MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Working on our new report on mobile apps for wealth management (see last year’s edition here) we came across many different ways wealth managers are seeking to meet the mobile needs of their high-net-worth clients.

From our 2014 survey on mobile disruption in wealth management and other continuous research, we learned a lot about wealthy clients’ digital behavior and one major insight is that they are using different devices throughout the day for different purposes:

When on the go, clients need a mobile app to look up their account balances, make easy and convenient money transfers to their friends, and quickly check their portfolios and watch lists.

In the evening when at home, they are mainly using their tablet device for checking and analyzing their portfolios, making payments and executing trades. Additionally, this is the right environment for reading comprehensive research materials and expert commentary.

The tablet is the preferred device when meeting with their financial advisor, as well – checking their investment portfolios with their personal advisor is a basic part of the meeting.

Two possible ways to address these behavioral patterns are shown by Citi Private Bank and Deutsche Bank. Citi Private Bank offers two complementary core apps: the Citi Private Bank In View app is a dedicated wealth management app, allowing users to view their accounts and comprehensively analyze their portfolios with the help of rich graphics. At the same time, clients benefit from deep informational content. For their daily banking activities including credit card account views, mobile payments and check deposits, they can switch to the Citi Mobile UK app.

A different strategy is offered by Deutsche Bank. As an exceptional example, the Meine Bank app contains all relevant core features, including portfolio analysis and trading while working on smartphones as well as tablet devices. Additionally, Deutsche Bank launched a dedicated app for the Apple Watch to complete their digital strategy.

No matter if offering separate apps or a holistic wealth management app, wealth managers are strongly recommended to offer a unified user experience and branding across all digital interfaces. Additionally, they should provide for a sensible channel integration, allowing clients to easily switch media – including social media presences, websites, and mobile apps.

Watch out for the upcoming report on mobile apps for wealth management 2015 for more interesting results – coming up mid June!

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Few wealth managers exploit the promotional potential their mobile app offerings provide. Evaluating the apps of the 30 leading wealth managers and private banks for our new report on Mobile Apps for Wealth Management 2015 (coming in June), leveraging the app to advertise the financial institutions’ products and services remains a surprising area of weakness.

While most wealth managers are still seeing their mobile app or websites just as a transactional tool, some players are already reaching a new level in mobile advertising. As this new type of voice-controlled mobile advertisement by Edelman Financial shows, the future of interactive ads has already begun and customers are becoming attracted and involved in a totally new way. Private banks and wealth managers may find these interactive features too intrusive. However, mobile apps and websites are great platforms to interact with the client (and not only via payment or brokerage transactions). Mobile touch points are great to advertise one’s services and showcase the bank’s research. But the rules of the game are very different from the times when clients used to look at printed brochures or brochure-like websites. Voice control is just one way to make it much easier for your client to get in touch, receive an offer or trigger another activity.

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In June, we will again publish a new edition of our report on Mobile Apps for Wealth Management 2015 (see last edition here). At this early stage of evaluation, we are truly impressed by the efforts of the most innovative wealth managers and private banks over the course of last year.

Here are only a few areas, where some wealth managers already show great performance:

Apps for smartwatches. With the launch of the Apple Watch, a new era of wearable devices has heralded and, actually, there are some early birds adopting this trend.

Personalization. We see a great movement towards an individualized user experience thanks to customizable dashboards, schemes, and other user preferences.

App presentation. Demo accounts or videos, great and interactive websites, interactive tours and user guides – several wealth managers fully exploit marketing potentials for presenting their mobile app offerings.

Utility tools. Contributing to wealthy clients’ demand for convenience, some apps already excel thanks to sophisticated utility tools. Besides commonly known currency converters, elaborate financial planning tools are entering the space.

Check out our website for the latest research in the digital world of wealth management and private banking.

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Everybody is talking about Deutsche Bank’s plans to sell the Postbank network and to slim down its own branch network. Many pundits think that’s too little too late and they are missing the big strategic vision of Deutsche Bank’s co-CEOs Fitschen and Jain. But these pundits are not getting the real point: Deutsche Bank has announced to invest EUR 1 billion in digital technology over the next 3-5 years in addition to what they’ve already planned to invest. That’s a big number and it’s a good decision.

Today, Deutsche Bank’s customer facing digital touchpoints are only mediocre. For instance, in our Mobile Apps for Banking report 2014 they are ranking only 18th out of 40. In our ranking on Mobile Apps for Wealth Management 2014 DB fares even worse, being on rank 22 out of 30. In social media Deutsche Bank is showing more strength as they rank number 1 for corporate social media (out of 20 global banks). But again, they can get only to rank 17 and 18 for their usage of social media in retail banking and wealth management respectively (check our report on Social Media in Banking 2014).

