LET’S TALK DIGITAL
EUROPE 2017
A More ETFFICIENT Way To Trade.
The Tradeweb electronic marketplace brings greater efficiency to over-the-counter ETF execution through access to multi-dealer liquidity, more transparency, and better information. You can trade the full range of European-listed ETFs from all the leading issuers.
Dynamic performance Request quotes from multiple dealers simultaneously See instantly who’s offering the best price and trade immediately
Easy efficiency Reduce costly errors and settlement risk Access an electronic record of every trade Support best execution reporting with time-stamped audit trails
For more information +44 (0)20 7776 3200 Š 2017 Tradeweb Markets LLC. All Rights Reserved. This communicated has been issued and approved by Tradeweb Europe Limited, which is authorized and regulated in the UK by the Financial Conduct Authority, in Japan by the Financial Services Agency, in Hong Kong by the Securities and Futures Commission, and in Singapore by the Monetary Authority of Singapore.
LET’S TALK DIGITAL
EUROPE 2017
CONTENTS INTRODUCTION
7
EXPERT OPINIONS
9
USING ARTIFICIAL INTELLIGENCE TO UNDERSTAND AND INFLUENCE YOUR CLIENTS
11
ROBO-ADVICE - THE CATALYST FOR TRANSFORMATIONAL CHANGE
13
THE NEXT STEP IN ROBO-ADVICE IS TO MOVE BEYOND ETFs
17
BRINGING EFFICIENCY TO OTF ETF TRADING IN EUROPE
18
A ROBO THAT LETS YOU SLEEP AT NIGHT
21
REDUCE THE STRESS FOR INVESTORS
24
CURRENCY-HEDGED ETFs
27
INFLATION - A Q&A WITH CHANCHAL SAMADDER
29
WHAT’S ALL THE HOOPLA? PASSIVE INDEXERS ARE STILL A RARE BREED
32
INNOVATIONS IN BOND PORTFOLIO MANAGEMENT
36
FINTECH COMPLIANCE - CONTROL, ALTER OR DELETE?
38
ROBO-ADVICE IN THE CONTEXT OF THE POPULIST AGE
40
BABEL SYSTEMS’ DEVELOPER SANDBOX API REMOVES HURDLES FOR DEVELOPERS
42
DELIVERING A HIGH-QUALITY INVESTMENT OUTCOME THROUGH PORTFOLIO OPTIMISATION
45
SMART BETA - A TOOL FOR PRECISION AND CONTROL
46
BONFIRE OF REGULATORY LAWYERS - THE DISRUPRIVE EFFECTS OF REGTECH
50
ROBO-PARTNERSHIPS SET TO RISE FOR FUND HOUSES
52
SPEAKERS
54
ABOUT US
65
Food Sponsors
Partners
7
EUROPE 2017
Founder, Anthony Christodoulou It gives me great pleasure to welcome you to Robo-Investing Europe 2017 - the 2nd annual conference dedicated to automated solutions and digital innovation in wealth. We are entering an exciting and transformational period in wealth and asset management. What started as disruptive innovation amongst a select few robo-advisors is quickly developing into a widespread and accelerating digital shift across the entire industry. Institutions are quickly learning to service clients through multiple channels and segments as well as empower their financial advisors with automated propositions and the tools needed to improve relationships and grow their business. Many start-up firms are emerging with new technology in the fields of AI, content and portfolio management, whilst others are evolving their business models to include white-labelled services and forge new partnerships and distribution channels. The regulators too are playing a crucial role to ensure that, with modernisation, personalisation and scale, comes due care and attention to investor risk and suitability. There are many challenges we face together in educating clients as we move from selling products to providing solutions. But at the same time, technology is being used to improve and resolve long-standing behavioural issues that investors face through market cycles and the uncertainty that comes with financial planning. Please join me in thanking our esteemed group of speakers, the many contributors to the event brochure and, of course, our corporate partners. We wish you all an informative, thought-provoking and above all inspiring experience.
