Rob Kingsbury spoke to Zahid Bilgrami, chief executive of Defaqto about the ethos of the company and what it offers paraplanners to help provide better outcomes for their clients.
Defaqto is an independent financial information business producing data for both consumers and the financial services market. For the financial advice market it offers product ratings, service ratings, events focussed on product knowledge, industry and regulatory developments, publications and commentary, and support in the form of training and webinars.
Building on its research and monitoring capabilities, Defaqto has developed Engage Core, an end-to-end financial planning solution that can be adapted to a firm’s specific advice process. It offers this through three primary workflow streams : Accumulation – which addresses risk rating and profiling, model portfolio building and the ability to review existing holdings; Natural Income – for clients in the decumulation phase interested in generating regular or one-off withdrawals; and Research Workflow – which enables research across funds, products and platforms. Engage Core also offers the ability to write suitability reports using data in the core research software. The final element of the solution is a protection product comparison tool.
As a business Defaqto has a 25-year history and in March 2019 it was acquired by SimplyBiz from its private equity owners.
We spoke to chief executive Zahid Bilgrami about what Defaqto specifically offers to help paraplanners in providing better outcomes for their clients, with a particular focus on its suitability report writing capability.
PP: How would you describe the raison d’être of Defaqto?
ZB: At our core, we are an independent information business. We empower informed decisions for both consumers and the financial services industry, by providing, information, workflows, functionality and ratings. We spend a large part of our time and resources – over 60 analysts – researching and analysing financial products and structuring the information in a way that it can be easily compared, scored and analysed, making it easier to find suitable products for the end client.
What makes us different from others in the market is firstly, it’s the information which is at the core of what we do and the technology fits around the information and brings it to life.
Second, is our view of the world and specifically the often fragmented workflow that happens within the financial planning space. We believe that in terms of workflow everything that needs to be done outside of the back-office risk profiling, fund research, platform research, etc – is done more efficiently and faster within a one-stop-shop solution, enabling streamlining of the process.
I am passionate about helping people make informed decisions. There is a disjoint between the product providers who have a lot of knowledge and the end consumer or client who is buying intangible financial products, around which there are lots of words but not a lot of understanding. I think what we are doing is helping make for a better world.
PP: How can Defaqto’s service help paraplanners in terms of suitability of advice, investment research and platform due diligence?
ZB: With Engage Core we provide an integrated process, where paraplanners can do all three of those tasks without having to leave our ecosystem. The information can move seamlessly between and from the processes into a suitability report. On the investment research side, for example, we provide fund information and discretionary fund manager information, which can be sorted depending on the clients mandate and risk profile and the asset allocation within their portfolio. We provide sophisticated tools yet which are simple to use and allow paraplanners to very quickly create the right solutions based on the mandate of the client.
Paraplanners can also do platform research. If they want specific funds and share classes of those funds and have to use a specific platform for the client, we make visible only the share classes available on that platform.
What’s important is that everything the paraplanner needs to do research on is in one place –product, platform and investment types. And all of this can be brought together in a suitability report that we make available through the system. This saves the paraplanner having to move information and data between disparate systems, it’s all automated and integrated in the one place.
PP: Paraplanners have very different ways of writing reports, so how customisable is the suitability report tool?
ZB: Our system is very flexible. There are some adviser firms that are very prescriptive in the way their reports are structured and what must be in them, while others are more flexible. Our system allows for a wide variety of outcomes very much based upon the requirements of the paraplanners and the businesses they are working in or with.
We have a standard suitability report that paraplanners can use, which we developed in-house with input from legal firm Eversheds, which addresses the reports from a legal and compliance standpoint, or users can set up their own report. Paraplanners can customise the report to the way that they work using the various elements available to them.
The reports are output into a Microsoft Word document, which means that whether they use our default report or a bespoke one, paraplanners can tailor it to suit their needs. I’d say it’s several steps better than a blank piece of paper because you’ve already got something to work with, but you can change or delete items as required, so paraplanners can deliver a report they want for the adviser they are working with and to best suit the end client.
One-stop-shop systems have a reputation for being Jack-of-all-trades and masters-of-none propositions. Hence many firms buy ‘best-of-breed’ for the task in hand. How would you win them over to using Engage Core as the one-stop-shop system for their businesses?
I disagree with a best of breed approach, which in my mind is where you get different systems and you stitch them together. While each component may be good at delivering its own bit of information, the downside is in the quality of the integrations and what that means for those using the systems, to provide suitability reports, for example.
In the best of breed route you’re going to experience fragmentation where there is a lot of manual rekeying of information. Integration, where it exists, means less rekeying but you’re still not making it easy for yourself compared to a one-stop-shop where things move seamlessly between the different elements. It’s simply more efficient.
It’s also how effective you can be in using the various systems and that comes down to training. Our training and support for our users is free. We refer to our support team as our Customer Success team. There is no point in someone subscribing to our services and we are failing to help them succeed. Whether it’s face-to-face or webinar training or other support we can offer, that’s all included in the service. That’s a part of the reason for our success.
There are elements of financial planning which currently we don’t cover but we are working on it. Pension switching is one where we have completed development and the solution is being beta tested. Another is a cashflow modeller. We’ve created the basis of the tool, we’ll be improving on that and then launching as a fully integrated element of Engage Core. Customers can either take the whole package or the elements they want to.
What I should emphasise, however, is that we are not a back-office system, nor do we want to be. We integrate with all the main back-office systems. The elements we want to fulfil are around the research and process of decision-making and the record of that decision-making for audit purposes.
PP: What does SimplyBiz ownership give you that you didn’t have before?
ZB: We thought carefully before the acquisition about whether it would be the right thing for us and eight months in it’s absolutely the right thing, for two main reasons.
First, we were promised autonomy; we have our own board which is completely separate to other elements in the SimplyBiz business. We have full control over our budget data and processes, our creativity and the direction that we go in.
Second, we were previously private equity backed and now we have a large listed investor who backs us. The main difference here is that private equity tends to look for short-term return while now and refreshingly, we have owners who want a return but not one around the corner. It’s a far more long-term, thought-through discussion around what brings benefit to Defaqto, the larger group and in terms of the services and technology we provide to the industry as a whole.
