MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

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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MyPrivateBanking Research released a new report on ‘Digital and Mobile Solutions for Financial Advisors 2015‘ this week. Unlike the first two editions, which focused exclusively on mobile apps for financial advisors offered by technology vendors like Avaloq or Temenos, the new edition has a much broader perspective. Besides evaluating the developments the established vendors implemented in their mobile apps over the course of 2014, in-depth research has taken place in the fields of communication solutions (particularly video tools), recommendation and analytical solutions, as well as social media management tools.

In addition to the interviews our analysts conducted with the technology vendors themselves, they did several interviews with representatives of the leading wealth management companies, private banks and bank consultants in order to derive a deeper understanding of the actual level of digitization in wealth advisory business.

The three most disruptive trends according to our analysis are:

Remote meetings increasingly gain importance. Contributing to an omni-channel client experience, advisors are shifting more and more towards alternative digital channels like video conferencing and screen sharing tools.

Advisors are under great pressure. Shrinking margins force wealth managers to serve more clients per advisor who therefore need to be more efficient to operate feasibly. Solutions, which partly automate certain processes as well as social media management tools, are the response to these needs for an increasing number of advisors.

Clients are becoming more self-directed. With the booming app supply for retail banking clients, the high-net-worth clientele are demanding digital tools for their financial matters, as well. Hence, matching client tools empowering them to do their financial planning or even trading and portfolio rebalancing by themselves, are already standard. What has yet to be covered more extensively is the provision of advisor contacting options. Many advisory apps still lack basic communication features like video and text chat.

The report combines all the thought-provoking findings from these interviews, detailed company profiles of the vendors included with thorough descriptions of the solutions and products, and comprehensive conclusions on all these results.

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With the unexpected level of success of the iPhone 6 generating record profits, Apple is said to be already ‘cooking’ up the next big tech sensation: the iCar. Apple’s shift into the auto sector would not mean the end of the iPhone business. On the contrary, Apple fans have come to devour anyiThing related to iPhones - apps, music, films and more. And that’s exactly the main idea behind the tech giant’s strategy: to captivate more prospects and clients with every new product into the Apple universe.

With Tesla already leading the electric car market one may wonder how is Apple going to compete against that given the company’s lack of experience in the strictly regulated automobile industry. Have the iBeetle and Google’s self-driving car not stolen the thunder away already? What new revolutionizing design or functionalities could the iCar bring? First of all, Apple has never played the race to first game, the iPhone was not the first smartphone ever seen and the iPad was not the first tablet on the market. Secondly, Apple’s strategy is strongly brand- focused on Apple being a product company and not a technology company like Samsung. The aim is not to come up with completely new products on the market but to make sure the products Apple brings to the market are well-designed and have cutting edge technology integrated. Therefore, the iCar project is going to take a few more years to be finalized. In the meantime, suggestions and rumors are unstoppable: the Apple car would connect to all its existing products thus creating an exciting Internet of Things (IoT) experience or it would enable unimagined ways of interacting through digital channels while driving. Imagine your car morphs into a full-fledged office. It will be another step to make clients and employees more independent of their physical surroundings. It will have implications for advisors and their clients, for the ways they work, meet, communicate and interact.

Electric cars and Apple definitely make an interesting combination but to take on the car industry will be a different kind of fight than everything Apple has done so far.

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Exploring the digital world of financial advice for our upcoming report, we had to take a deeper look at cognitive computing, analysing the role of tools like IBM Watson and others. The technology certainly sounds promising: enabling advisors to make better and faster recommendations to serve a higher number of wealthy clients with higher quality recommendations through cognitive computing. This way, IBM Watson is likely to play a substantial role in easing the pressure for wealth managers, which results from shrinking margins as well as from rapid digitization in private banking.

While the use of Watson in financial advice is still in an early phase, the technology shows already promising results in healthcare. Moreover, IBM Watson plans to launch their first intelligent toy for children this year – CogniToys are supposed to develop with the children side by side, learning together with them through continuous interaction.

The need to educate Watson prior to using it effectively is the critical step for wealth managers who consider implementing the technology. Although there are some use cases already, for example at Singapore-based DBS, most banks are not yet rolling out AI platforms – such as Watson – as they are waiting for a clear proof their economic viability and ability to deliver RoI.

It is out of question that intelligent, learning software platforms with cognitive abilities will find their way into the wealth management industry. Early adopters may face some uncertainties but will certainly gain a competitive advantage being a step ahead of the pack.

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/by Francis Groves , Senior Analyst/

I saw numerous presentations at FinovateEurope that have implications for wealth management, especially in the wide variety of security features and applications designed to help people with their financial goals were demonstrated. However, there were just three presentations that looked at supporting the work of wealth managers/client relationship managers specifically.

The first of these presentations was from Crealogix, the digital banking software providers based in Zurich, whose CLX.AdviceManager financial advisory mobile app we covered in MyPrivateBanking’s ‘Mobile Apps for Financial Advisors 2014′report. Now Crealogix are adding a new product to their overall offering for financial advisors called ‘BankClip’. This an easy to use video clip assembly module that enables the advisor to create a customized video including components such as an update on the client’s portfolio, excerpts from the latest market commentary by the private bank’s analysts together with, for example, the advisor themselves making the argument in favour of a change to the client’s portfolio. It’s a good way to make service more personalized and more immediate and it really was straightforward to implement.