Anthony
9
EXPERT OPINIONS
Artificial Intelligence for Customer Experience Predict your clients’ financial interests and investment intent: • Optimise your investment research • Personalise web & email content • Enhance advisor conversations
Find out more at idioplatform.com
11
Using artificial intelligence to understand & influence your clients Andrew Davies, Co-Founder & CMO, Idio
As Friedman wrote, the world is flat. With a rush of new entrants into the investment management market, it is flatter than ever before - switching costs are small and loyalty is low. PwC’s Wealth Management Report in 2016 found only 23% of clients with $10m+ invested would recommend their wealth manager. New entrants are building a seamless customer experience from the ground up, and it is this (often digital-first) experience which is proving attractive. Forrester’s CX Index has consistently shown that investment in customer experience is strongly correlated with financial performance - both for new entrants and incumbents. The Holy Grail is a seamless and personally relevant experience for each client - and it is here where the data challenge emerges. From that same PwC report, 67% of HNWIs under 45 were positive about the use of personal data by apps or websites to tailor information, products or services to their needs. But only 25% confidently felt that their wealth manager uses their data to provide tailored advice (and only 33% when including all HNWI age groups). This data challenge is exacerbated as we consider the impact of artificial intelligence (AI). Predictions about customer behaviour or relevance based on incomplete or inaccurate data, will only alienate clients. No amount of good maths can make up for static or even obsolete client data, which most firms willingly admit is a frequent occupier of their core CRM system. In a recent Idio survey, 90% of UK asset managers said they currently use first party transactional data to understand their customer, but in a sign of things to come, the top ranked dataset they were planning to use was web behavioural data (74% of respondents). This “dark data” (meaning it’s currently not analysed or used) is hugely valuable because it contains patterns that precede, and can help predict, key investment decisions. Imagine if you could understand each individual based on the way they browsed and consumed your research, rather than just hoping your content influenced action? By analysing their client’s behaviour, predicting investment interest and intent, and baking this insight into automated digital personalisation and sales enablement tools, leading firms are reaping the rewards of a data-driven approach. What’s most interesting is that in this AI-obsessed season, many of our clients at Idio have already proved solid business cases for their recent investments - cutting through the buzz to ensure relevance leads to revenue. The first movers are tilting this ever-changing, yet supremely flat world, in their direction.
THE ENGINE POWERING FINANCIAL UNDERSTANDING AND DECISION-MAKING We rigorously process the world of investment risk and present it in the way that works best for our clients and the onward communication to their customers; driving better-informed investment decisions. It’s this advanced processing power and accessibility that makes us the first choice for the largest financial services companies in the UK. They want the best, on their terms – and we deliver. And have done for over 20 years. We are now the leading provider of Robo Advice, working with some of the UK’s largest financial institutions on their automated digital advice propositions. See how EValue could support your Robo Advice proposition with our Foundation solution at ev.uk. Or contact us directly on contact@ev.uk or 01635 780 118.
13
Robo-Advice – The catalyst for transformational change Bruce Moss, Founder and Strategy Director, Evalue
In today’s electronic age, it is virtually inconceivable that an industry still exists that has not been fundamentally altered by rapidly changing developments in digital technology. The financial advice sector, however, is one glaring exception. In spite of fundamental regulatory change arising from the Retail Distribution Review and the arrival of pension freedom, technology has yet to transform the way in which financial advice is delivered. A so called “advice gap” has emerged excluding those who either have too few assets to merit the attention of professional financial advisers, or who are unwilling or unable to pay for financial advice. Pension freedom has made it overwhelmingly important to tackle this deficiency. Every year hundreds of thousands of consumers reaching retirement have the critically important decision to make of how to secure their retirement income. They need advice. The FCA sees robo advice as a major part of the solution and accordingly, is making major efforts to encourage its development.
THE CHALLENGE
The Financial Advice Market Review (FAMR), jointly commissioned by the FCA and HM Treasury in August 2015 and published in March 2016, places considerable importance on the role that technology, such as robo-advice, can now play in creating a more inclusive, accessible, engaging and cost-effective advice market in the UK. The rationale for this is obvious. By automating the advice process so that it can be delivered remotely and driven by the consumer, costs will be cut sharply as a result. At the same time, consistent quality and thorough documentation generated by the process will provide a full and reliable digital paper trail to ensure regulatory compliance. Finally robo-advice offers a scalable way to deliver advice not dependent on the ability to recruit, train, motivate and retain growing numbers of financial advisers. However, against these positives, two very considerable negative concerns currently exist. The first is to do with regulation. Although the FCA is supportive of robo-advice solutions in principle, the key point in practice is that the regulator has not lowered the suitability standard of the advice given. The advice can be focused on a particular goal, but the consumer’s other financial circumstances must be considered to ensure that there are no higher priorities which might make the advice unsuitability. The second concern is to do with the level of consumer demand. Beyond a small number of highly engaged investors, there seems to be little sign, in the UK, of pent-up
consumer demand for new ways of making investment choices. Indeed, in the fastgrowing field of auto-enrolled pensions, the vast majority of new members are not making any investment decisions at all. Instead, they are simply accepting the default option provided for them. This only helps to highlight that for any robo-advice solution targeting the less engaged or savvy investor: Recruiting customers will be slow and difficult, and unless organisations are wellsupplied with accessible prospects, it will be extremely expensive. Even among those attracted to tackle a robo advice proposition, drop-off rates through the advice process will potentially be high. The large majority of these customers will lack the engagement, enthusiasm and confidence to persevere through what, if it is avoid future regulatory comeback, is bound to be a “longish” process to achieve a final investment decision. Some consumers need more help than others – possibly because their circumstances are complex. Rather than lose them it is important to be able to offer another option – advice over the phone or even face to face. Robo should be part of an integrated advice solution with the consumer in control and able to decide how much help is needed. The technology and advice process should be consistent between each of these options so that consumer can move seamlessly and cost efficiently between them.
