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Archive for the ‘Thought Piece’ Category

What does it take to be a Leader in digital wealth management?

Friday, April 13th, 2018

The need for replacing legacy systems with more agile, and often cloud-based, platforms is clear, and most of the world’s top wealth managers are currently in the process of restructuring and transforming their existing business models to a digital first, agile, and innovative plan. However, some of these top wealth managers are more successful than others, and this brand new MyPrivateBanking report showcases these “top of the top” leaders.

2018 yields clear improvements but weaknesses remain

After a full review of the mobile app strategies, websites for wealth management, and social media channels for wealth and private banking divisions, we have been able to rank the top ten leaders for digital channels. A subsequent evaluation showed that within this top ten ranking there are clear differences in how these leading wealth managers approach their digital transformations and how successful these transformations have been. Importantly, this year’s report reveals a clear weakness in the long-term planning of even the cream of the digital wealth management crop. In particular, there is a clear failure to foster digital leadership from the bottom up-something that will, in the years to come, cripple the success of a long-term digital strategy. Interestingly, this lack of bottom up leadership and a failure to secure the talent pipeline is partially mitigated by clear improvements in top down digital leadership between the 2018 report and the 2016 report.

Digital winners are solidly on board with fostering top-down leadership

In 2016 we were surprised to find a lack of top-down digital leadership in the world’s best digital wealth management firms. Only 55% of these organizations had a dedicated C-level position for digital wealth management or similar. In this year’s report, then, we were pleased to see that this clear weakness has been rapidly overcome-over 80% of 2018’s digital winners now have dedicated digital positions at the very top of the hierarchy. This shows recognition of the need for top-down guidance of digital transformations and the importance of having an ally at the top of the hierarchy for fostering innovation. This increase is one of the strongest positive findings of this year’s evaluation.

Bottom up leadership is, however, still very weak

While the finding for top down leadership is a very positive step in the right direction, this has not yet been balanced with an equally strong emphasis on bottom-up leadership. Top down leadership, and having a C-level digital ally, is undoubtedly a key factor in short term success-especially when it comes to fostering innovation, pushing through reforms, breaking down silos, and similar. However, we caution that bottom up digital leadership is equally important for long term digital success and is, critically, only present in around 55% of this year’s winning organizations.

Securing the talent and leadership pipeline is key for long term success

Long-term thinking means also developing a strategy to maintain the talent pipeline within the bank and a smooth entrance ramp for talented external hires. At the same time, established banks have to make sure that talent stays in the company rather than being lured away by better offers from FinTechs or competitors. Only half of the top ten digital leaders have a clear and comprehensive strategy in place for securing their innovation and leadership pipeline-meaning that many of these leaders risk losing traction when it comes to long-term digital leadership.

Securing the talent pipeline is about more than just hiring practices. This can be both a top-down and a bottom-up process and, realistically, it should be both. This is a strategy that ensures that new employees are provided opportunities to become innovation leaders by providing internal training and mentoring. It also means ensuring that leadership is fully on board with promoting and fostering a culture of innovation and digital focus within the firm.

Our latest report goes into greater detail about the ways in which wealth managers and private banks can successfully secure this talent and leadership pipeline in order to set up their organizations for long term digital success. We cover key aspects of a successful long term digital strategy, discuss the differences between finding a good talent pool and supporting internal development of promising leaders from day one. We also provide examples and case studies of organizations who have been successful in this area in order to derive learning points from them.


Only robo-advisors constantly pushing ahead for superior client experience will survive

Thursday, November 17th, 2016

The pioneer years of robo-advisors have come to the end and the market will separate the wheat from the chaff. Too many automated investment services target the same, growing - but still not sufficient - client segment to nurture all or most of them. Too few of the automated investment services see their platform through the eyes of a first time user, while many are losing sight of the need for sustaining a customer experience that will - ideally - last for years.

