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Thought Leaders in Financial Technology: Bristol Gate Capital Partners CEO Richard Hamm (Part 3)

Posted on Wednesday, Oct 2nd 2019

Sramana Mitra: How is this information consumed by your customers? Is there a human in between the bank’s automated system and where the consumer touches the bank?

Richard Hamm: At the front-end, we use predictive analytics. We also add our own human influence on this to verify the accuracy of the models by good old-fashioned fundamental analysis to make sure that the 65 names that are generated are worthy of investment. We drive that number down to 22.

The bank buys from us the finished product of 22 stocks that are driven by the process I discussed. In the final stages, we do correlation analysis and risk analysis on the 22 names that finally make it into the portfolio that we sell to the banks. The portfolio is sold to the banks.

Sramana Mitra: The bank then, in turn, sells that portfolio to their customers.

Richard Hamm: Yes. The reason they buy it is they don’t do this themselves.

Sramana Mitra: This workflow applies to all your customers then? 

Richard Hamm: Yes.

Sramana Mitra: This is what you do. You come up with a portfolio that is optimized for dividend growth on a regular basis. How often would a bank want a recommendation like this? Is it monthly, quarterly, or annual?

Richard Hamm: Banks tend to be consumers of this kind of product over time. We would be hired on an annual basis. These relationships tend to last a long time as long as we’re delivering what we say we’re going to deliver.

We’ve got long-term relationships with most of our customers, although we’ve only been in business for 10 years. We’ve known these people for a long time and we tend to be involved long-term with their companies.

Sramana Mitra: At any given time when you’re giving a recommendation, it’s the same portfolio that you’re recommending to all the banks?

Richard Hamm: It would be no different.

Sramana Mitra: Basically, you’re coming up with a portfolio recommendation which is then sold to all the banks or all the investment companies who are your customers.

Richard Hamm: In the United States, we deal with UBS and Citibank. What they would do is the same thing as Canadian banks. They would use our intelligence on building a portfolio, and they would buy the finished goods from us.

Sramana Mitra: You said at the outset that companies like Fidelity are your competitors. Elaborate.

Richard Hamm: Most of the big companies in the mutual fund business believe everybody is a competitor, because we’re selling to the same distribution systems they’re selling to. When you’re fighting for someone’s dollar of investment, they would obviously believe that they were a competitor to us.

Fidelity is a big powerful company. They have recently added some artificial intelligence into their investment world, which is no different than a lot of other people who have come to the game quite late.

In a recent study, 85% of investment managers in the United States said that they would like to investigate using artificial intelligence in their work. 15% have actually adopted it. Of that 15%, most have done so in the last year.

I don’t know if they’re responding to the demand in the trend of customers, which I believe is probably true. It doesn’t mean that they have mastered the process at all.

This segment is part 3 in the series : Thought Leaders in Financial Technology: Bristol Gate Capital Partners CEO Richard Hamm
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