IN CONCLUSION
So what does this mean for the future of robo-advice in the UK? Undoubtedly, there are some large obstacles to overcome if robo-advice is to be successful. But instead of thinking narrowly about the potential for robo-advice let’s think on a much grander scale as to how digital technology can be used to make financial advice less expensive, more reliable, more accessible and much more engaging. Ultimately, the real, and bigger, challenge is about how new strategies, combined with new technologies, can help re-invent the financial advice industry in ways which will work better not only for the industry but the regulator and consumers alike. Roboadvice can be the catalyst for that change.
Navigating your business Deloitte’s financial services industry specialists provide comprehensive, integrated solutions to the banking, insurance, capital markets and investment management sectors. We can help you navigate the changes in regulation and customer expectations to meet your goals and plan new strategies. Š 2017 Deloitte LLP. All rights reserved.
17
The next step in Robo-Advice is to move beyond ETFs Daniel Tammas-Hastings, CEO, RiskSave Technologies
The majority of the industry has come to the solution that buying a portfolio of ETFs is the future of advice. This is naive - the point of automation is granularity. RiskSave which is now on-boarding clients has gone further. Instead of using an investment universe of Funds. It seems clear than an investment universe of individual securites is more appropriate. This wider universe can reduce risk whilst increasing expected return. It also saves a layer of fees (to the ETF provider). So far, Robo-advice has been synonymous with a diversified basked of ETFs. As the focus has always been on equity risk this has worked reasonably well: equity ETFs are a cheap way to access a diversified portfolio. But as the inevitable reweighting towards fixed income happens there is an assumption that all that is required is to include fixed income ETFs in the mix. We know this is naive, and an Advanced Robo, instead of relying on a package of liquid managed funds/ETFs to provide fixed income exposure , will necessarily move to a larger investment universe of individual securites. Fixed Income ETFs: Typically underperform their index Force a one-size-fits-all risk/return profile on all customers Could be the next CDO-like risk In a market shock investors want their fixed income exposure to provide a safe haven but there is no guarantee, or even any reason to expect, that liquidity providers will continue to support ETFs. This will lead to underperformance right when the hedging properties of fixed income are supposed to protect investors. With a more intelligent portfolio we can avoid these hidden pitfalls and also save a layer of fees that would go to the ETF manager. RiskSave’s unique algorithm uses powerfull fixed-income analytics to generate superior (and more cost-effective) portfolios, significantly lowering downside (in addition to liquidity) risk. We consider this a best-in-class representation of Fixed Income in FinTech & RoboSpace – we believe this is a significant leap forward in multi-asset risk hedging for the retail market and the enabler to more specific and granular algorithmic individualised trading.
Bringing efficiency to OTC ETF trading in Europe Tradeweb
2016 proved to be record-breaking for the exchange-traded fund industry in Europe and worldwide, as the popularity of ETFs among institutional investors continued to rise. Assets invested in European-listed ETFs and exchange-traded products surpassed USD 570 billion, while global ETF/ETP assets crossed the USD 3.5 trillion mark at the end of December. It was also a great year for the award-winning Tradeweb European-listed ETF marketplace, which saw annual traded volume surpass EUR 134 billion, an increase of 19% from 2015. According to Adriano Pace, managing director for equity derivatives at the firm, “The platform has enjoyed consistent growth since its launch in 2012, and currently supports more than 50% of dealer-to-client OTC electronic ETF trading in Europe.” In 2016 alone, 52,670 European ETF trades were executed on Tradeweb by institutional investors, whose number also increased by 18% compared to the previous year.
MAXIMISING THE TRADE LIFECYCLE BENEFITS
If there is one thing that has driven Tradeweb’s remarkable success in the ETF space, it’s the firm’s relentless focus on increasing efficiency across the entire trade lifecycle: from the search for liquidity, through to execution workflow, and post-trade measurement of the efficiency delivered. Its European ETF marketplace gives institutional investors access to a consolidated pool of liquidity for the entire range of products listed in the region. Market participants are able to execute single orders of large notional size competitively and efficiently, minimising any market impact or slippage. Last year, the average trade size exceeded EUR 2.5 million, while investors benefited from an average saving of 3.1 basis points compared to the exchange best bid/offer.
IMPROVING THE SEARCH FOR LIQUIDITY
Tradeweb is well aware that enhancing the trading infrastructure of the European ETF market will encourage greater institutional adoption of ETFs. With this in mind, we introduced trade data reports and dealer axes to our ETF platform in early 2015 to increase transparency and improve access to liquidity. Axes functionality provides an indication of whether a dealer is a buyer or seller of a specific ETF. This allows investors to select the most relevant dealers to put into competition for each trade. In the second half of 2016, the firm went a step further by introducing pre-trade information embedded within the trade ticket, providing a complete picture of dealer track records, hit rates by either volume or number of trades, and most recent trades and axes. “As well as improving the execution experience, this new Tradeweb feature provides the hard evidence and rationale for selecting a particular dealer during a trade
19
enquiry, thus helping firms prove best execution,” Pace said.
