot quicker, so democratizing that. The emerging technologies we talked about, but also, to Susan's point about coopetition and collaboration, we've also, as part of our digital strategy, significantly changed our approach in how we interact with fintechs. Over the last three years, we've gone from seeing them as potentially in the robo space as competition to actually somebody we can work with.
So fintechs, we spend an awful lot of time collaborating with and actually working with them to create solutions for asset management and wealth management. Over the last few years, one of the key things we've seen is the definition of the opportunity for fintechs that this space, asset management and wealth management, is somewhere they can really play in and provide solutions to. So I'm going to touch on the customer experience area briefly. And really, before I start on that, it's been a key mission over the last three years for us as an organization to understand the change in customer experience. A decade ago, when I've previously worked in asset management, it practically felt that people still believed that institutional clients would like to receive a quill based letter.
But now in every walk of life, in every aspect of their working life and of their personal life, our clients, our intermediaries, our end consumers, the B2C, they now live in a world where technology is everywhere. They are connected all the time in every aspect of what they do. And what we have worked hard to understand is the various touch points of that and how does that affect us staying relevant in that changing world, in that new connected environment and how do we deliver products and services to that. We also provide the capability to work with our distributors for them to understand their market as well. And how that's translated is that change in the user experience expectation.
So we now have got, in the digital team, an experience design team. Everything we do, we now recognize that understanding the experience, the service design, how that's delivered, the context in which it is delivered is absolutely essential. It is part of the product. So when Peter was talking about that focus historically of the industry just on performance numbers, we're now looking much broader and we're understanding how is this delivered. And this has resulted in significant changes.
Schroders Go that Susan talked about is actually a whole of market chatbot. So actually, you can ask a question about non Schroders products. That was quite a leap. Traditionally, I think an organization providing the first chatbot in Asia as we were would have just focused it on just Schroders products. But we actually ran some client focus groups, and they liked the product.
They liked what it would do for them, but they actually said, but it would be helpful if I could look at all funds and I can actually compare them. So that's what we did, and that's why it's had significant success. So those sorts of areas. We've also recently, as you know, worked with marketing and brand to redefine our brand and the digital experience of that. And that's been quite key because as we move to multiplatform consumption of our content, we have to be able to make that still feel cohesive to the end consumer.
And really, I guess the best analogy is working like Apple and really caring as much about the box that the product comes in as the actual product. Some of the data science capability that we've been working on, we've now started to roll out across the organization. And that means we've reached a significant level of maturity now in the data science techniques and the capabilities to provide a really great understanding of what our clients actually want. That isn't just about personal face to face user group conversations. It's really understanding of the content we push out there, the thought leadership we push out there and the client interactions our advisers and our salespeople have.
How do we start to categorize that? How do we start to use that as a data resource to be able to provide, I use this analogy internally about provide our sales teams and our marketers and our product designers with their own Ironman suit with a Jarvis that's constantly feeding them real time data about how successful the article has been, whether or not the clients are finding the certain topics we're talking about interestingly. And we've actually started to be able to engineer for the first time a direct correlation between website activity and investment into product. That's absolute gold for both us as a product manufacturer but also for our distribution partners to be able to provide them with the clarity of what pitches, what events, what activities, the actual evidence to show that those are working. And you can see there, there's a sort of dashboard we call the sales cockpit, which shows what's going on and the information there, and you can search for when a product has been discussed and what the sentiment was.
So we've taken that very sort of leading edge digital marketing capability, and we've turned it on to an internal lens. But again, going back to the original point of it's not just about marketing, we've applied the same techniques and capabilities across the organization. So focusing on operational improvements, Susan talks about Singapore leading the way in our robotic process automation. These are some of the numbers that we've shown. So we've got 79 bots working.
There are 10 business areas that are actually leveraging those. And what's interesting is those 100 FTE equivalents are freeing up people's capacity. Think about your own working day. When you come into work in the morning, there are activities either quarterly, monthly or daily you have to do that are very mundane. You have to collate data.
You have to process information before you can actually start to do your job. And what we're really seeing is the opportunity here is taking those slices of nonvalue generating activity from a sort of productivity perspective and actually taking them away from people who should be doing other things and automating them for them. So when they come into work, the task is already done. The data is ready to go. They've got the information they need to do their job, and that's the real value of this.
And we'll be starting to apply more intelligent automation going forward to start allowing there to be decisions and criteria around certain follow on activities. One of the other things we found is, for example, when we implemented RPA in Singapore, for example, we found this latent business engineering capability where some of the people that we were taking out time from their day and freeing them up, they actually had computer science degrees that they weren't really using in the general day. So by being able to provide them with these sorts of tools, they can now code their own robots to actually do other tasks and actually start to free up their own time and really get to being a much more self-service capability. The other area I think has been really revolutionary for us is we were one of the first movers to implement a data science function within the investment research and investment space. We've now reached a maturity of that, where, as I said, in distribution and marketing, that capability is now being rolled out across the organization.