In our new report on the leading robe-advisors worldwide, MyPrivateBanking makes a series of recommendations on the basis of our benchmarking evaluation, among them:

Aiming for transparency is the best policy, especially when presenting the robo-advisor’s pricing and product and process information.

Automated investment platforms need to be subjected to rigorous user experience testing. Looking good is not enough - equally, content must be in-depth.

Robo-advisors risk side-lining themselves if they don’t recognize that clients need financial plans as well as investment portfolios. At least a basic financial planning offer should be considered for inclusion as part of the robo value proposition.

We foresee the need for leading institutions to be more radical and wholehearted in their automated investment initiatives in the next few years, even if this means starting over again with a second robo-advisor to replace their first.


Why falling stocks might make your ears ring

Thursday, December 4th, 2014

The question is not if there will be wearable banking but rather when it will arrive in the mass market. While wearable activity trackers already observe every step of an increasing number of people, the use of wearable mobile devices (other than smart phones or tablets) for financial matters is still in its early stages. But there are a few financial services apps already out there for Google Glass and smart watches. Just check here, here and here. These are the early movers but there is no doubt that others will follow soon.

It’s not clear yet which apps and which devices will ultimately be successful: It could be devices like Google Glass, smart watches, or even bracelets for taking the role of contactless payment tools. Even more far-fetched ideas might ultimately come to the market. Why not a partnership between a big fashion house and a stock broker. Earrings, which discretely start to vibrate when stocks fall below a certain level certainly could find their buyers. Therefore, continuous research among its client base, rapid prototyping and closely watching its competition should be on every bank’s critical path to their next breakthrough mobile app.


How Important Segments of Wealthy Customers Open Up to Social & Mobile Media

Tuesday, January 31st, 2012

Important Segments of Wealthy Clients Are Opening Up to Social Media

This chart summarizes a lot of our insights with regard to segmentation of wealthy customers and their usage of social media and mobile apps. Put in a nutshell, we are seeing that particularly the entrepreneurial segment and the “young & hungry” are aggressively using social and mobile media, followed by “Old Money” and the “Mittelstand”  (managerial class and owners of medium-sized businesses) segments.

It is a development that will profoundly influence the business of wealth management over the next decade. As social media are increasingly entering the financial industry, clients will demand new solutions and communication patterns from their banks and advisors. Another development shows, that recommendations from peers will become critical in the decision making process when choosing a new provider. The brand of financial players can also be heavily influenced through discussions and sentiment on social networks. In summary, social and mobile media are a strategic challenge, involving communication, sales and marketing efforts of every financial player. Be ready.


The Age of Viral Information

Friday, December 3rd, 2010

“Information is moving from being the bedrock of market efficiency to a source of crisis. The risk for the market is not the news itself, but what news gets drilled home through so many channels that people act on it; we cannot anticipate when information might go viral and sweep the markets.”

This is Rick Bookstaber on why information is becoming a source of risk. Interesting throughout. It will be one of the critical tasks of any financial institution to monitor and, if necessary, counteract this flow of viral information. As our study on Wealth Management and Social Media has shown, most banks are not prepared at all to deal with social networks and viral information.


Excellent Post on Buy & Hold & Rebalancing

Monday, September 13th, 2010

“But let’s not forget that there are no silver bullets in portfolio management. Instead, success comes only through diligent monitoring and managing of the asset allocation. That starts by diversifying widely and planning on routine rebalancing every, say, year or two, or more frequently if you’re opportunistically inclined. Yes, there’s more, much more to do, if you’re up to the task. But the thousand-mile journey still starts with the first two steps: asset allocation and rebalancing.”

Find the whole article here. Excellent and informative through-out.