OPTIMISING THE TRADE WORKFLOW
Tradeweb has pre- and post-trade connections to all major OMS/EMS vendors. In 2016, 80% of buy-side ETF trades in Europe were executed via integrated links, up from 70% in 2015. The benefits of FIX connectivity go beyond minimising operational risk. Clients are able to define best execution rules and determine how to execute different profiles of orders. This Tradeweb innovation eliminates the risk of manual errors for low touch trading activity, thus allowing clients to concentrate on value-added trading.
ENABLING EVALUATION AND ADAPTATION OF TRADING BEHAVIOUR
Although buy-side firms have been focused on best execution for some years, the new MiFID II rules will place greater emphasis on firms to demonstrate they are meeting this requirement. Tradeweb enables firms to perform detailed Transaction Cost Analysis for every single one of their trades by measuring each electronic execution against the exchange. In addition, clients can analyse their behaviour through every stage of the trading lifecycle, and identify where improvements can be made. This allows them to modify their trading strategy to reduce costs and achieve optimal results for the end investors.
A GLOBAL SUCCESS STORY
In Q1 2016, Tradeweb announced the launch of its electronic OTC marketplace for U.S. ETFs, offering institutional investors a new level of transparency, flexibility and efficiency in the way they trade funds listed in the U.S. By end of September 2016, activity on the U.S. ETF platform had exceeded USD 12 billion, and by year end, it had accelerated to an astonishing USD 24 billion.
REGULATORY REFORM SPURS E-TRADING ADOPTION
As the shift towards electronic OTC execution of ETFs shows no signs of slowing down, upcoming regulatory reform under MiFID II is expected to significantly accelerate the adoption of e-trading among institutional investors. “Increasing transparency and proving best execution are two key themes of the MiFID II rules,” said Pace. He added, “Electronic execution venues are ideally placed to help market participants meet their obligations in the new regulatory landscape emerging in 2018, and Tradeweb is already proving to be a leader in the space with the launch of its APA service in the first quarter of 2017.”
The world’s most awarded and highly endorsed Risk Tolerance ToolkitTM — validated on over one million people.
A Gen III white-label robo that fully incorporates industry best practices Secures properly informed
first meeting
consent from clients with: - Robust financial planning - Award-winning investor profiling
Happy clients are valuable
Seamless integration with
clients
your portfolio
Right advice, from the very
management and order
A tick in every box
execution platforms
Tried and trusted
Multi-jurisdiction,
Create lifetime relationships, through better advice that results in clients who refer more, invest more and remain suitably invested through market highs and lows. contact: info@finametrica.com
multi-currency, multi-language contact: info@planplus.com
Changing How the World Does Planning Financial Planning Software and Training Solutions for: Independent Financial Advisors and Planners Financial Institutions Educators Modular and Comprehensive Planning. Multi-jurisdiction, multi-currency, multi-language. contact: info@planplus.com
21
A Robo That Lets You Sleep At Night FinaMetrica Risk Tolerance Profiling
FinaMetrica has been helping high end financial advisers objectively map the needs of clients to portfolios since 1998. Initially in Australia, then the USA, the UK and now in 20 countries, more than one million profiles have been completed for thousands of advisers. The evidence from these psychometrically tested profiles is that risk tolerance is generally stable over time, as investors age, through market turmoils and uninfluenced by financial education. Risk tolerance is an enduring personality ‘trait’, not an unstable ‘state’ of mind varying with market noise. As one of few stables in an investor’s financial life, the accurate assessment of risk tolerance is important. Investment decisions can be framed against the agreed risk score. Risk tolerance is, in turn, one of three factors that enable the accurate development of an investor’s risk profile. Together, risk tolerance, risk required and capacity for loss provide a defensible, collaborative framework for both initial and ongoing portfolio recommendations. If you see the value in standardising risk communications within your firm, you may be interested in FinaMetrica’s lexicon of fifty plus risk terms at http://www.riskprofiling.com/risklexicon
3200
70
2800 2400
60
2000
50
1600
JUN 16
JUN 15
JUN 14
JUN 13
JUN 12
JUN 11
JUN 10
JUN 09
JUN 08
JUN 07
JUN 06
JUN 05
JUN 04
JUN 03
800 JUN 02
30 JUN 01
1200
JUN 00
40
MSCI WORLD INDEX VALUE
80
JUN 99
RISK TOLERANCE SCORE
PERSISTENCY OF RISK TOLERANCE OVER TIME
MEAN (MALE) MEAN (FEMALE) MSCI WORLD INDEX
BENEFITS OF INTEGRATIONS
FinaMetrica has integrated with financial planning systems in several countries to improve the administrative and compliance efficiencies of advisory businesses. Most recently we have worked with PlanPlus of Canada to service the unadvised middle market and legacy investment managers. Not only does PlanPlus bring academic
rigour to the calculation of risk required and capacity for loss, it also has a 25-year track record supplying comprehensive multi-jurisdictional, multi-currency and multilanguage financial planning systems to banks and larger advisory firms. Together we have developed ‘Best Practice’ suitability algorithms and professional judgement matrices for the robo marketplace through miPlanPlus. Robo advisors are, beyond any doubt, disruptive to the financial advice market. They change the speed, accuracy and supply of advice processes – just as the power loom changed the speed, quality and supply of woven cloth. Good cloth was no longer hard to make. The hard part became finding customers to buy all the cloth that could be manufactured. In the robo-advice world the differences between an enterprise robo and an entrepreneurial robo are stark. Where an enterprise robo is primarily a client retention tool, an entrepreneurial robo relies on customer acquisition to be successful. Robo-advice using defensible suitability algorithms for enterprise customers is a demanding and poorly serviced market. Many enterprises are currently ‘stuck’ – their robo plans frozen by strategic uncertainty, implementation fears and a lack of regulatory clarity. Indeed, the emergence of robos shines a spotlight on the limitations and failures of standards-based regulation when applied to financial advice. Robo creators are left to decide on protocols that will deliver fair and appropriate outcomes for clients and be defensible under the scrutiny of legal challenge. There is no meaningful distinction between robo and personal advice obligations in most countries. Damaging errors of human advice may be leveraged many times over by an otherwise successful robo. This makes managing and reducing systemic and systematic risk in robos a priority.
