Cofounder and CEO at Quovo
Lowell came to wealth management from the investment banking space. He worked at Lehman Brothers and Barclays Capital, in the Financial Institutions Group, with a specialty in consumer lending companies. In 2008, Lowell started trading stocks and became an active personal investor. This is when he faced problems tracking his own investments over time. Together with Michael Del Monte, who is CTO at Quovo today, they built a data platform for pulling outside account data into other platforms. The two joined forces with CPO Niko Karvounis to found Quovo.
During the interview, we discussed trends disrupting the wealth-management industry, peculiarities of working with FinTech startups and financial enterprises, and expectations about the industry’s future.
The most exciting industry trend
The start of the Quovo project, which then turned into a business, coincided with the start of the robo-advisor trend. At that time, the wealth space was experiencing a huge explosion of innovation, and Lowell says that there was a particular moment at which he and Michael realized that the data platform they had built had turned out to be rather innovative and could become a new trend.
Talking about today’s trends, Lowell mentions fee compression as the biggest and most exciting:
“Fee compression is making advisors realize that their operating leverage is at risk, and so they’re more willing to look for data-driven solutions to add leverage into their business. That leverage can come in the form of automated processes like robo-advisors, but can also come from next-best-action data insights, or data-driven practice management.”
According to Lowell, fee compression brings more financial account data and data insights into customer relationship management and improves the financial advisor’s experience.
Startup vs. enterprise: Blurred lines
Quovo works with FinTech startups as well as financial enterprises. These customers have both similarities and differences. The main difference is the sales cycle.
“It’s not rare to have a one- to two-year sales cycle for enterprise customers, as opposed to a couple of months for a FinTech customer.”
However, Lowell states that it is sometimes difficult to draw a clear line between FinTech startups and financial enterprises.
“Robo-advisors like Betterment and Wealthfront—what do you call that? Are they startups or are they enterprises? They have hundreds of thousands of customers, they have billions of assets. They’re looking more and more like enterprise customers. So the line’s getting very blurry.”
In addition, some enterprises create FinTech squads or skunkworks teams to build tools to work with the Quovo platform. In this case, Quovo works with them more like startups than enterprises.
Still, there are some differences in the processes established there. While at enterprises vendor management and procurement is a stated function, at FinTech startups it is generally absent or ad hoc. Moreover, most startups don’t invest in a full information security team, account-management team, or implementation team.
“Those were the things we had to invest in very early to get through the information security review and the vendor procurement processes that big enterprises have. It’s a very different process, and so you have to be staffed with people who can handle that work.”
Predictive analytics and roadmaps
Quovo uses machine learning in a number of their algorithms. Lowell states that, unlike machine learning, predictive analytics is much more straightforward and heuristic.
“You can […] simply tell when spending categories or transaction types have changed in such a dramatic way. You can set a pretty hard threshold for what dramatic is, and then that threshold probably adjusts over time. It’s pretty easy to tell when something’s happened.”
When Lowell talks about the company’s future, balancing current client demands with longer-term priorities is a constant challenge.
“There’s a constant balance between a long-term roadmap, which is where we think the industry is going, and a more short-term roadmap, which is very much client-driven. Our sales engineers serve a dual role here. One is explaining the technical aspects of the platform to prospects and clients, but also soliciting feedback throughout the sales process, [the] onboarding process, so that we know where […] our platform [is not meeting] someone’s needs today, what we can do to build something, not just for one client but for many clients.”
Lowell does not have a clear prediction of how wealth management will evolve in the future.
“Is it possible for automated solutions to completely replace the human element of wealth management? Yes, but not for a very long time. I think that the power of technology to replace the human touch asymptotically [will approach] 100% over time. The question is where we are along that curve?”
One of the most serious impediments to replacing the human component is the need to answer customers’ difficult questions, which requires research into the customer; indeed, most such questions have no clear black-or-white answer. The same is true regarding the US taxation system—it’s too complex.
“I think that today it’s very, very difficult to build an algorithm to actually navigate the tax code, especially since it changes on a regular basis.”
This is why Lowell believes that human advisors will not be eliminated any time soon. Nevertheless, young people may cause a significant shift in the industry.
“I think the need for the psychological component decreases as the services themselves get easier to understand and more comprehensive in an automated way. I also think that the changing demands of the consumer are really interesting. We’re midway through this massive wealth shift towards a generation that has different expectations of service.”
That generation prefers automated solutions and has very low expectations of human touch.
Active and passive management
Lowell believes that although active management does not outperform passive management in the down markets or up markets, over a long period of time passive management outperforms active management.
“I’m a deep believer in Jack Bogle, when he says that the stock market in the long run reflects the economy. And as a result there is no way to [“beat the market”…] just invest in the market.”
Though Lowell recognizes that he started in a business that was based on active investing, in the past 10 years he has changed his opinion.
Interviewed by Vasyl Soloshchuk, CEO and co-owner at INSART, FinTech & Java engineering company. Vasyl is also author of the WealthTech Club, which conducts research into Fortune and Startup Robo-advisor and Wealth Management companies in terms of the technology ecosystem.