And we spend an awful lot of time understanding the data that we need to be able to create, to manage, and that's a significant part of what we do, that data management. And that's now happening across the organization in all the different spaces. Part of the benefit of the digitization of what we do is the vast amounts of data that we then get, organizing that and then being able to provide those feedback loops on the objectives, the success of those activities or finding those lean opportunities to actually redefine the process to take out the wasted activity or the areas that we could just automate anyway. So that's now reaching a significant level, and we're starting to find that by democratizing the data science capability of making it available to everybody through both our own skills development, also the commoditization of those technologies, it's becoming much easier to actually overlay technology on top of the data we've got to start to help people serve themselves, but also to be able to find the ways in which we can then learn from that and improve what we do. The democratization of the analytics has also been a key activity because it's one thing being able to capture the data, to be able to analyze the data, but it's the visualization of that which has also been key.
So rolling out a global analytics practice to help every aspect of the business define the reports and insights that they need on a daily basis. So fundamentally, the toolkit available to a fund manager and pretty much to most other people in the organization has fundamentally changed. So now we have the ability to give them analytics and insights on their data. We now are building a really sophisticated data platform. We're just launching a project which will, deliver an internal data marketplace.
One of the things about democratizing that data is if you think about your own organizations and our own peers, often they have lots of data, but it's in silos. And getting access to that data is one of the biggest inhibitors to becoming a data driven organization. So part of our digital strategy is to find ways of being able to make that able to be shared within a safe and appropriate way and allow people to, instead of the previous models of people having their own copy of the data, manipulating it, doing their job and then it not being useful to anybody else, we want to be able to create this data marketplace across the organization that everybody will be able to work on the raw data collectively so they will have access to it. And then as they work in refining that and creating value out of that data, they can then share it. So then that means that the application of robotics to take some of the manual tasks out of those processes and then applying machine learning and artificial intelligence creates a very different skill set and capability, where it gives us scalability and it gives us insights and efficiencies faster.
The previous two elements of better data about what your client is doing, what your client wants, looking at your operational processes to drive efficiency and increase the capability of those, leads you naturally to the ability to actually evolve, challenge and redefine your business models. So the living proof of that, unfortunately, she's not in the room now, is really Susan and James Rainbow, where we're able, through acquisition of a technology centric business such as Benchmark, we're able to enter into a joint venture to be able to provide technology that previously wouldn't have been made available or wouldn't help us be able to operate at the scale we now need to work at. And really, that's a reflection of the journey that digital has had through the asset management industry. So where you see Susan talking about being able to provide enhanced products and services, that is a very natural progression and it's a journey we've been on over the last three years. So when we first started out in digital, unfortunately, was there in 02/2001, it was just about creating websites and marketing.
Then we evolved into being a sales support tool, starting to evolve into client services, where we were providing portals for clients where they'd log in. The reality of those portals was that we were probably one of eight providers. So we weren't necessarily solving the client problem, we were solving our part of the problem. So what we needed to do is now moving into Digital three point zero is really start to co create financial solutions with our clients and actually provide solutions to their exact problems. So an institution, we would now expect to be either working with them with something like Symphony, where we create a live data stream for them or actually providing APIs for them to be able to plug the data into their core systems, whereas previously, and traditionally, they would receive a PDF version of the data, which is completely, although it's informative, they have to rekey it.
That data is inert. It doesn't form part of their own business value chain. So what we're trying to do now is reinvent how we deliver that information, working with our partners and distributors to actually create those data streams of a variety of data. So our API strategy is very key in terms of how we cooperate and co really design financial products and solutions. And that's true for our intermediaries as and distribution partners, as Susan was explaining, by providing tools that go into that client relationship, a, that helps provide better outcomes for the end consumer.
So we are much more sure by providing things like InvestIQ as part of the risk profiling process, we are much more sure that we are confident about the client's suitability of those products being sold to that client. But also, we have been part of that journey. And as we work with those distributors and partners to get feedback over what worked and what doesn't, hopefully, that will inform our product design and the design of our capabilities and services. And it is about longevity. So providing these services creates a deep relationship with our partners in every way: a, we're easy to work with.
We've removed friction from the process of buying and selling product. And we're seen as a deep partnership where we really help them try and understand their clients and help them deliver value to their clients. A classic example is Ant Financial. The Ant Financial discussion that got us to deliver InvestIQ to them was something that was born out of our desire to get much closer to the client in terms of understanding the experience they wanted. We ran a workshop in Hong Kong.