DUE DILIGENCE REQUIREMENTS
Most digital advice offerings fall short of the standards required of a sustainable robo business. Understanding of client risk profiles may be cursory and it’s questionable whether algorithms are reviewed for accuracy and reliability. Underdeveloped and untested suitability algorithms are the Achilles heel of digital advice. For how you might undertake due diligence on the risk tolerance component of a suitability algorithm visit http://www.riskprofiling.com/WWW_RISKP/media/RiskProfiling/ Downloads/Due_ Diligence_Checklist.pdf
ROBO 3.0
miPlanPlus is an early 3.0 robo built with academic and practical rigour delivering a high level of defensibility. This more sophisticated robo can manage a broader range of inputs and outputs than first and second generation robos. We see two initial markets for this FinaMetrica and PlanPlus collaboration. First, enterprises looking to service a large client base in a cost efficient, client centric and robust manner. Secondly, investment managers with legacy books bringing new services to market can protect current accounts with a methodology to match existing allocations to clients’ needs built into a scalable pathway for further service and product developments. If you are not getting a full night’s sleep over concerns that your current risk profiling is not defensible we would be happy to review the test and outcomes. Or if you simply want to see what a third generation robo can do for you contact Paul.Resnik@FinaMetrica.com or Stuart. Erskine@PlanPlus.com
Variety Exchange Traded Funds, from currency hedging to factor investing. UBS ETF. / ubs.com ts etf-insigh
For professional investors only. For marketing and information purposes by UBS. This document has been issued by UBS AG, a company registered under the Laws of Switzerland. Issued in the UK by UBS Asset Management (UK) Ltd, authorised and regulated by the Financial Conduct Authority. This document is for distribution only under such circumstances as may be permitted by applicable law. The products or securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Source for all data and charts (if not indicated otherwise): UBS Asset Management. Š UBS 2016. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Reduce the stress for investors Marcus Böhm, CEO, SpeedlLab AG
SpeedLab AG was founded in Switzerland in 2014 and is a member of the Swiss Financial Services Standards Association VQF. The ability to manage volatility, correlation, liquidity and event risks at the same time has become one of the most important challenges in asset management. The year 2016 with its extreme fluctuations in the stock and commodity markets was exemplary. In addition, there were abrupt changes in currencies and bond yields. More risk, more stress, less profit - investor search in this environment for alternatives to conventional asset management. These alternatives include financial products based on algorithms. The Invest-Tech segment is likely to experience a massive inflow of investment assets over the next five years, according to the “2015 Robo Advisory Services Study” - in the US alone, US $ 2 billion by 2020 Invest- Tech in a short time to the mainstream with fast market penetration.
QUANTITAVE INVESTING
Makes complexity manageable But why is this so - what do the financial algorithms do? EAssetManagement, as Speedlab implements it, means the combination of intelligently automated processes on the basis of market-price-related, quantitative methods. These can be diversified, calibrated and scaled according to the market and risk profile. This requires deep know-how in asset management, combined with digital technology and quantitative methodology. Because it is necessary to translate financial portfolio, risk and money management expertise into high-tech applications digitally into algorithms. This approach works. Speedlab has succeeded in significantly reducing the stress on investors in the extremely difficult year 2016. In all events with risk potential, the strategies have achieved a positive performance or at least a very small loss. These include the stock market crash in early 2016, Brexit, pound-flashcrash and US elections. The monthly standard deviation of the “Robo R & D managed account” was 3.16 percent, the maximum loss was 8.1 percent, while the profit was almost + 10 percent. The “RoboTrade Fund” * came in the first year to adjust with a lever of 1-2 on average, to a volatility of less than 0.8 percent, with a maximum loss of only 1.6 percent. When using a lever for 2017 between four and ten and with further improvements of the system should have a value development in average of 15% p.a. to be realistic.
