MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

/by Francis Groves, Senior Analyst/

Yesterday there was news of two major acquisitions of fintech companies in the United States with the takeover of Advent Black Diamond by SS&C in a deal worth $2.3bn and the purchase of eMoney Advisor, the financial planning software company.

The eMoney Advisor deal is reported to have cost Fidelity Investments just $250 million and reflects the fact that although financial planning software can bring great advantages to financial advisors and eMoney Advisor seems to be highly regarded in its field, the software itself seems surprisingly cheap. A license for eMoney Advisor’s emX PRO product currently costs less than $4,000 a year. Other financial planning products in the U.S. are even cheaper.

In fact eMoney Advisor offers more than financial planning software with marketing tools (advisor branded media such as videos and presentations), account aggregation, vault solutions and, perhaps most importantly, its client portal. The eMoney Advisor personal financial management (PFM) tool (they call it a client site) is seen as possibly the most attractive of the company’s products in the eyes of Fidelity. MyPrivateBanking’s view is that Fidelity’s purchase should probably not be seen as a cherry picking opportunity and that they have plans for the whole product range. That said services like MINT.com or Personal Capital’s financial software are showing that personal finance portals have plenty of potential in the retail segment.

Just what those plans may be is unclear at this stage but the eMoney Advisor purchase has raised concerns among financial advisors that use its products even though Fidelity has promised not to interfere with emX’s integration on the platforms of other custodians such as Charles Schwab and TD Ameritrade. Concerns have also been expressed at the possibility of Fidelity making use of big data on HNWIs’ portfolios available on the eMoney Advisor platform but this raises such serious questions about who really owns that data that we think Fidelity Investments would see this as a highly dangerous strategy.

Although we shall have to wait to see how Fidelity plans to build on its eMoney Advisor acquisition, it is clear that the company is fully aware of the need to accelerate the speed with which it engages with digital technologies to provide more help to investors. MyPrivateBanking believes that, in particular, the new collaborations between Fidelity Institutional and Betterment Institutional, and with LearnVest may be a sign that Fidelity’s focus on providing advice and planning services to the mass affluent and the young via technology is increasing.

The eMoney Advisor deal also sheds an interesting light on the volume of investment going into fintech from venture capital funds. Fidelity is paying a lot more than start up’s funding but it is getting an established revenue stream of at least $30 million a year as well as a well qualified team of 250 people. It seems likely that they have interesting plans for that team as a team but that they will respect what eMoney Advisor has already achieved since it started 15 years ago.

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I read an interesting article about the fear AI (Artificial Intelligence) development causes due to an assumed threat of destroying jobs. However, the conclusion Andrew Ng, the famous AI researcher, makes, hits the nail on its head: the true challenge is not the robots but the retraining of the employees.

What does this imply for wealth managers? As robo-advisors gain ground, don’t waste your time but think about ways how to obtain benefits from this development. Define your new competitive advantage and exploit the psychological lead a human advisor (still) has over a robot.

Watch out for our upcoming report in March 2015 on digital interfaces for financial advisors to learn how.

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Reading about the more and more popular Steve Jobs schools or new iPad schools in the Netherlands it struck me that this kind of digitized scenario is exactly what happens or should be happening in the financial industry. Children attending these schools need no textbooks, blackboards, pencils, or fixed classrooms but only their iPad. They choose what they want to learn and in the rhythm they can do it. And most importantly, the educational apps are interactive, thus providing each kid with immediate feedback on his/her tasks, which changes the traditional teacher-student hierarchy into a closer student-coach relationship.

And this is also what financial advisory should be based on: coaching, advising, suggesting, making recommendations for the client while also allowing clients to use the same technology as the advisor does. Making sure the advisor has access to the latest tech solutions that bank clients are using, being able to offer flexible communication channels like social media or to share screens during a video conference with overseas clients.