We invited Ant Financial along when we were just designing the very start of that product, and we designed the capability for a client to be able to take this and use it for their own relationship discussions right from the very beginning. Those conversations drove the design, the technology that was being used and how we would actually think about how we would manage the security of the data and how we would run that part of the technology platform. And it is those sort of platform decisions that form an equal part of understanding the client and delivering value to them and is a key part of what we're calling Digital three point zero. So this all is being a digital leader is great, but you need to make sure, in my job, that you keep the organization with you. So I spend a lot of time working with senior leaders, helping them understand the art of the possible, helping them understand why something is hype, why something isn't quite mature yet, but also that certain things are very mature and we really should be exploiting them and then working with them to work out how they should be able to leverage those.
And also on the ground, helping people who are living the interactions with our platforms, running our business on the grassroots level, really helping them understand this disruption that they're seeing in their everyday working life, helping to balance some of the hype that you get in the media about robots taking all of our jobs, etcetera, and really, a, demystifying it for them, but also making them informed so that they can be part of that change too. And so we've developed a sort of a three level digital training program, which we're rolling out in the second half of this year, which will be foundational level for everybody in the organization and helps them understand both the digital transformation they're seeing in their personal life but also their working life and then helping them specialize in certain areas such as AI, machine learning, robotic process automation to help them become really quite expert in that in terms of being a practitioner on the ground. And then for certain people that we're working with that will be actually driving those change and really identifying where that application would really provide value, we're providing that sort of master class level.
We see this. So everything I've talked about, we see as a significant competitive differentiator. So everything today, as a former technologist and a former entrepreneur, it's great to work at Schroders because our embracing of technology is significant. You've seen it today. It's mentioned in every presentation.
And the desire to change and disrupt ourselves is huge. And we see that as working on the application of this as a key driver of our future. The final thing I'd talk about is how we are learning from other organizations, be they a fintech, be they a big tech on the East Coast and really understanding how we can inject into our organization those different ways of thinking. The recruits I have in digital are not often traditional financial services employees. They come from telecommunications.
They come from big tech. They come from fintechs themselves. And that's really key because they bring that very different perspective and they inject into the discussions that slightly different way of thinking. The other way we do that is through our COBOLT program where we work with incubational startups where they have a product that may not be quite right at the moment for asset management or they have an asset management applicable product, but we think it would be really interesting to actually use that in our organization. And instead of doing the usual thing of setting up a lab or setting up a garage in Shoreditch where they all sit on beanbags and play table tennis all day, we decided to do it in a very different way.
So we actually bring them into the organization. One of the promises of fintech mentoring and fintech engagement is that your staff will mentor them. Well, if you've done that outside the organization, they're not going to get the time because everybody's too busy. And the other challenge with innovating with the fintech external to your organization is, to be honest, you haven't really dealt with the problems, which are compliance, which are legal, which are information security, and it's your technology infrastructure. So by bringing them into the organization at the very beginning, we tackle all of those issues head on.
And actually, they've significantly changed our procurement process, our legal processes for getting NDAs and how we actually design contracts for companies that are very new and also working with our information security guys to help them understand the different ways of working on the cloud and the different ways you can work with data. So over the last year, we've met with over 400 start ups. You can see on there that 30 of them were running with active proof of concepts. And what we also do is by having those engagements and understanding those technologies and where they may be applicable, we also run hackathons. Right now, on our Ninth Floor, there is a distribution hackathon going on where we are working with our distribution folks, my internal and my external innovation team, are working with the distribution folks to explain to them very much in the Google way of giving up 5% of your time.
Giving up 5% of your working time over the next three months, how can you innovate and change something in your organization? So right now, they're upstairs. They're going through the ideation process this morning. This afternoon, they'll refine those ideas. And then later on, they will then decide which of those ideas are going to be successful and are worth pursuing over the next three months.
Last week, Peter very kindly hosted our own internal hackathon, which is a global one where it's an innovation challenge. And the great thing, when we first started out, it was a load of technologists who were just finding technical things they could do. This time around, we've had 69 ideas submitted, of which, completely to be frank, 66 of them were actually business ideas. There wasn't actually much technology involved at all. And pretty much none I think all but two of them were new technology.
So it was taking the existing technology, finding new ways of doing new business things that actually have significant value. And we chose the winner, and the winner will now be funded because as we work with our key technology delivery partners, we run a sort of innovation fund where we accumulate funds, and then we use that to then make sure that those innovative ideas actually make it into the real world. And actually, if you didn't know, Schroders Go was a previous the chatbot was actually a previous winner of a chat of an internal hackathon. So we now have a track record of taking that idea that came out of Singapore from a very small team where they decided that it would be great if you could get fun prices just by using a chatbot. And we took that idea, we got business sponsorship and we've delivered it.
