COVER STORY WEALTH MANAGEMENT THE FIN TECH TIMES
EXPERT OPINIONS
“There are definitely lessons that incumbents and fintechs can learn from one another…” KEVIN RUSSELL UK Proposition Director, SEI Wealth Platform How is fintech is reshaping asset & wealth management industries? Two industries shrouded in legacy and well-known for slow evolution have received a wakeup call with the surge of new fintech firms globally, accelerating innovation at an unprecedented rate. Customer expectations are being completely reshaped across financial services through a combination of technological advancements, regulatory changes and the consumption of non-financial products and services. As a result, the industry is now focusing on customer advocacy ahead of product advocacy, a long overdue change in mind-set. As a prominent example, robo technology is challenging traditional wealth management models by offering lower-cost automated advice that has democratised investing for consumers under served in the past. New fintech solutions are also resulting in operational efficiencies and risk reduction by providing STP multichannel support.
investments to a wider audience. By simplifying the investment process by providing lower cost automated advice, companies can approach client acquisition in much smarter ways. Technology and hybrid-advice allows firms to efficiently manage existing clients, while simultaneously targeting a much broader client base with minimal operational impact. This segment has traditionally been unable to afford these services or has not qualified for minimums. This is opening up new revenue streams to wealth managers. A fully STP solution is relatively straight forward to manage and is a good way to introduce a new sub set of clients who have not been targeted previously due to high barriers to entry.
Your TOP-3 trends for the investment industry for 2018 1.
How do you evaluate a cooperation between incumbents and fintechs in wealth management, and how can they benefit from it? The decision to build, buy or partner is one taken seriously by both incumbents and fintechs. 2016/17 saw numerous mergers and acquisitions in the robospace and an increasing number of partnerships in the AI and blockchain space. There are definitely lessons that incumbents and fintechs can learn from one another. Fintechs are challenging existing business models and the thought processes in enterprise firms, pushing the enterprise firms to work in more innovative ways to create new tools and services. There are further challenges in the ability of incumbents to innovate at the same pace as fintechs. Conversely, larger institutions can assist fintechs that lack the distribution channels in marketing their solutions and bringing their products to market. SEI has experienced this first hand through our regtech incubator, Codify that houses and supports regtech start-ups that are strategically and culturally aligned with SEI, with a view to a possible future long term partnership.
How does tech democratise the investment market and processes? Like the adoption of online shopping by high-street retailers, technology has opened up the world of
6 I April 2018
2.
3.
Data analytics is all over the news and regardless of where you stand from a moral perspective, the fact remains that advanced data analysis can be an invaluable addition to any organisation if utilised correctly. This is an area where the investment industry has barely scratched the surface. Big data has the ability to offer new revenue streams and the potential for specific actionable insights tailored to customers. However, customer trust is key here. This is an area SEI are exploring both internally using our own data and with our clients. In alignment with data analytics, AI and machine learning have huge potential to revolutionise the industry. How far this technology can go is still yet to be seen as we are still at a learning stage where we are mainly seeing augmented intelligence, i.e. human intelligence aided by AI. One of the newest firms to join Codify, our regtech incubator uses artificial intelligence to help banks, insurers and intermediaries simplify their assessments of complex regulations. Regtech services provide a vast opportunity on the basis of the time, effort and investment needed to meet the increasingly stringent regulatory landscape. New legislations such as MiFID II, GDPR and Open Banking have changed the way we treat data. Data aggregation technologies have the potential to provide truly holistic customer engagement. For a customer to be able to see a single picture of their wealth, or a wealth manager to be able to view a holistic picture of their customer will be key to differentiate yourself from competition, an area that SEI is exploring.
“New technologies have the potential to offer increasingly sophisticated investment products” JON DAWSON Manager, haysmacintyre What technologies have the biggest potential to improve asset and wealth management industries? (data analytics and automation of asset allocation, areas typically associated with “robo advisors” etc) As with professional services, wealth management is a people-led industry where quality relationships, expertise and trust command a high premium. Artificial intelligence in the form of robo-advisers, algorithmic trading and smart asset allocation represents a significant opportunity for businesses in this sphere to enhance their product offering, and should not be seen as a threat. These new technologies and their applications have the potential to offer increasingly sophisticated investment products to consumers at a lower cost base than currently available active portfolios and can also be marketed as being lower-risk, having removed human judgement and error from the equation; a very attractive proposition. The result of this is that previously exclusive products aimed at high net worth and sophisticated investors can be rolled out to a far wider base.
Where does this leave the industry of the future? Certainly, lower quality offerings will be squeezed out with a concentration high quality (and likely larger) players remaining. Those incumbents looking to succeed in a post-AI environment will embrace the opportunities technology offers while continuing to demonstrate they possess those same qualities that have always been the fundamental to success: quality relationships and excellent client interaction and above all, trustworthiness.
Will ICOs disrupt the angel investor model? ICOs are likely to open the world of angel investing to a broader range of individuals who may not have necessarily had the appetite to invest under the more traditional model. The opportunities for existing angel investors are likely to continue to exist but we expect, similarly to the way crowdfunding broadened the landscape for companies to access capital, ICOs will be another route to funding that companies will consider. Notably, the regime is currently relatively unregulated, again not dissimilar to the way crowdfunding started, and we expect this will change in the near future; although the task is likely to be much more complicated than for crowd funding due to the global platform of ICO’s. We expect increased regulation will help in developing the perception in this new source of funding and will possibly lead to more interest from institutional investors.