Mobile devices and digital solutions reinvent the school for our children, offering them flexibility and enabling individualized learning, helping them stay focused on what they really want to learn. Applied to the advisory world, the advantages are the same: clients become empowered, stay up-to-date with developments and communicate effortlessly with their advisors from anywhere in the world while advisors and relationship managers morph into client coaches. Will banks and wealth managers have the courage to follow this new path?

Our upcoming report (March 2015) on mobile apps and digital solutions for wealth advisors will focus on the technology infrastructure required for a changing client relationship.

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(by Francis Groves, Senior Analyst)

Windows 10, due for release on Wednesday January 21st, is being reported as Microsoft’s latest effort to establish itself in the smartphone business. At first glance this looks like a lost cause with sales of Windows smartphones globally only making up 3% of global sales in the third quarter of 2014. With such poor market penetration, many mobile app developers are simply not including Windows in their calculations. Certainly, MyPrivateBanking’s findings on app deployment by financial institutions suggest that Windows smartphone users are very rarely catered for.  In some cases Microsoft is reported to have been paying important developers to develop Windows phone apps.

In these adverse circumstances, Microsoft is doing what it can to make its mobile platform more appealing to app developers and mobile app market. With regard to Windows 10 this means that developers are going to be able to adapt compatible applications available on personal computers more easily to mobile use.

Many commentators seem to hold the opinion that nothing that Microsoft can do can overcome their original late entry into the mobile market and the relative failure of Windows smartphones ever since. A contrarian view might be that Microsoft still remains supreme in terms of work-place computing, even if not in terms of devices used by workers, and there might yet be ways to grow the market for Windows as a mobile platform by leveraging the average office’s reliance on Windows on its laptops/desktops.

To a large extent the success (or failure) of different platforms for mobile has been a matter of fashion. So which way does fashion flow, from experience of technology in a work context into leisure and recreational activities or the other way around? Sadly for Microsoft, we think that apps for recreation are the trendsetters BUT there may be hope for Windows in some contexts where the purchasing decisions lie with employers rather than individuals. Apps for staff ‘on the road’ or ‘in the field’ are big business though not as high profile apps for leisure. And, of course, increasing numbers of people have more than one smartphone in their possession; my work mobile - as opposed to my mobile - is common.

In terms of mobile apps for wealth management clients, we expect that they will continue to be content with apps for Android and iOS, where all their other after-work app requirements are being met. But if Microsoft were to come up with awe-inspiring developments in cloud computing  or Internet security or its natural language research program, Windows as a mobile platform could have a new start in life.

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Remember Inspector Gadget, the detective who solves cases with the help of high-tech devices? Totally futuristic in early 80s, the concept is easily applicable to today’s financial advisors. While particularly the advisory services for the mass-affluent experience a severe threat from the booming robo-advisor industry, we forecast a pressing need for HNW clients’ advisors to redefine their role, too.

In Private Banking, advisors or relationship managers as they are called there, will not disappear as the main interface to the high-net-worth client. Digital innovations like robo-advisory tools, mobile apps, video conferencing, or social media dashboards will support and improve the advisor’s work. Just like her cartoon sibling, the new advisor is combining her human benefits (the emotional intelligence) with the technological benefits (the data, analytical and visualizing part). The new advisor will be – like Inspector Gadget - inspired by Cyborgs, bringing together the best of human capabilities and machine intelligence.

The new advisor offers to her clients support and coaching across all channels in real time in an increasing personalized way. Big data tools help her to identify relevant information to recommend the right products at the right time. Social media compliance tools deliver the compliant framework for advanced client communication, and sophisticated video conferencing tools allow for flexible advice anywhere and anytime. Thanks to dedicated mobile apps, client meetings improve in terms of quality, engagement and efficiency.

Watch out for our upcoming report on digital interfaces for financial advisors this spring!

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(by Francis Groves, Senior Analyst)

So far, it has been taken for granted that mobile apps cannot be searched effectively  by Internet search engines. App use and Internet use are still different activities, often complementary but not seamless. For ordinary lay-people using the Internet and mobile apps this characteristic unsearchability of apps is hidden in plain sight. It’s been taken for granted up until recently but things look as if they are about to change.