So in summary, I hope I've been able to illustrate to you that digital at Schroders is not just about the traditional digital aspect of distribution marketing. We are a team that champions new ways of working. We're driving and working with senior leaders to really understand how they can disrupt their own business, And we're actually delivering value to both our clients. We're improving our operational efficiency. And we're also upskilling our employees and colleagues for the future.
And the combination of that is presenting some quite interesting opportunities for us to innovate our business. Thank you.
Thanks, Greg. I'd add one other thing. I think in transforming people's personal technology, we've enabled the organization to go get rid of paper, work in an agile manner. So we were only able to move 1,800 people, in theory, into this building because of the structure of it. In fact, we put 2,500 people in this building because we're able to work agile.
That was driven by a technology platform and the ability for people to log on anywhere, any moment within three seconds. And that just changes the whole tempo of the organization and makes you far more appealing to a different group of employees that perhaps wouldn't have been attracted to Financial Services in the first place. Questions for Graham? I thought that was going be the case, but anyway.
It's Geertj from JPMorgan. In terms of when you're rolling out these digital propositions to clients, how tailored are these solutions? And I guess what I'm trying to understand is this the tailoring versus the scalability in these solutions?
So I would say that the reality is that change happens and every client you have to build these things knowing that every client will have different requirements. So we are very fortunate, I think, in this day and age that by developing microservices, so by atomizing everything you do into very small components allows you a greater deal of agility. But we also go into these things. I think traditionally, when people were building monolithic solutions, they would have a very defined use case and it would only cater for that use case. So we try and be a bit more flexible when we're developing those now.
But also the technology we're delivering allows us so the classic example somebody asked about the data on InvestIQ, We've designed that so it can be delivered on prem for the client. It can be in the cloud of their choosing or we can host it for them. So by having that microservice capability, it gives us the ability to deal with those nuances that I worked in client technology delivery for twenty years. And every time you go to a client, it's different. So we've just tried to bake that in from the get go.
I think the other part about it is it allows us to do many other variables of InvestIQ, which we haven't talked about but deliberately say, which will come from the same technology platform. So you can reskin this over and over again.
And that really has been learned from talking to East Coast you know, big tech organizations about how do they experiment and fail safely. You know, people talk in my role about failing fast. We're working in a regulated environment. I've got to fail safely. So part of the challenge is finding ways of making sure we can zig and zag without it being a problem.
We talked right at the beginning about personalization. And I said I think our industry obsesses about performance. I think we're as the world recognizes that capitalism isn't working, climate is becoming massively important. What we do with our money, I think, is going to be more important than ever. We've set ourselves an internal goal to make sure that we lead in this place.
Jessica Ground is Head of our Stewardship. I'm just going to spend a few minutes now just saying what that actually means because I think bringing it to life, we're not talking about painting the walls green. There's a huge amount of painting the walls green which has gone on. This is, I believe, different. Thanks, Jess.
Thank you, Peter. As a former financials analyst myself, I have some sympathy for you sitting there Investor Day. So I will really try to focus on making this an engaging and as punchy as possible, but also stressing how important this is for increasingly for our clients. I'm sure you're aware that you cannot open FTFM this week without there being some article on ESG investing. And we believe it's something of a perfect storm, primarily because we see environmental and creating an incredibly challenging backdrop for companies to navigate and for our investments to navigate.
If you look ten years ago, the World Economic Forum was talking about the challenge of asset price declines and failed states. Roll on, it's now about cybersecurity and climate change, clearly ESG risks. The second major issue is the global challenges that Peter's just talked about, issues like climate change, which definitely require finances involvement to solve. In case you haven't noticed, governments seem to have run out of money, and we need to think about a low carbon economy. So there's going to be more pressure on channeling finance towards that direction.
Then there's the regulatory pressure. This has really risen in the wake of the global financial crisis, and it is indeed global if we look at things like stewardship codes. But there's more scrutiny on the entire investment chain about how we're holding companies to account, not just on issues like remuneration, but also on their own environmental and social performance. Asset managers have increasingly got to maintain their own social license to operate and prove that they're not just traders, but really are good stewards of the companies that they're investing on their end clients' behalf. And then finally, there's the end client interest, that old adage, you don't drink what your father drank, you don't invest perhaps like your father invested or indeed your mother.
