MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

The finance industry is positioned to benefit very strongly from Big Data. With the rise of highly performant commodity hardware, big data solutions such as Google`s Hadoop, H-Base, Pig, Hive, Mahout or Couchbase, the question of overcoming the technical barriers of big data storage and processing seems to be solved.

Customer profiling and targeted offer improvement requires careful analysis of each customer`s journey from being a prospect to becoming a customer. Understanding where the customer comes from before visiting a bank’s homepage, Facebook presence or downloading its banking app (e.g. previous visited URLs) means identifying the touch points of her journey and indirectly understanding how customers` preferences and needs are being shaped. Social media channels, forums, Q&A platforms, comparison sites have become highly relevant touch points throughout the customer`s journey, since this is where the single customer journey within the web starts.

All this means that significant investments have to be made in the technical infrastructure in order to cope with huge amounts of unstructured data. Yet, the biggest barriers to success are not related to high costs of data management but how to address privacy in Big Data systems while complying with regulatory requirements. Today there is probably no other industry under more public scrutiny than the banking industry. Big Data poses a lot of questions with regard to privacy and regulatory issues. For instance, Germany and other EU countries enforce strict privacy laws that require corporations to inform any individual about all the data which is on record about her and delete the data if this individual wishes so. On top of it, personal data can only be stored with the explicit prior consent of individuals.

However, a merely legal and regulatory perspective is not sufficient. The biggest challenge is the potential threat to a bank’s reputation when clients and the public in general perceive it as secretly spying on their lives.

Above and beyond complying with existing regulation, there is one important thing that banks need to do: being transparent about Big Data. Clients and users of the digital and social platforms of a bank should be informed in no uncertain words what the Big Data strategy of a bank is all about, how this benefits clients and users, how privacy is addressed, and how risks are monitored and managed (just think hacker attacks!). Only openness and full transparency will bring acceptance to banks’ Big Data. Big Data should not be perceived as a bad black box. It can be a win-win-game for both, financial firms and their clients. Get this message out.

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(by Francis Groves, Senior Analyst)

Little by little Internet security is moving towards center stage. At MyPrivateBanking, we’ve been focusing on the importance of security issues in Internet and mobile banking in our reports on websites and mobile apps.

Two recent developments to hit the headlines were the attack suffered by JP Morgan Chase in August. This is suspected to have been the work of Russian criminal, not government hackers, who found a way into the bank’s systems through one or more of its older components. The hackers gained access to data about 76 million personal accounts and 7 million business ones, though no JP Morgan Chase customers suffered loss as a result.

Last week the launch of the iPhone 6 in China was accompanied by a widespread outbreak of ‘man in the middle’ hacking of purchasers first time connections to iCloud. In this case the new iPhone’s reputation for being highly secure may have been part of the problem. It is believed that the authorities may have initiated the attack because they are unhappy about the increased data privacy that Chinese citizens gain through the iPhone 6’s use of encryption. Given that Apple is hoping that the enhanced security of the iPhone 6 qualifies it with the Apple Pay app for use as a payment system, this widespread hacking is worrying.

Significantly, many (but not all) Chinese users would have received a warning from their browser that the verification certificate from iCloud was actually fake. But how many of them carried on regardless and ended up by compromising their log-in details?! The problem for many of us is that we need or want to use the Internet at such speed that we risk exposing ourselves and our money to danger. Maybe we do need to bring into play the split second responses to danger signals that we’ve inherited from our early ancestors.

We also need a lot more education from our financial institutions to develop a more vigilant mindset. The problem of Internet security and banking and payments systems is certain to grow in the coming months.

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In the light of big data and real-time business intelligence discussions, one thing becomes increasingly clear: data latency is expensive, old-fashioned and not competitive. As things speed up, new technologies are needed that can cope with increasingly challenging demands. This is especially true for the financial industry where time really is money.

In-memory analytics has great potential to become the philosopher’s stone in this issue. The concept is simple: traditional BI queries data stored on physical disks whereas in-memory analytics uses data and queries located in the server’s RAM, making query results available near time. While this concept is not new, it is far from standard in the finance industry. Yet.
As pioneer banks are taking their first steps into IMC (in-memory computing) – such as Germany-based Dekabank or Swedish Avanza bank – we will be likely to see a fundamental technological turnover in bank’s BI in the near future, triggered by falling costs and increasing capacity of RAM as this article describes very well.

The advantages for banks are obvious: Dekabank’s use of Quartet FS is only one example how in-memory computing boosts performance through high-speed risk analysis combined with trading positions, which allows for faster reaction and near time alerting. Rapid fraud detection and credit card reporting are other benefits to name only a few.