According to the New York Times (6th January, 2015) the race to develop app search tools is on, with major players such as Facebook and, not surprisingly, Google looking at ways to crack the problem of creating a generation of apps that are searchable in the same way that websites are searchable. There are also a number of start-ups, such as Quixey (who already have an app to search apps on a single device) and Branch Metrics, who are trying to develop the winning technology. The particular advance Branch Metrics have achieved is the ability of one app user to share in-app information over the Internet in such a way that their friend/contact can be directed to the appropriate app store page to download the app and access the app service for themselves. For the time being, searching across apps with an equivalent to Google Search is a challenge still waiting to be overcome.

Talk of searchable apps not only seems mind-boggling but calls into question our understanding of what mobile apps are. Up until now they’ve been tools to help us but now how should we view them.

The advent of searchable apps will also raise a whole range of questions relating to the use of mobile apps in financial services. For those financial service companies that have seen the wisdom of branching out into mobile apps, they have combined a few key advantages that could begin to be undermined by the arrival of app searching. Firstly, the confidentiality of one’s personal banking app suits the bank customer just fine. Like your wallet, no one is supposed to be poking around in your banking app except you. Just like a wallet, the contents of your banking app are probably terribly boring, pretty predictable and intensely personal and private. So, if apps become searchable, we’re going to have to become used to distinguishing between the new searchable apps and the ones that stay as private and secure as they were before (you hope). Could apps in general lose some of their attraction if some of them lose that dedicated-to-me quality? Users may not like having to identify and remember which apps are the new sociable (or leaky, depending on your point of view) apps and which are the safe ones.

And doesn’t the possibility of a universal app search mechanism ultimately mean that even apps that are currently equipped with robust security - as financial service providers’ apps should be - are going to become less secure in the end? At the very least, banks are going to have to shout louder to clients about their personal app security.

We’re not sure if 2015 will see a real breakthrough in app searchability - the existence of rival technologies may severely restrict the effectiveness of any one app search engines - but we certainly think that this is something that the finance industry should be on the look-out for.

Happy New Year.

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2014 - what a year! Digitization has only started to disrupt the financial industry through innovations like robo-advisors. Mobile apps for various financial areas have really taken off in 2014: wealth management, financial advisors, and fund management, are catching up fast on the mobile battle field. And social media is quickly becoming the most important customer support channel for banks.

But digital change in the wealth management industry is not slowing down. Here are our top-10 trends for 2015:

10.) Personalized marketing based on big data: Social content mining tools deliver a clear client profile, making it easy and convenient to address wealthy clients’ dedicated needs.

9.) Margins under pressure: Wealth managers must be prepared for an increasing pressure on their margins due to the emergence of automated investment/advisory services and the emergence of commission free brokerage.

8.) Messaging becomes ever more important: Particularly the high-net-worth clients expect to be able to reach their advisors anytime and everywhere they are. Instant messaging services, video chat, social media, and co-browsing are gaining momentum.

7.) Advisors become client communication managers: Thanks to client portals and social media dashboards, financial advisors are now able to manage and monitor their client communication through one single tool, thereby increasing efficiency and productivity.

6.) Security remains crucial: Comprehensive security and privacy protection stay on top of wealthy clients’ wish list with regard to banks’ and wealth managers’ digital offerings.

5.) Advisors become coaches: Through content collaboration tools, financial advisors are able to add value to their clients as real sources of expertise and deliver high quality educational material.

4.) Social finance as a new definition of charity: Banks are increasingly recognizing the benefits – social as well as financial – of social finance as opposed to donating to charities by highlighting the investment character of social finance projects.

3.) Social media become most important channel for customer support: Mainly Twitter and Facebook serve increasingly as a public interface to deliver support to clients – first in the mass affluent and retail segments but later also for the HNWI.