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EN DETAIL: THE SPEEDLAB QUANT ROBOTECHNOLOGY
SpeedLab operates a proprietary, fully automated quantitative eAssetManagement system with multiple, uncorrelated, scalable and dynamically managed market strategies. Risk management is carried out by means of intelligent digital algorithms and filters that buy and sell securities on the basis of statistical correlations and deviations from the markets. An absolute return approach, which is based on a complex risk management, is pursued with market correlation and volatilities are exploited. The investment process is by no means aimed at high-frequency trading, but rather on a strategic execution in different time periods. The core of the system is the SpeedLab Quant Robo technology, which consists of four elements: The eFilter is a complex integrative filter system that recognises patterns in the interplay of volatility, volume, speed and trends. There is no magic formula for this - only the market price counts. The eFleet is one of the world’s largest RoboFlots worldwide and adopts the scalable Robo portfolio management. With the number of robots, the risk premium increases, ie the Sharpe ratio. With a Sharpe ratio, the fund generates a surplus that compensates for the fund’s risk. The eAllocator is responsible for the intelligent autoallocation. He always invests in all strategies at the same time, but he changes the strategies according to the risk assessment. The eOptimizer finally performs automatic parameter checks on a regular basis and ensures that the strategies used remain uncorrelated and efficient. With Quant RoboTechnology, SpeedLab always achieves high risk premiums, the best Sharp ratio in industry comparison and a top performance in any market situation, especially in the case of high volatilities, crisis scenarios or flat markets.
THE NEXT STEPS
As an early mover in the industry, the private bank Donner & Reuschel based in Hamburg and Munich has agreed with SpeedLab AG an exclusive cooperation in digital asset management. Together, the partners work on product concepts for different asset classes. At the moment, SpeedLab is developing trading strategies for all major equity indices – for example, the results of the S & P 500 trading system show the scalability of the system in the sense of spreading to investment classes. In addition to gold, there are further commodities as well as strategies for very liquid bond markets such as German bonds.
* The RoboTrade Fund (SICAV) is a professional investment fund regulated by the Maltese Financial Supervisory Authority (MTSA) under the Investment Services Act and a professional investor fund registered with BaFin.
Deutsche Asset Management
For Professional Clients only
db X-trackers Currency Hedged Exchange Traded Funds
¥€$! Discover one of the largest product ranges in currency hedged ETFs, offering EUR, GBP, USD and CHF hedged share classes across equity and fixed income exposures. Find out more: www.dbxtrackers.com
db X-trackers ETFs – Simply buy the market. www.dbxtrackers.com I Hotline: +44 (20) 7547 1747 I E-Mail: etf@db.com
The value of your investment can rise as well as fall and investors may get back less than they originally invested. Currency hedging cannot completely remove exchange rate movements. Brokerage fees may apply.
© Deutsche Bank AG 2017. This advertisement has been issued and approved by Deutsche Bank AG London Branch. Please refer to the relevant full prospectus of db x-trackers and/or db x-trackers II and/or Concept Fund Solutions plc, and the Key Investor Information Document of the relevant Sub-Fund for more information on Deutsche Bank ETFs, which can be found free of charge at www.etf.deutscheam.com. For further information regarding risk factors, please refer to the risk factors section of the prospectus and/or the Key Investor Information Document. Deutsche Bank AG is authorised under German Banking Law (competent authority: European Central Bank) and, in the United Kingdom, by the Prudential Regulation Authority. It is subject to supervision by the European Central Bank and by BaFin, Germany’s Federal Financial Supervisory Authority, and is subject to limited regulation in the United Kingdom by the Prudential Regulation Authority and Financial Conduct Authority. Deutsche Bank AG is a joint stock corporation with limited liability incorporated in the Federal Republic of Germany, Local Court of Frankfurt am Main, HRB No. 30 000; Branch Registration in England and Wales BR000005 and Registered Address: Winchester House, 1 Great Winchester Street, London EC2N 2DB. This advertisement has been prepared solely for information purposes and does not constitute an offer or a recommendation to enter into any transaction.