The next item that was specifically relevant to wealth management was by newcomer Mydesq, also based in Zurich. The company’s CEO, Milan Vora, demonstrated their just launched advisor application. The most impressive aspect of Mydesq is how much the application assists advisors with its continuously updated compliance content. This not only enables advisors to keep up-to-date with regulations in multiple jurisdictions but it seamlessly introduces all necessary compliance-related changes to the advisor’s work processes. As an advisor application, Mydesq includes features to support account and portfolio analysis and portfolio recommendations to the client. A client app is planned for Q2, 2015.

Lastly, Vienna-based CPB Software introduce some of the features of its PROFOS software, launched in September 2014. The three aspects of PROFOS that particularly stand out are presentation in relation to risk, the financial crises feature and the client profiling. PROFOS has introduced an extra degree of flexibility in portraying investment risk so that in addition to text explanations or charts projecting risk, the advisor can employ other graphical tools to explain risk in relation to the client’s portfolio. The financial crises feature of PROFOS allows the advisor to demonstrate how the client’s portfolio would have performed during specific crisis events such as the Russian default in 1998, the dotcom bust or the collapse of Lehman Brothers. Lastly, PROFOS allows the advisor to create a (confidential ) profile of each client on the basis of client meetings that will enable them to prepare for future meetings in the most effective way. The client profile focuses on the client’s negotiating style and communication style in particular and gives the advisor extra resources for achieving mutually satisfactory outcomes from client meetings.

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/by Francis Groves, Senior Analyst/

MyPrivateBanking were kindly invited to FinovateEurope 2015 and I attended on Wednesday this week. So how was it? There were a lot of presentations by providers of payments technology, so, occasionally they seemed to be crowding one another. Nevertheless, payments is really technology security going by another name and there were plenty of other security features presented as well. It seems a safe prediction that some of these will have implications for private banking and wealth management. We hope to post here about these in more detail before long and we’ll also look at some of interesting private banking relationship manager applications that were featured at Finovate.

One of the presentations that stood out for me in the field of security was Israeli firm NICE Systems’ voice authentication solution, demonstrated on a bright green analog phone (circa 1965) complete with curly flex. I especially liked the way that the voice database can store the voice ‘print’ of crooks and scammers. The genuine you can be authenticated in less than six seconds; the criminal impersonator lasted just eight seconds before they were identified.

Solutions aiming to educate and support clients included the gamification applications from AdviceGames of the Netherlands. This looks fun to use but I’m not sure that the pirates theme of the games demonstrated would really appeal to the older customer. Also impressive was the Spendific app from the Norwegian firm Evry. This is a savings goal app for 18-24 year olds. You set your goals and allow the app to have a say in how you spend your money; it’ll tell you things like whether a particular purchase will wreck your saving plan and how much money you’ll have for the rest of the week if you go ahead. It’s not particularly sophisticated – or diplomatic – but it is a great way for people to be sure that their financial good intentions bear fruit. Moreover, it’s easy to see that Spendific could be integrated with financial planning and investment applications as users become older and wealthier. Also, it’s another example of the imperative to be financially prudent being promoted in retail finance that we’ve noticed is a feature of several robo-advisory services. I love the name ‘Spendific’; it’s just a pity that this is a white-labelled product so users won’t get to use it.

Finally, who received the most applause? This was the Polish Internet bank, mbank, and their collaboration with i3D to create a hybrid interactive digital/physical banking experience for shopping malls. As well as standard functions, the shopping mall bank enables very rapid enrollment in banking products such as payment cards complete with special offers for the retailers nearby. A key feature are the very large multi-touch, motions sensing screens that provide identification through face recognition. All the time the mall is open for business, the mbank branch stays open and though rentals are high, the bank’s staffing costs are considerably lower than for a normal bank branch.

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Many banks and wealth managers are happy once their great new banking or wealth management app is uploaded to the app store(s). They start promoting the app to their client base and advertise it on their webpage. And that’s where the story usually ends.

Our analysts are often dismayed how difficult it is to find the right banking app in the app  store or on the Internet. If a client does not know the precise name of the app, she might not be able to find the app at all. Existing clients can at least be targeted and informed directly by the bank. But what about prospective customers? A wealth manager might just have launched this wonderful research app with great new features. It would be an awesome tool to convince potential new clients to check out the wealth manager. Yes, it would and it could. But prospects hardly find this new app. Because banks hardly think about app marketing, app search and app promotion.

Pinterest is a place where people check out new things. Cook recipes. Fashion. Gadgets. And beginning in this week, there will be also the Pinterest app store for iOS apps only (at this point). iPhone and iPad users can download apps directly from Pinterest without going to the app store. I think this is one great example how banks should start thinking about app promotion. Recommending an app with cool images. Getting your app on the smart phones and tablets of prospective clients is becoming more and more important for promoting a wealth management organization and ist capabilities. The Pinterest app store is just one option.

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