As IMC gains ground, the heavyweights of the IT industry come up with their solutions. Quartet FS, Oracle TimesTen, SAS High-Performance Data Mining, SAP HANA or IBM DB2 with BLU Acceleration are some examples. We at MyPrivateBanking Research are looking forward to see how fast the finance industry will be able to adopt this promising technology.

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Over and over we keep hearing that robo-advisors are really only capable to develop simple investment strategies mostly based on simple products like index funds. For example, today Forbes carries a story that argues along these lines:

„While innovative and cutting-edge, most of today’s digitally-based offerings are still restricted to the discrete areas of basic planning and investing. People that want a more comprehensive wealth management relationship will need a broader solution, the kind that has been perfected by seasoned wealth advisory professionals.”

Well. We beg to disagree. Forbes maybe right that today’s offerings are relatively simple and restricted to basic planning and investing. But there is no doubt that software and relatively basic artificial intelligence will soon be able to tackle more complex questions.  Private banks and conventional wealth managers should not rest on the assumption that high-net worth clients and their more complex financial needs cannot be supported and advised by algorithms. Computers are able to solve complex and relatively unstructured problems in such diverse areas as diagnosing serious health conditions or advising customers on buying perfect gifts. Partly this is based on big data analysis, partly on very smart algorithms. No doubt that this kind of software will at some point soon be able to solve tax problems or estate planning. Don’t underestimate the speed of innovation. Of course, there still will be a role for humans in the advisory industry. But it will change from subject expert to human coach or therapist as many clients prefer interaction with humans rather than machines.

Check out our new report on robo-advisors for an in depth look how this industry will develop and how this brings new opportunities for conventional wealth managers.

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(by Francis Groves, Senior Analyst)

A week and a half ago the Financial Times reported that Google was believed to have intentions to enter the asset management industry and that as long ago as 2012 it hired a research firm to look into the possibilities.

Not surprisingly, news of a possible move into the investment industry by a company as successful and powerful as Google has sent shivers through the world’s huge fund management industry and existing industry players and commentators are speculating about the likely effect of a ‘Google Investments’ landing meteor-style on their territory.

Some have forecast that Google will aim to leverage its analytics capabilities to predict macro-economic and company trends. This could be dangerous in a number of ways. An institution with a reputation for enormous predictive power could have enormous effect on financial markets. It could also be very dangerous for Google if they used their Big Data to make big gambles and got them wrong. And it could also bring down on them a whole new wave of anti-trust activity.

Maybe Google is more likely to head down the road of providing value-for-money opportunities for small investors, possibly by becoming the world’s largest (and first global) robo-advisor. The Chinese company Alipay, an Alibaba subsidiary, acquired fund manager Tianhong earlier this year, raising expectations that Internet giants could soon move into the investment industry in other parts of the world. However, the Chinese public have a justifiable reputation as savers rather than consumers that is not found in the majority of western countries. The question arises as to whether, say, an Amazon or Facebook investment fund would be able to persuade enough clients to save.

But Google occupies a different space, rather more Internet nuts and bolts than (short term) experience or pleasure though, with Google Play, they cater for that, too. The point is that an Internet giant that makes its money through services that are free at the point of use (like Google Search and YouTube) is better placed to encourage a savings habit than companies that make money by selling ‘stuff’.

That said, the kind of people needed to staff an online investment manager are unlikely to be Eric Schmidt’s ‘smart creatives’, (“impatient, outspoken risk-takers who are easily bored and change jobs frequently.” ) The staff (and the robo if there is one) had better be measured, consistent, risk aware and more concerned with investor motivation than their own great ideas.

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Having evaluated for the first time the mobile websites of the 40 leading private banks and wealth managers in our recently published report, the results left the impression that the wealth management industry is still not aware of the importance of a unique mobile web presence and simply does not care about their mobile websites.

However, reading this article about the efforts of fashion brands to make bigger pockets on their jeans to fit bigger smartphones (responding to the #bendgate issue) it becomes more than evident that as we design our habits, lives and textiles around our mobile devices, every single firm – no matter from which industry – unconditionally MUST cater for a mobile web experience. The mobile website is one element in a unified interface of a bank with its customers. Together with mobile apps the mobile website is increasingly critical to reach clients and other users. Mobile devices are quickly becoming the main access point for any private client or consumer-facing company. Banks ignoring their mobile websites are missing a huge opportunity to reach out to their clients.

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MyPrivateBanking Research has just published our first report on the new class of ‘robo-advisors’ that have joined the wealth management industry recently. Starting in the United States and now appearing in Europe, Canada and Australia, robo-advisors have become instantly controversial with differing prophesies of the part they’ll play in wealth management in the next few years.

