Strategy talk with Rosecut: re-thinking wealth management for the modern client
Qiaojia Li, CEO and co-founder of new wealth management firm Rosecut, talks to CREALOGIX about her ambitions to redefine wealth management and use an AI-driven platform to provide the currently under-served middle market with high-quality, bespoke advice.
What motivated you to found Rosecut?
[Qiaojia Li:] Although I began my career in corporate finance, I’ve always had an interest in investments and I started investing for myself about 20 years ago. But the financial crisis was a turning point for me – lots of my family and friends, all clever, successful people, lost a lot of money. It made me question how it could go so wrong, so quickly; I was frustrated by how, despite being a professional in the financial industry, there was little I could do directly to help them. This was a major driver for me to learn more about managing and investing money.
That motivated me to pursue a career in private banking, and I’ve been lucky enough to work at and learn from a number of excellent firms, including Credit Suisse and Coutts. I also developed strong relationships with my clients, guiding them through their investment journeys.
But I recently became less content with the limitations of this traditional model. The ever-increasing regulatory pressures mean that private banks are no longer able serve all their potential clients cost-effectively without changing their business models. I was asked to leave my smaller clients behind and this made me think about where they can go for advice.
That’s why we started Rosecut: we want to make sure that up-and-coming investors – who could still be significant investors in their own right with complex arrangements – can get the personal wealth management service they want and need. We know that by adopting a digital mindset and deploying technology in the right ways, it’s possible to eliminate a lot of the manual effort and costs and develop a profitable, modern wealth management service.
Why do you think a new wealth management model is needed?
I believe the traditional wealth management model is fundamentally outdated. Our clients’ needs are changing but the model isn’t.
Many people used to work for the same company for their whole careers and live in the same country their whole lives, but that’s often no longer the case. No one stays in a job for 30 years any more. People move around: they change jobs, change careers, and take career breaks. They move to different countries, or live away from their families. People are much more mobile these days, and therefore their wealth is going to be spread across different countries, while needing to be accessible from anywhere.
All of this affects how their money is managed; people need advisors who are equipped to deal with uncertainty and have the training to advise on a range of multi-jurisdictional issues. Many of the incumbent wealth management firms and private banks have family offices and non-dom teams, but these are often set up for the ultra high net worth clients who can afford an army of advisors. The up-and-coming high-net-worth clients are usually left unserved.
"Traditional wealth managers and private banks are excellent at serving our parents’ and grandparents’ generations, but they haven’t adapted the way they work to suit the younger generation."
The increasing international mobility of clients is a big example of how traditional wealth managers and private banks are excellent at serving our parents’ and grandparents’ generations, but they haven’t adapted the way they work to suit the younger generations.
I consider myself part of a new breed of wealth manager. We’ve trained in multiple disciplines – tax, immigration, investment, etc. – and we’ve helped clients with a range of life issues, from investing money and buying properties through to guiding them on school choices for their children. The wealth manager role has become a lot more demanding: you have to really understand your clients and all aspects of their lives, and be able to support them on a wide range of challenges.
But while there are some of this new breed around, because of the way the industry operates we don’t yet have large enough client books or the necessary influence to really shake up the processes and service provided from within a traditional private bank or wealth management firm.
What sets Rosecut apart from the digital-only investing services already in the market?
For us, technology isn’t the main selling point; being a fintech doesn’t make us cooler or better than other wealth managers. That’s not what our clients care about. Our clients care about getting an excellent service and holistic experience from a provider they trust.
The first generation robo-advisors have many strengths. They’re digital and easily accessible, and they’re able to adapt their service and make improvements at a much faster pace than the private banking world can. They’re also potentially going to get better at providing relevant content and products matched to distinctive challenges or stages in people’s lives, based on finer-grained and more up-to-date knowledge of people’s life data and preferences.
But so far, these robo-advisors have a typical tech mindset – they enter an industry, identify just the broad elements of a service that can be done a lot simpler and cheaper online using technology, and then scale that offering. Within our industry, they took 10% of the service – portfolio management – and simplified as much as they could about it. But there’s a huge gap between someone with money to invest, and the advice they need, and just portfolio management. To be successful, that gap has to be bridged with knowledge, an understanding of the client, and a truly personal service.
This is a big part of what sets Rosecut apart from solely digital services. We’ve found a way to create bespoke advice and planning – which includes in-house portfolios – using a combination of artificial intelligence and human advice.
We use technology as an enabler
We use technology as an enabler, for example to provide an easy onboarding process and real-time access to your portfolio and insights, but at the core of the business we’re a modern, holistic wealth manager.
We strive to understand clients’ needs in a friendly, less formal way than a traditional provider, while still diligently looking after their money and making sure they’re on the right path for what they want to achieve, irrespective of whether they have a specific goal or merely want to have the peace of mind that their finances are under control.
Our mission is not to have as many clients as possible, but to serve the clients we have as best we can.
Do you think high net worth individuals are open to a technology-enabled wealth management model?
Without a doubt, yes. High net worth individuals are often self-made. They’re curious, smart and hard working. They also live in the same world we all do – a world in which software and smartphones touch everything we do. So if there’s an option to try wealth management through digital channels, there’s no reason why they wouldn’t give it a go.
Research shows that over 40% of wealth management clients are demanding a more digital service, irrespective of their age. This is certainly going to be a lot higher if you focus in on younger generations.
There’s a common misconception that digitally-focused services like robo-advisory only serve the retail market, but even for the relatively mass market offerings, their client bases do include both high net and ultra high net worth clients. These clients don’t have large proportions of their wealth invested with new digital services, but they will often invest a ‘play pot’ of around £20-50,000 to try it out.
We think it’s a very good time for investors. There’s a lot more choice in the market every year for clients who want to explore the increasing range of pure digital services. I think it’s a newer thing at the moment in terms of a choice of more hybrid wealth management services like Rosecut. There’s a really sizeable addressable market of investors with a fair amount of experience and complex wealth structures who don’t want a completely DIY approach, but haven’t yet reached the private banking level.
Qiaojia Li’s co-founder and CTO at Rosecut, Gustavo Silva, recently spoke at our CREALOGIX UK Digital Dining Club discussion panel on strategy for modern wealth management. To join in our private networking events in London, sign up here.