27
Currency-hedged ETFs Deutsche Asset Management Adding international assets to a portfolio can be useful for investors as international diversification offers access to new sources of potential return. However, if foreign currencies fall or the domestic currency turns out to be stronger than expected then return expectations may be disappointing. In other words, adding international securities exposure can also add currency risk to a portfolio. For example, investors using the MSCI World index as a benchmark are exposed to the returns of over 1,600 large- and mid-capitalisation stocks across over 10 currencies. Moreover, even under the assumption that an individual currency’s value moves in cycles around a long-term equilibrium rate, shorter-term volatility can impact the actual returns experienced by an investor. Historic data shows that the possible consequences of not hedging foreign securities exposures can be dramatic. For example1: Between July 2012 and December 2013 the Japanese yen fell from 96.12 against the euro to 144.82, a 33.6% loss for euro-based holders of yen; Between March 2014 and March 2015 the euro fell from 1.377 against the US dollar to 1.0731, a 22.07% loss for US dollar-based holders of euro; Between January 14 and January 15 2015, the Swiss franc appreciated from 1.5518 against GBP to 1.2739, a 17.9% overnight loss for Swiss-based holders of GBP. Meanwhile, potential losses as a result of medium- and short-term cycles in currency values can be substantial. Figure 2 shows the maximum one-year loss over a 12-month period from January 1999 to March 2015 by investors with base currencies of the US dollar, euro, Japanese yen, British pound and Swiss franc, when investing in each other’s currencies.
FIGURE 2: MAXIMUM ONEYEAR CROSSCURRENCY LOSSES USD USDBASED INVESTOR IN
EUR
JPY
GBP
CHF
24.3%
23.2%
31.6%
26.1%
28.8%
24.6%
14.2%
42.0%
25.2%
EURBASED INVESTOR IN
22.4%
JPYBASED INVESTOR IN
22.8%
29.5%
GBPBASED INVESTOR IN
16.2%
15.3%
22.0%
CHFBASED INVESTOR IN
31.3%
25.4%
26.6%
23.5% 32.1%
The maximum losses are calculated using daily closing foreign exchange rates. Currency losses of more than 25% are marked in red. Past performance is not a reliable indicator of future results. Source: Bloomberg L.P., maximum rolling one-year loss in daily closing FX rate between 1 January 1999 and 20 March 2015.
The decision as to whether to hedge non-domestic currency exposures or not depends on several factors, notably an investor’s base currency and time horizon and the investment outlook. While academic studies have reached different conclusions regarding the costs associated with currency hedging, published studies usually agree (see Passive Insights, Over the currency hedge, Deutsche AWM, April 2015) that hedging can at least provide a reduction in the risk faced by an investor. db X-trackers ETFs are an efficient way to take international currency hedged exposure. db X-trackers currency-hedged ETF product range An extensive and range of db X-trackers currency-hedged ETFs are available, across the equity, fixed income and commodity space. For institutional investors over 40 currencyhedged db X-trackers ETFs are currently available, with GBP-hedged share classes available on many exposures. Details of all db X-trackers currency-hedged ETFs can be found at www.etf.deutscheam. com
Notes: 1 Source: Deutsche AWM, Bloomberg, LLP, (As reported in Passive Insights, Over the Currency Hedge, Deutsche AWM, April
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Inflation – a Q&A with Chanchal Samadder Lyxor Asset Management
There is a lot of fear about inflation at the moment. What is behind this? Inflation is back on the radar. After years of record lows, there are signs we could see inflation start to creep up again. Inflation is a stealth tax on savers. It erodes the value of money in our wallet, in the bank. So when supermarkets threaten to pull products from their shelves over price arguments with suppliers, we know it’s a serious threat.
WHAT’S DRIVING PRICES HIGHER?
In the UK, the biggest factor is weak sterling. According to Bloomberg, on 1st January 2016 a pound would buy you $1.47. By the 1st January 2017 it was $1.22 – 17% less. The knock-on effect is that imported goods become a lot more expensive. But it’s not just in Britain. Take the USA – policies from the new administration could drive prices higher. Some expect an increase in spending in infrastructure projects, which drive price rises more widely. And protectionist moves could drive up energy prices and wages.
SO HOW SHOULD INVESTORS REACT?
Beating inflation is a goal for many portfolios – it is important investment managers take this seriously. We know many investors are reacting, buying inflation protected assets. There is a range of ways to protect a portfolio from inflation but they each have different features. It’s important investors look at each option and understand how it works for their circumstances.
GIVE ME SOME EXAMPLES.
There are three main options. First is equity – companies can adjust their pricing to align with inflation. But some worry about short term reaction of equities. Many markets are close to record highs. Next we have commodities – particularly gold. Again, this might provide long run protection, but in the last few years the link has been weaker – as commodities prices have mostly been falling. The most direct way to get protection is through index linked bonds – whose interest payments and capital values are directly linked to inflation.
ARE INVESTORS BUYING LINKERS THROUGH ETFs?
Yes, flows to inflation linked ETFs grew steadily in 2016. There does seem to be much greater awareness of the fact active managers aren’t always delivering what their investors need. On average, only 11% of active funds outperformed the FTSE MTS
Eurozone Inflation-Linked bond index in 2015. Not one has outperformed the index over 10 years.*
WHAT DOES LYXOR OFFER FOR INFLATION PROTECTION?
Lyxor offers a range of inflation protected investments. We’ve got 5 inflation-linked ETFs, covering the UK, Europe and USA. These are worth $1.8bn and costs start from just 0.07% (22/11/16).
WHAT HAPPENS IF THERE’S AN INTEREST RATE HIKE?