And savers of all types are increasingly focused on sustainability related issues, and it becomes more important in part of our overall proposition for clients. But we are a clients come to us for alpha, and I think the most important thing to start is why does ESG integration, why is it increasingly important for us as active fund managers and how we navigate these headwinds that I've just talked about. There's plenty of academic evidence that is quite backward looking that that says what we all feel. We know that companies that are well managing their ESG risks benefit from lower cost of capital, less operational volatility that gets recognized in credit ratings. But what I think is a forward looking approach, and that's what's really important for us as we think about how we navigate this for our clients.
Large companies are becoming increasingly important to economies, and they've grown their share of GDP, their share of employment over the past twenty or thirty years, and that trend doesn't show any signs of abating. And in line with that, I mentioned asset managers licensed to operate. But unsurprisingly, as they adopt this privileged position in society, there's a lot more focus not just on what they're doing, but how they're operating in business terms. So if we look at a number of issues in terms of how regulatory costs are increasing quite significantly, not only in The U. S.
Where we have the data there, but we're seeing that happening globally in emerging markets as well. We've all seen the OECD clampdown on tax avoidance and tax rates, and the public mistrust of major corporations is rising. So for us as investors, we need to understand, as I said, not just what a company is doing, but increasingly how it's doing it, and that pulls on a lot of the new data analytical tools that Graham just talked about. So unsurprisingly, as well as being more important for generating alpha, we have a huge amount of our own data about why this is more important for our clients. We do two major survey of clients every year, both institutional and retail.
Let's start with the institutional one, six fifty asset owners everywhere from pension funds to insurers globally. And what you'll see if you look at 02/2018 has been the acceleration of those who feel that sustainable investing is going to become more important over the next five years. Now levels are very strong in Europe. We know that. It's quite well established here.
What is so interesting is the growing interest that we're seeing in The U. S. And Asia, and we're very focused on being early movers into those markets and talking to our institutional clients. The same data comes through in our retail survey, which looks at 30,000 investors at about 28 countries. So 64% of them say that they're interested in sustainable investing, including funds that are supporting things like good corporate governance and climate change.
64% have increased their allocation over the past five years. That's from a very low base. And 76% of them say it's much more important than it was five years ago. But what's so fascinating is when we survey the advisers, and what we are seeing is that sustainable investment is much more important to end clients than it is to advisers. And that's a gap that we can really help to bridge.
And the other thing that we see is that end clients say that sustainable investing is the number the second education topic that they would like to see receive training on. So there's a huge underlying demand for more sustainable investing, which so far, as far as we can see, the investment chain hasn't been very good at navigating and demonstrating. And one of the things that we need to be able to demonstrate is how we really are giving our clients more than investment returns and also how our work can actually support the development of investment returns. Now we're in a stage now where everybody, if they didn't embrace the green revolution at an asset manager, is now talking about how they drive a Tesla. And what's incredibly important to underline about how we've approached here is our ongoing commitment to it.
So we first started this twenty years ago. And yes, we have grown the team recently, and Peter has been instrumental in backing that over the past five years in particular. But you cannot do this overnight, especially if you want to embed it and have it impact every aspect of your performance. The second thing, which I think is very distinctive about what we do, is we have the investment leadership of it. So I've been here for twenty one years.
As well as being a financials analyst, I was a global I was a UK PM. And if you look at Andy Howard, our Head of Sustainable Research, he was a sell side analyst. And that's incredibly important because there are a lot of people there who are passionate about the environment, but they don't always know how to translate that into financial impacts. And if you look at the thought leadership that we put out there with tools like carbon value at risk, the climate change dashboard, we've been really innovative at showing that. And then it's unsurprising that we're getting a number of accolades.
So we've consistently been A plus by the UMPRI for our overall approach, and we're either A or A plus in each of the individual asset classes, which is incredibly important. There is not an institutional RFP that does not ask that these days. I think something we're more proud of is the NGO share action, doing an assessment of 40 pan European fund managers in 2017. This is the last date that they did it for, and saying that we were number one for the robustness of our policies and processes. That type of external validation is incredibly important to us and incredibly increasingly important for clients, whereas ESG a few years ago used to be a tiebreaker, it's now very much a dealmaker in the institutional space.
But one of the questions that we need to acknowledge about sustainable is it's very easy to say that we all want to be more sustainable and we all want our investments, but it's so incredibly complicated to navigate. And this really is one of the huge opportunities that we have for getting closer to our clients. There is a huge variety of regional definitions and differences. There's a huge growing body of both soft and hard regulation in here. Many of you will be aware of the EU financial package on sustainable finance, which is creating a whole load of more things that need to be navigated for a lot of our clients, but we're also seeing policymakers all around the world having more interest in this area.