So what’s the conclusion? There is a lot to do for Deutsche Bank to transform itself into a truly digital bank, offering seamless mobile, online, social and offline touchpoints to their clients. It’s a big challenge but the CEOs have taken the right decision: Digital must be priority number one for Deutsche Bank (as for any globally operating bank worldwide).

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Technology giants, start-ups and retailers like Google, PayPal, Starbucks, Square, and Stripe have moved on from just threatening and competing against the traditional banks to dominating the mobile payments arena.

Starbucks is the new model of success in mobile payments with an impressive comeback after the unsuccessful partnership with Square in 2014. The Seattle-based coffee giant has made mobile payment strategy a top priority and continued to invest in its own in-house mobile payment systems. The result is remarkable: over 8 million mobile transactions per week, 16 million active users of its mobile app, which translates into nearly 19% of all mobile transactions in US stores.

The brilliant idea behind Starbucks’ “Mobile Order & Pay” system combines the convenience of a simple payment tool, which works on the majority of smartphones, with the benefit of a well-thought loyalty program. The app’s success is not only driven by the ease of payment (“shake to pay” and give a digital tip to the barista) but also by the remarkable set of supplementary features (loyalty program, manage Starbucks card, send Starbucks gifts to friends etc.).

There is yet no confirmation about a possible white-labelling solution of the mobile payment app. However, ‘Mobile order& pay’ will surely trigger a wave of similar solutions either brought up by tech giants or by other consumer companies willing to pay the price for a bespoke solution. Either way, given the rapid acceleration in mobile device purchases and millennials’ hunger for convenient mobile payment solutions like digital wallets, credit card companies and banks are vulnerable to lose a substantial number of mobile customers.

At MyPrivateBanking we believe that customers will choose a non-bank mobile app over a bank’s mobile solution if it offers more convenience and interesting add-on features. It is not enough for banks to launch their own mobile wallets. To gain market share and penetration banks need to think hard about the smart add-ons for their payment solutions: Loyalty programs, preferential treatment when ordering or buying things in high-profile store chains, and many other innovative features will require banks to think like FMCGs (fast moving consumer good companies) rather than old fashioned retail banks. This will be the hardest challenge.

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The launch of Apple’s new smartwatch undoubtedly provokes completely new strategic considerations for banks and wealth managers. While the Android Wear admittedly did not cause a disruptive change in the digital device landscape, the omen with regard to the Apple Watch looks completely different.

While Android shipped only 720,000 of its smartwatches in 2014, Apple Watch pre-orders alone add up to 1 million already now in the U.S. It will well be worth keeping an eye on these numbers until launching date at April 24, 2015.

The continuous developments in the fields of wearable devices should start ringing a bell for banking and wealth management app developers. Having started with this year’s evaluation of the mobile apps of the top 30 wealth managers worldwide, we are excited to see who the early adopters are. Given the extremely cautious attitude, the financial sector usually shows towards new technological developments, exceptions like BNP Paribas are particularly noteworthy. Among the early adopters, the French bank offers a smartwatch application to their customers, which allows them to check their accounts when on the go or contact their personal advisors.

We are convinced that this will only be the beginning as the penetration of smartwatches is likely to increase substantially. We expect that wearable devices will be a game changer for mobile banking, adding numerous useful features for clients.

Check out our new Research Briefing, which will be published next week, to learn about how the Apple Watch might actually add value to banking customers and which considerations banks should keep in mind when entering this new digital field.

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We’ve seen it before: sooner or later, cross-industry trends like customer service via video chat have strong potential to conquer the banking space, as well. While video chat features are slowly becoming standard among the more elaborate mobile apps, mobile and desktop websites, new add-ons are already on their way.

As Facebook recently jumped on the train of P2P payment with their Messenger app, it is more than likely that the use of such features will skyrocket given the masses of Facebook users worldwide. P2P payments are defined as an online technology that allows customers to transfer funds from their bank account or credit card to another individual’s account via the Internet or a mobile phone using a simple and quick process.

Hence, it is just a matter of time that financial institutions – be that retail banking or wealth management – face the need of implementing P2P payment features for their mobile touchpoints. Starting the research on mobile apps for wealth management for our new report (see last year’s edition here), we already see some frontrunners among the 30 top players in this respect; one example is the great DBS PayLah! app, which allows customers to split bills, send money to or request money from friends, and even donate money to selected charities in an easy way.

Considering these and other ground-breaking technological developments, we are particularly curious to see, how the top wealth managers worldwide perform this year.

