MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

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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(by Laura Elsler, analyst)

This post is about a topic which is not directly related to the financial services industry. But we think that the development is so profound and implications are far reaching that we would like to discuss it on our blog.

Samsung, Apple’s mightiest competitor in the area of mobile devices, is about to release a project called S.A.M.I./Simband. Behind these acronyms, which rather evoke thoughts of  robots controlled by artificial intelligence and sci-fi movies, is a cloud-based platform and reference technology for wearable devices. The Simband is a sensor packed wrist-band which measures physiological and ambient data. S.A.M.I. translates to Samsung Architecture for Multimodal Interaction and shall allow wearable devices with different operating systems to connect to it, store data, run algorithms and send information back to the device.

Putting it differently, Samsung attempts nothing less than to become the central hub for all data which run on wearable devices, an industry which is expected to grow 6-fold until 2018.  All devices, which consumers will wear on their bodies, or which connect their home with their car and the office, may run on this platform.

Unlike the Facebook model of leveraging data, Samsung promised that users and developers will remain owners of their data. If Samsung has yet a model how to cash in on the Simband and S.A.M.I. platform seems questionable. To me it appears, once Samsung is the central player controlling a market growing so strongly, the potential return on this investment can be huge.Of course, Apple is not standing by waching Samsung overtaking them. The Apple Health App is aiming for the same or similar  consumer needs.

Wearable technology has long been predicted to be the next big wave after the smart phone and the tablet. It seems that the battle has finally started. The implications for financial institutions are yet far from clear. But there is no doubt that all aspects of life and business will be touched by this new technology.

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(by Francis Groves, Senior Analyst)

A few days ago the MyPrivateBanking team were discussing communication and the topic of bullet point came up. Generation Y members of the team were strongly in favour; ‘bullets are snappy, they help the reader focus.’ The baby-boomer wasn’t so sure; ‘it feels like you’re being shouted at’.

This made me think about the way in which the investment industry customarily communicates with investors, whether they are wealth management clients, retail clients of banks or D-I-Y investors. By and large, even in today’s wired world investment content is surprisingly long-winded. Service providers are still providing commentary in substantial chunks of text; they are publishing as if they have to fill up a certain amount of space. And, collectively, much of what they say is repetitive. They seem to have an old fashioned and now misguided idea of what really works for their readers or, you could say, they are focusing on a type of reader who is time-rich, likes reading and equates financial wisdom with acquiring more and more detail.

Perhaps it’s time for a change to providing investment commentary that’s more suited to younger generations. They’re perfectly happy to read but they really don’t want to read the same things over and over again. They want to know what matters and they only need to be told once that, say, shale gas affects energy prices or that good economic data is bad news because it increases the likelihood of interest rate rises. News in brief columns in the press and short business bulletins on the radio work for them but they need news media to be more helpful still.

Maybe it’s time to try out business news that looks more like Buzzfeed lists and rich and varied graphical content and even to start mining ’standard’ news as if it was big data; think of headlines like: “how many mentions of ‘forward guidance’ has Federal Reserve Chairman, Janet Yellen, made in the last three months?” accompanied by a chart.

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This week I had the chance to attend a workshop led by MicroStrategy, the Business Intelligence company, to learn how to build an app in no longer than a few hours. To be honest, this sounded a little bit upbeat to me: evaluating app features is one thing, but developing them myself in only a few hours?

After a short introduction into the company’s worldwide operations, products and services the attendees were handed out a kind of script, which should lead us through the different steps for becoming a true app developer. Still skeptic, I started with the first task. Following the instructions, I created an app homepage on the personal computer, which immediately showed up on my tablet.

Excited from this success, I continued with clicking, dragging and dropping, typing and sizing. It reminded me a lot on my decades old experience with building a house, a farm or a car with my Lego kit. In the end I was entirely puzzled by this genius piece of digital work I was responsible for: a retail shop app containing a comprehensive product list, filter options, a barcode scanner, an interactive map with all of ‘my’ stores and the respective sales figures, multimedia documentary as well as a calendar containing all of my meetings and cool features like the app showing up different content when changing the orientation of the device.

At the end of the day I came to the conclusion that it’s not only possible to develop a mobile app without coding skills, but that it’s easy, fast and even fun – through the right platform, of course. This is why software vendors that offer such a modular approach are gaining substantial ground. Another example that is pushing a similar approach is banking software vendor Avaloq who is also increasingly relying on a building kit approach. This market is still in its infancy and it will be well worth keeping an eye on it in the coming months. It also shows why apps are such a fast and customized weapon in the fight for new clients and market share. Within only days you can change your offer, adjust it to new customer needs or respond to your competitor’s last move.

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