And then finally, there are a number of different solutions to meet a number of different client needs. So while the overall objective is being sustainable, the regulation is increasing, the levels of education are relatively low and the investment solutions are complex. So actually, we spent a huge amount of our time helping clients to navigate that. We spent a huge amount of time producing research on if you want to decarbonize your portfolio, what are the options, and a huge amount of time trying to bridge the very different expectations. If you're a private client, you're perhaps interested in how do I actually have impact.
If you're an insurer, you're trying to understand what's the FCA going to do to regulate me on this. So one of the things that we've done in our institutional survey again is we've actually dived down into the barriers to this and what to give us a better understanding of what clients need to do to help them to gain confidence in this area and then recalibrated our approach accordingly. So the major concern is still performance. And people have had bad experiences with different versions of sustainability. Sustainability one point zero was all about exclusions.
Unsurprisingly, that can sometimes drive a bit of a volatile performance. Sustainability two point zero has been more about perhaps some of the best in class or some of the indexes. I'll show you later why they haven't delivered. We're very confident that Sustainability three point zero of meaningful ESG integration, and we can start to see this in our own funds and teams that are doing it, can drive alpha. But we've got to realize we've got to get our clients over that.
But equally and just as powerfully are the number of concerns about lack of transparency, reported data, the need for education, difficulty in measuring managing risks. So we can really take our clients on a journey to educate them about this and to help them to navigate it. And one of the first things that we're doing is just helping them to understand that everything under this huge sustainable investment umbrella is not the same. Talking to Peter's thing of idea of mass customization, I think as we look into the future, we're going to see this more important in being successful of sustainable investing. We right now, we have a situation where the Nordics and the Belgians can't even agree on what's unethical, let alone what is ethical or sustainable.
And also, what we see increasingly coming into the conversations is an explicit desire to have social benefits alongside financial benefits. So I want to take you across the spectrum and just talk briefly about what we're doing. First of all, it's ESG integration, meaningful voting and meaningful research. Incredibly important, as I said, on how we deliver alpha going into the future, incredibly important for our institutional investment and has become very much nonnegotiable for any fund manager who wants to work in our business. Peter is nodding on that one.
Where we're seeing really interesting demand is and actually, that is coming from institutional asset owners and it's also coming from intermediary, is more sustainable investings. So more of a best in class approach, explicitly stepping away from more controversial stocks or sectors, and we've launched a number of new options there. And we're still seeing demand for screened investments, which are growing faster than our overall AUM, and those are becoming much more complex. Impact is we take a very pure definition of impact. So we are really targeting, as this says, a social benefit as well as a financial benefit.
And I think it ties in quite nicely and the things that we're looking at tie in very nicely with our with private assets. And then finally, the philanthropy. Now one of the huge challenges that we have in this is that we're seeing a rise of different philanthropy. Labels, and we're also seeing a huge amount of greenwashing. Now And so some of the things that people are being putting out about caring about the environment are not necessarily matched by other areas.
So what we have done is introduced an internal accreditation system for individual funds and investment projects. So that is one of the most important things about this is that fund managers that are integrating ESG have to be able to demonstrate that they're doing that in a meaningful way that can pass rigorous stress by clients and consultants and provide the evidence of how that's influencing their portfolios construction and their stock selection. So ESG analysis and sustainability becomes a building block of the investment process. We have about 40% of our AUM that has already achieved this, and the target is to have 100% by the end of twenty twenty. I would like to say this is what we believe is a step above what already is the UN RI assessments at an individual asset class level.
And so far, it encompasses quite a wide variety of assets, so as much real assets, we have real estate that's already integrated as we have EMD, as we have another of our equity. Then the other area where we are investing more resources and launching new products are sustainable products, where we are explicitly targeting the same normally the same performance target as the reference fund, but asking that clients look adopt a longer term approach, so look for outperformance over five years. And we've launched a number of interesting global solutions, both across quant, multifactor and very concentrated equity. We're building out our regional equity and increasingly our fixed income and our solutions in other asset classes. And as I said, hopefully, time, we will be launching looking more at the impact space and what we can do with our existing capabilities there.
Looking As I've mentioned, our realization that as well as ESG integration, we need to show that we're delivering more than investment returns to clients. And holding companies to account is a really important way of doing that. So over we've been increasingly engaging more on ESG topics, and increasingly, we're seeing more regulatory interest in this, not just in The UK, but globally. So we did over 2,200 in 2018, about half of these are fact finding and half of these are pushing for change. These are the number of issues that we've engaged on.
Climate change, we believe up to 15% of global earnings could be at risk, issues like data security as well as your typical corporate governance issues. What's really important is these engagements gives us additional investment insights, but they're also encouraging that more sustainable financial change. We've been tracking our engagements since February. We have a very high success rate. We're talking about a success rate of 60% to 70%, but you have to be patient.