In our report we seek to puncture some of the (second-hand) misconceptions about robo-advising. For example, robo-advisor firms are all about technology, certainly, but the first wave of robo-advisors are not yet as robo as can be; there’s more to come in terms of deployment of artificial intelligence and mobile technology, to name just two areas for future progress. Nor are robo-advisors homogenous pure passive index-trackers; among them there’s considerable variety when it comes to investment strategies – though it is true to say that many of them use passive ETFs as their main investment vehicles.

At the same time MyPrivateBanking believes that wealth managers are in danger of becoming dangerously complacent about the robo-advisor phenomenon. Industry practitioners and commentators may think that robo-advisors compare unfavorably with what’s on offer from conventional wealth management businesses but to do so is to place too much faith in the status quo. In particular, relying on face-to-face client meetings as an economic moat to defend one’s client base seems a flawed strategy.

In the face of the massive short-fall in the availability of investment advice for the mass-affluent market, the robo-advisor model has what it takes to set this market segment on sustainable wealth acquisition pathways. The robo-advisors are staking their future success on the belief that today’s savers and investors are able to maintain a consistent approach without the hand-holding that has up until now been seen as necessary by the wealth management industry. The danger for conventional wealth managers is that the lean, efficient robo model will catch on among their HNWI clients. No one should be in any doubt that robo-advisors are very focused on client enrolment and their approach is scale-able both in terms of pure numbers and the size of individual client portfolios they can work with.

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(by Roxana Palade, analyst)

A good indicator of how digitalization impacts our life is the use of technology in designing tech-enabled clothes (one important part of what we call the “wearable technology revolution”).

Every traveler has probably at some point made the dreadful experience of forgetting her smartphone charger. The fashion designer Pauline van Dongen has found a practical solution: the solar dress. Part of a truly innovative collection, the Dutch designer has created ‘intelligent clothes’ like the dress with integrated solar cells that can fully recharge a smartphone.

No solar dress-fan? Then you might want to purchase the GPS-enabled blazer that functions with the help of an app and directs you by means of vibrations and LED lights integrated into the jacket.

As these examples show, the smart phone and tablet may become a lot less important as the device of choice for consumers in their everyday lives. Financial institutions should start thinking hard about the implications of the next wave of mobile technology development. When, where and on what occasions will their clients need mobile services and support and how should these be delivered? Are there ways, for instance, to provide account information and transaction capabilities to the client without the requirement to use a smartphone or tablet? How, when and where should content get delivered to client? Wouldn’t the communication with the advisor work much better via video chat on a smart watch rather than a clunky phone screen?

Some may think that there is no urgency to answer these questions today. They may be very wrong.


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What began as a lunatic idea years ago is entering our pockets today. Cyborgs, intelligent assistants, robots – they have many names but research labs and start-ups all over the world are working on the same idea: combining human and artificial components to end up with efficiency.

These days you cannot surf the internet without coming across several articles on artificial intelligence. This one really caught my attention as it reveals what is going on behind the doors of the labs of Viv, a start-up led by the inventors of Siri.

The crux on which they are currently working is the linking of multiple queries based on a cloud system working like a ‘global brain’. The objective of this kind of knowledge net is that the intelligent assistant should be able to actively learn from the incoming queries and even become able to predict what its user needs next.

Just try to imagine the impact this revolution will have on the finance industry – for instance, an investor could ask his smartphone “How can I build a portfolio with lowest possible fees limiting my expected maximum loss to 10% per year?” instead of meeting with his advisor. Along with an increasingly self-determined client, these changes draw a dire picture of the industry’s future and it will be up to the wealth managers and banks to find new ways for becoming indispensable.

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MyPrivateBanking welcomes the news that the British Standards Institute has launched its standard for security of transactions on mobile apps. This means that the public will benefit from being able to check for the presence of BSI’s well-respected kitemark as its approval for the level of security for treatment of app users’ personal and financial details.

The first to receive the app security kitemark is Barclays Bank for its Pingit mobile payment service and mobile banking apps. In the longer term it is expected that the kitemark use will be extended beyond banking and finance to other commercial apps such as ones for (paid for) entertainment but clearly the need for easily understandable standards is most pressing for financial service users simply because it is here that security violations expose users to the greatest financial losses.

Here at MyPrivateBanking, we have long considered that easily understandable and verifiable security standards are a must in terms of what financial services companies owe to clients and this is especially in relatively new areas such as banking apps. Up until now reference by banks to existing standards for Internet security, such as ISO 27001 (on which the new kitemark is partly based) and 27032, has been patchy at best. The launch of a kitemark for financial app security, more consumer-oriented than ISO standards, is especially welcome. The new standard requires meeting security standards and regular follow-up checks and ‘penetration tests’ by the BSI. Hopefully, it will be adopted widely internationally.

The full name of the new standard is BSI KitemarkTM for Secure Digital Transactions’. BSI say that it has been developed to help consumers confidently and easily identify websites or apps they can trust with their financial and/or personal details.

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