“No human or strategy can consistently beat the market”

Monday, August 9th, 2010

James Altucher is one of the least arogant and most knowledgeable hedge fund managers I have come across. He is a great investor but has also started some great businesses like In addition, James has written several books on investing. The Kirk Report has just run a long interview with James:

“The only three things that are important are discipline, persistence, and psychology. Without those three things there isn’t a strategy in the world that will work for you. With those three things, just about any strategy will work.(…)No human or strategy can consistently beat the market. The best traders I know are some of the most humble guys out there and have no arrogance on their market opinions at all. They are able to switch opinions and strategies very quickly. I would say that over the years any arrogance I had about any strategy has probably disappeared and now I’m appreciative of just about any strategy out there as long as it comes with persistence, discipline, and positive psychology.”

Very  wise words, indeed.


Why Investing Has Become More Democratic Than Ever

Tuesday, July 20th, 2010

I am pondering one sentence I stumbled upon today:

“It is ironic that the markets are now at their most democratic at time when returns are at their nadir.”

This is from the blog abnormal returns, a great source of financial debate. Basically, indivividual investors today have all the tools and vehicles to free themselves from unhealthy advice and make their own decisions:

“The ironic thing is that at a time of poor returns, the information and tools available for investors have improved dramatically. This is largely a function of the rise of Internet. Abundant data, cheap trades and an explosion in investment vehicles, i.e. ETFs, have made it ever more possible for individuals to manage their portfolios how the largest institutions did just a few years prior.”

I still think that this investor heaven is a far cry from what most private investors do today. Most individuals are still entrusting their wealth to a bank or a wealth adviser who is not free of conflict of interest when picking investment products for their clients. Most private investors still believe their advisers when they tell them how to time the markets or pick individual stocks or bonds. And on top of everything, most investors still pay way too much money to their wealth managers. It will be a long time until the majority of private investors really takes investing in their own hands. But, in any case, the revolution has begun and it offers too many advantages to individual investors to be stopped. Particularly in times of low returns the weaknesses of trading-oriented and active stratgies of most wealth managers become very clear to investors.


Your Are Not So Smart

Thursday, June 24th, 2010

Do you think you have based your investment decisions on years of cool rational analysis and experience? Well, you might be in for a surprise. Following up on our last blog post about behavioral finance, read this great post on confirmation bias.

“Half-a-century of research has placed confirmation bias among the most dependable of mental stumbling blocks.”


Responsible Wealth vs. Responsible Spending

Monday, February 8th, 2010

A friend of mine has drawn my attention to an initiative called „Responsible Wealth”. It aims at the top 5% of income or wealth in the US that “care about economic justice” and asks them to donate some or all of the tax savings from the tax cuts of the Bush and Clinton administration to “tax fairness organizing”. This raises the question if the top 5% do not already pay a fair share of taxes already? To assess this question I looked at data of the Internal Revenue Service (IRS) to get a better idea of the role of the Top 5% in income generation and tax payments:

As it turns out in 2007, the top 5 percent of tax payers earned 37.4 % of adjusted gross income paid 60.6 % of all federal individual income taxes. In comparison to 1992 (when Clinton came in office) the Top 5% had a share of 28% of the total adjusted gross income and a share of 45,9% of all federal income tax. No shift in the relation between share of total gross income and share of tax paid during the Clinton/Bush era. Just for comparison: The bottom 50% of adjusted gross income in 2007 had a group share of 2.9% of income tax.

While “fairness” is always in the eye of the beholder and one can always argue about the “fairness” of single cases and tax cuts I do not see the overall point of the Responsible Wealth Initiative. If the top 5% of the taxpayers account for 60% of all tax payments and the bottom 50% for 2.89% I find it hard to argue that the wealthy do not already “care about economic justice”. Even more so when taking into account that the wealthy in the US spend each year between 2-3% of their investable assets for charity.

I fully agree that the living conditions of the poor can and should be improved, but for me it isn’t a matter of the wealthy being irresponsible, but instead, a matter of the government spending their huge amount of tax money responsibly. The solution to take more and more money from those who generate economic development in order to increase public spending and improve ecomomy is too populist and shortsighted. It would be much more useful for this purpose to demand more effective investments of tax receipts by limiting the influence of lobby groups, streamlining bureaucracy and thinking beyond the next election day.