It takes two years to affect the change. And we're also backing it up with really rigorous voting. So at 48% of AGMs, voted last year. We voted against management on at least one resolution, and we have one of the best records on voting for things like climate change resolutions as recognized by the NGO, as you saw. So we really are engaging, holding companies to account and then able to show our clients the impacts that, that is having on their portfolios.
So lots of people are talking about their engagements or writing lovely letters about how they're holding management to much more account. But one of the other questions that we have is can ESG be done passively? So we've witnessed this huge growth of more sustainable funds, particularly in the ETF space. And one of the things that we passionately believe that ESG is so complex, it cannot be distilled down to a single number. And actually, if you look at the evidence of when that's happened, it has not delivered alpha, going back to that huge concerns about our performance that we see.
So on the right, we've got the two the Dow Jones Sustainable Index and the FTSE4Good, and you can see their underperformance against the mainstream reference indexes in both of those case. The left is some analysis that we've done on ourselves on third party ESG ratings, and we particularly look through the lens of corporate controversies. And what we found on average, if I these corporate controversies will be very familiar to you, that on average, the third party rating agency had given them higher than average ESG ratings, and then quickly they have a controversy that they get downgraded their bad stock and it takes them many years. One of the great examples that I love as an ex banks analyst is all the banks were AAA going into the financial crisis. There's also another number of issues with the third party ratings we've written on quite extensively.
They overweight developed market stocks. If you're a larger company, you get a better score. And again, quite a lot of evidence they don't really sort alpha. But of course, we need to make sure that we're integrating ESG in a meaningful way and that we're not because we don't believe in third party ratings, we're not stepping away from that. So I'm going to give you insight into one of the tools and how we're helping our analysts to do this really rigorously.
So I think it's first helpful to think about the traditional model of ESG analysis, which basically focus on governance and management quality. And I was as guilty of this as most. I'd throw in a question at the end of a meeting. And if the CEO didn't seem to completely panic at the question, I would assume that all ESG issues were under control. What we are moving to is a much more evidence based, a much more data driven approach.
And what that it looks through the lens of different stakeholders, and it's underpinned by my original premises that companies have got to maintain their license to operate and the cost of maintaining that license to operate is growing. How have we done this? So the first thing is we spent two years doing it. It's taken quite a lot of time, and it's very much been helped by the digital things that Graham was talking to. The second thing is we've gone back academic evidence and to have a rigor.
So we're looking at seven thirty five different global ESG trends for 47 different subsectors. And what's so different about what we do compared to the third party ESG ratings is that we have used our financial analysts to decide, looking at this body of evidence, what do they believe is really the most important issues. This really contrasts with what we know some competitors have done, which is just use a standard framework like SASB. We want to engage our analysts, and we want to have this feeding in. The second point is it's incredibly data driven.
So we're looking at 150 different data metrics from 50 data sources to evaluate how well companies are managing their stakeholders. About half of this is conventional data, so from Thomson Reuters or sort of the MSCI, but over half is from unconventional. So this is helped hugely by working with the DIU, looking at brand data, looking at product recall data, looking at Glassdoor. We can analyze over 10,000 companies. That's 1,000 more than the leading third party ESG rating agency, and it sits on the desktop of every analyst.
And I thought I'd give you an insight into how then analysts are able to use this to come to data driven informed ESG views that they can that they agree with. So we had quite a lot of fun picking a company that wasn't necessarily going to be controversial. And I think this goes back to one of the core adages is that there's no such thing as a perfectly sustainable company. And what we can do is understand relative areas of weaknesses and strengths and build up an evidence based conclusion. So this is a consumer good company.
And one of the very powerful things about our tools, as I mentioned, the third party ratings just look they look globally, is that investors can change this to reflect their universe. So this is against European universe, but equally, the company might look different against a global one. And then you can see a picture, as you can see relative areas of strength. So management quality is one. Actually, this particular company is very good on the environment.
But then what's so interesting is that you see they're quite weak on employment, and you can see the reason behind that. They don't train very much compared to a lot of their peers, and their Glassdoor ratings are much lower than their peers. And in terms of governance, they don't have very high levels of independence on their audit and the nomination committee. So what this enables our analysts to do is, one, come to an evidence based conclusion and two, to then engage and to improve things on relative areas of weakness. What we can also do with this, and we're in this example, is we are building funds where we can see our top quartile, our best performers on this tool called context are thereby make up the investment universe.