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/by Francis Groves, Senior Analyst/

MyPrivateBanking was very pleased to include a profile of Schwab Intelligent Portfolios in our latest report on robo-advisors, published last week, AFTER the launch of the new Schwab service and to be able to make a full assessment of it. Inevitably in such a fast changing area, fresh developments in the robo-advisor sector keep coming and this week we have seen the announcement of the acquisition of LearnVest by Northwestern Mutual. We cover LearnVest in our report, even though we don’t see LearnVest as a full robo-advisor (and neither do LearnVest). However, we do think that LearnVest has some important robo characteristics and its pricing and range of services make it a disruptive force in the industry in a very similar way to robo-advisors. The company’s acquisition by a major financial institution is another example of the way in which corporate strategy is now becoming a major motor of the robo-advisory revolution, a topic that we cover in detail in our latest robo report, which we sub-titled ‘How Automated Investing is Infiltrating the Weath Management Industry’.

John Bogle, the highly respected founder of Vanguard, recently repeated his skeptical views about exchange traded funds (ETFs), saying to FTfm that they were an encouragement for investors to use index tracking in a counter-productive manner. Bogle has been a committed opponent of market timing tactics either by private investors or mutual fund managers and at Vanguard he was a pioneer of index investing. Although many would consider ETFs to be index tracking instrument ‘par excellence’, he’s convinced that investors will be tempted to trade too frequently for their own good. Vanguard’s  own current CEO has come out against Bogle’s criticism in favor of ETFs as a healthy innovation that have lowered the costs of investing for millions of people.

In the light of this debate about the dangers of ETFs, the robo-advisor trend could be a godsend to the ETF industry. Not only are robo-advisors an effective way to encourage people to start investing, they are almost all proponents of planned investing as opposed to impulsive investment decisions. With the robo-advisors around, ETF sponsors can say ‘look, these new robo platforms depend on our products and demonstrate that it’s perfectly possible to use ETFs prudently for investors’ long-term gain.’

Of course, robo-advisors have yet to prove their index tracking commitment in a number of ways. Individual robo-advisors could stray off the path of passive or mainly passive investing and become too smart for their clients’ good. Also, as has often been said, we’ve yet to see how robo-advisor clients behave in a real panic in the financial markets. Finally, we don’t yet have data on how consistently robo-advisor clients are behaving. Are clients sticking with the plan or do they sign up with a robo in a burst of enthusiasm and then lose interest, leaving a perfectly proportioned ‘bonsai ‘ portfolio in their account rather than a full grown tree to provide shelter in retirement or adversity.

On this last point, our view is that some investors will be committed enough to enjoy real benefits and some won’t, but enough people will use their accounts in the way the robo-advisors intend for the robo model to count as a success and to be held up as an example to be followed in the retail investment market.

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One major finding of our report on Digital and Mobile Solutions for Financial Advisors 2015 is that vendors are increasingly targeting the end customer. For instance, while only half of the vendors we covered in the 2014 report offered apps that could be used simultaneously by advisors and end clients, this rate has increased to 88% in 2015. While, for example, eMoney Advisor’s client tool is actually a mobile compatible website, it offers interactive workshops to HNW clients for self-education, an electronic vault to store multimedia content, and screen sharing capabilities to enhance client-advisor communication.

The implication is that the market leaders have recognized that high-net-worth clients are becoming increasingly self-directed and demanding when it comes to tools for handling their financial matters. We are convinced that such tools will be an obligatory part of wealth managers’ digital offerings in the near future and, according to our latest findings, the leading solutions already excel today through extraordinary features like elaborate document management or screen sharing capabilities to collaborate with their financial advisors.

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Well publicized, recent security breaches at giant retailers (Home Depot) and financial institutions (JP Morgan Chase and the European Central Bank (ECB)), have caused waves of panic about the security and privacy of sensitive (financial) data. As this threat seems to be ever expanding and detection of security attacks gets more and more problematic, the Canadian startup Bionym has developed a biometric alternative to passwords, PINs, or other time-consuming security details. The Nymi wristband leaves other biometric authentication methods like Apple Pay’s touch ID fingerprint technology for contactless payment behind. It could be used for numerous applications like unlocking devices, remembering passwords, authorizing transactions, or controlling connected devices. The bracelet has an integrated electrocardiogram (ECG) sensor that enables measuring a user’s heartbeats (the electrical activity one’s heart generates), which is unique to every person. Nymi uses the heartbeat signature to authenticate and confirm the user’s identity. There are three levels of security involved: the heart ID, the armband itself and an authorized authentication device like a smartphone (via Bluetooth and a matching app for Windows, Mac, iOS and Android). The user must wear the bracelet on the wrist and touch its top sensor with the opposite hand for it to work.

UK’s Halifax bank’s decision to test Bionym’s technology to allow its clients to make online banking operations in an easy and secure manner is an exemplary initiative. It shows that biometric identification is the future for online banking security. Over the next three years, we expect many innovations in this space – just like Nymi.

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