2.) Mobile touch-points will start to see, feel, and navigate for the client: As more and more sensors are added to mobile phones plus new devices are getting ready for apps like smart watches or glasses, mobile apps will use contextual data to deliver value to the client.

1.) Automated investment advice is becoming part of traditional wealth managers: Robo advisor start-ups have made a splash in 2014. But 2015 will be the year of established wealth management firms implementing automated investment advice as part of their own business model.

The whole MyPrivateBanking team wishes our clients and readers wonderful holidays and a happy, successful new year 2015!

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Social media’s disruption of communication is overwhelming financial institutions and creating confusion about which social networks they should focus on. Instagram, a mobile app based photo and video sharing platform, has skyrocketed to 300 million active users thus surpassing Twitter and making Instagram an important global media platform. But the pace of change and the mind boggling competitive dynamic in the social media industry is confusing to more conservative institutions like banks and wealth managers.

As our recent report Social Media for Banks and Wealth Managers: 2014 shows, it’s especially difficult to get banks to understand the significance of social media and the relevance of different social media platforms. 95% of the banks under evaluation have launched Facebook and Twitter presences but only 45% of them have an Instagram official photo stream.

Visual social media has become crucial in developing a good social media strategy. Unlike their more text-based siblings Facebook and Twitter, these channels give access to individual images and images are known to appeal to emotions and tell a story that is easier for consumers to connect with than informational texts. It is this emotional connection that distinguishes a brand, a service, a product, or a company from its competitors. Citi or Crédit Agricole are good examples of banking players that have well-structured Instagram presences with strong corporate images and entertaining posts.

As for those who have not yet joined the bandwagon: photo-stream us! Make us stare, meditate, laugh, frown, and get interested in your brand!

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(by Francis Groves, Senior Analyst)

Social Media Charter, formed in August to help the UK’s financial services industry to use social media compliantly and effectively, is holding a Summit event at the House of Lords on the subject of using social media responsibly.

Interviewed on the BBC this morning, Kitty Parry, the Social Media Charter Chief Executive, highlighted the upside of social media for the banking industry, including the interesting statistic that customer service interactions provided via Twitter and Facebook costs banks (presumably UK ones) an average of 75 pence a time, compared with a cost of £4.75 for an equivalent interaction conducted over the phone. She went on to mention the empowering nature of social media for bank customers as a way of comparing customer service and products between banks.

In our recently published report on ‘Social Media for Banks and Wealth Managers: 2014′, MyPrivateBanking finds that the leading banks globally are indeed focusing heavily on customer service functions in their approach to social media. In our report we provide detailed coverage of the most effective customer service strategies that our analysts encountered and the lessons to be learned from them, as well as information on how much customer query/complaint traffic is now going to banks’ social media presences. However, we also found that very few banks are using social media effectively to showcase their products and services, even new offerings. Although fear of infringing regulations in relation to marketing and social media may be one inhibiting factor, we see a more general lack of social media vision and a pervasive defensiveness in relation to their reputations as the main drag on effective involvement with social media.

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Digital channels are gaining ground when it comes to communication between affluent/high-net-worth individuals and their financial advisors. A substantial minority of around 20% - 30% already communicates with their financial advisor via instant messaging providers, video chat, social media, and screen sharing. These data are from our latest 2014 Wealth Survey, covering China, the US, UK, Germany and France. Yet, the most striking insight is that the wealthiest group – high-net-worth-individuals with more than 1 million USD of investable assets – are the most tech-savvy when it comes to digital communication. Around 40% of this client segment state that they are using messengers and video chat predominantly when communicating with their financial advisor.

Implications for wealth management firms are disruptive: Advisors need to be ready to use new digital channels, and security and compliance issues need to be addressed. However, in the long-term there are even more profound consequences. If communication moves from analogue to digital, it becomes possible to use software for automating communication and answering inquiries. Robo-advisors are already automating portfolio allocation. It’s not unthinkable that they will also automate client communication in a not too distant future.

For more learnings and insights, get our 2014 Wealth Survey including 289 data slides.

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