And then as a fundamental person, I'm normally pretty skeptical of that test, but it looks like our analysts are on the right track. So if we look at our top quartile context scored stocks, they appear to be maintaining their returns on invested capital for longer. So going back to our clients still want us to deliver investment returns, they want us to identify the most sustainable companies, and they want us to engage to improve performance where things are weak. So I think I've managed to keep back on time. But just to summarize, this is an incredibly multifaceted area of investment.
But hopefully, you can see it's an area where we can work and deliver our whole firm to our clients to help them navigate this. Most importantly, it helps us deliver investment performance. So it's giving unique investment insights which don't come from judicial analysis. I always like to say twenty years ago, when I started as an analyst, it was you would look pretty good if you could work Excel because we still had some people in the department that couldn't. Now it's much more about how you analyze huge amounts of data and understand the changing world.
That's what our ESG team really focuses on, and that's what the investment leadership makes them uniquely positioned to do. That, in turn, feeds through into really rigorous ESG integration and products that are able to deliver alpha. We are committed to being good stewards. So that means holding companies to account, pushing for change, pushing for engagement. In a couple of weeks, we will invite or we have all we've invited all of our UK holdings where we're going to talk to them about the issues of climate change and also run them through some of our thoughts on corporate governance so we can have a really proactive dialogue with that.
And providing transparency to our clients and showing them the impacts of that stewardship activity. And then finally, eliminating risks that can't be done by investment alone. And then finally, we're really determined to find solutions, realizing that there's a huge scope and there's a huge range of different needs. It is going to be about mass customization. There are very different challenges if we're looking at The Nordics compared to Sharia compliance impact compared to that example of just working with an insurance company to help them manage risk.
But we are really committed to taking our clients on that journey and providing some clarity in what we know is an incredibly complex but popular area.
Thank you.
Jess, thank you. You've done well to get through all that in that time. I was rather enjoying the picture of a bit of greenery rather than a concrete jungle. But anyway, but before we do, general questions, is there any questions for Jess that anyone would like to raise?
Just in terms of assessing performance versus benchmarks, how has the benchmark industry evolved? Because I think, clearly, it's quite difficult to compare funds versus others. Yes.
So that's a great question. And as you know, the benchmark industry has most evolved to charge us more for custom benchmarks. So as I briefly sort of touched on with our the new products that we're launching, we are using the mainstream benchmark because actually we think a lot of times that's what our clients still want. But generally, because these are more of a best in class or a narrow approach, we're saying there will be some intermediate volatility. So let's look at that over five years, over three years.
Now and the performance for that so far seems to be building quite well. And I think that's really important because if it sort of is performance without all the bad stuff, people are those performance concerns are still going to exist.
It's Laurent Gebel from Exane. You were saying that 40% of your AUM was currently accredited under your credit criteria. What do you think the industry AUM would look like under appropriate level of accreditation?
That's a great question. And you hear horror stories of firms that have made huge commitments to ESG and the asset and and, you know, as individual asset managers not coming in. Or you hear people just saying some of the quant houses are just saying, well, we're integrating this because we have a central ESG score. I think it's very hard. We haven't heard of other people doing this in that it's rigorous, it's annually renewable, it's in people's objectives and appraisals and monitored by senior members of
It's the also an objective measure. So there are RFPs. There's a proper auditable process that says you have integrated this into your investment process. And we think that actually if you think about where this goes over time and being held accountable for what it is we're doing, I think that clarity and that real detail is what's going to actually step be really important, not just from a return perspective but also from a risk perspective because you can't make these claims unless you can genuinely validate that you're doing these things. So we're going to be at 100% at the end of next year.
40% of our investment teams are there today. And I'd say that without exception, our teams are on the other 60 are on that journey to accreditation. But it's not an easy journey. I mean and those who've done it, there's some blood, sweat and tears along the way. Great.
Thank you, Jess. Before I let you go, are there any questions that we haven't addressed about the broader business? I'm conscious that we're focused on the consumer and wealth today. Richard and I are here. We're happy to take any other questions on how this fits together in the broader picture.
Hi. So it's a yes, hi. It's Hubert Lam from Bank of America. I guess one name that we haven't mentioned today was a net meg and how that fits into your digital and your wealth management? Or is it just a financial stake?
And I'm just going leave it at that.
Nutmeg is a financial stake. It's it was a very helpful learning for us to understand the nature of Robo, the cost of customer acquisition. You saw that Goldman Sachs took a meaningful stake alongside it. We've got a number of other initiatives, but Nutmeg is now held as a financial investment for us. Great.
Well, thank you all for giving us the morning. I appreciate the time. We've I say we've done well. We've done the core business. Next time, we'll probably bring it together with private assets.
But thank you all for giving the time. Thank you.