Good question – central banks use interest rates to control inflation, so we could see rate hikes down the line. Bond prices and interest rates tend to move in opposite directions – so even index linked prices could fall. Last year Lyxor launched two new ETFs which could provide some shelter from central bank policy. The Lyxor US$ 10Y Inflation Expectations UCITS ETF (INFU LN) and Lyxor EUR 2-10Y Inflation Expectations UCITS ETF (INFL FP) were the first of their type in Europe. They should rise when expected inflation rises, but are duration hedged to give protection against rising interest rates. These have been very popular since we launched them in April – particularly the US Inflation expectations ETF. Find out more information on Lyxor ETF and their range of inflation protected ETFs at www.LyxorETF.co.uk
Notes: * Source for following figures: Lyxor, using Morningstar data from 31/12/05 to 31/08/2016. The figures relating to past performances refer to past periods and are not a reliable indicator for future results. This communication is for the exclusive use of investors acting on their own account and categorized either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets in Financial Instruments Directive 2004/39/EC. These products comply with the UCITS Directive (2009/65/EC). Lyxor International Asset Management (LIAM) recommends that investors read carefully the “investment risks” section of the product’s documentation (prospectus and KIID). The prospectus and KIID are available free of charge on www.lyxoretf.com, and upon request to clientservices-etf@lyxor.com. Lyxor International Asset Management (LIAM), société par actions simplifiée having its registered office at Tours Société Générale, 17 cours Valmy, 92800 Puteaux (France), 418 862 215 RCS Nanterre, is authorized and regulated by the Autorité des Marchés Financiers (AMF) under the UCITS Directive and the AIFM Directive (2011/31/ EU). LIAM is represented in the UK by Lyxor Asset Management UK LLP, which is authorized and regulated by the Financial Conduct Authority in the UK under Registration Number 435658.
Navigate rising inflation Discover a new frontier in inflation protection. Only Lyxor offers inflation linked bond ETFs for as little as 0.07%*, and Europe’s first Inflation Expectation ETFs.
The original pioneers lyxoretf.co.uk *Lyxor FTSE Actuaries UK Gilts Inflation-Linked (DR) UCITS ETF, ongoing charge as at 18 July 2016
THIS COMMUNICATION IS FOR PROFESSIONAL CLIENTS ONLY AND IS NOT DIRECTED AT RETAIL CLIENTS.
This document is for the exclusive use of investors acting on their own account and categorised either as “Eligible Counterparties” or “Professional Clients” within the meaning of Markets In Financial Instruments Directive 2004/39/EC. These products comply with the UCITS Directive (2009/65/EC). Lyxor International Asset Management (LIAM) recommends that investors read carefully the “investment risks” section of the product’s documentation (prospectus and KIID). The prospectus and KIID in English are available free of charge on www.lyxoretf.com, and upon request to client-services-etf@lyxor.com. Lyxor International Asset Management (LIAM), société par actions simplifiée having its registered office at Tours Société Générale, 17 cours Valmy, 92800 Puteaux (France), 418 862 215 RCS Nanterre, is authorized and regulated by the Autorité des Marchés Financiers (AMF) under the UCITS Directive and the AIFM Directive (2011/31/EU). LIAM is represented in the UK by Lyxor Asset Management UK LLP, which is authorised and regulated by the Financial Conduct Authority in the UK under Registration Number 435658.
What’s all the hoopla? Passive indexers are still a rare breed Victor Haghani, Founder, Elm Partners
We’ve just passed the 40th anniversary of the first index fund (Vanguard’s naturally) and everyone’s talking about how passive indexing is taking over the world. That may be a good or bad thing, depending on your perspective, but a more fundamental question is whether it’s actually a fair description of what’s happening? We think not. Index funds are the offspring of Modern Portfolio Theory (MPT), which tells us that the equity portfolio that provides the most attractive return-to-risk ratio is the Market Portfolio, a market cap weighted index of all equities, everywhere. The theory says we should only invest in equities through this Market Portfolio: any other portfolio choice is simply sub-optimal. The major index fund providers offer funds that give investors direct and simple access to this Market Portfolio, such as Vanguard’s aptly named Total World Stock ETF (ticker VT). If investors were truly indexing as directed by MPT, wouldn’t we expect that these index funds, designed to deliver the Market Portfolio straight up, would attract all, or at least the lion’s share, of the assets of index investors? They don’t. The chart below shows just how tiny these Market Portfolio funds are, when compared to their component building blocks. In fact, they make up well under 1% of the roughly $4 trillion equity index fund and ETF market. VT, the biggest of these Market Portfolio funds, barely even scrapes into the top 100 largest ETFs in the world.
HARDLY ANYONE IS INVESTING DIRECTLY IN THE MARKET PORTFOLIO Relative size and closeness of main index fund groups to Market Cap Weighted World Equity Funds
BROAD XUS
TOTAL US MARKET
DEVELOPED XUS
S & P 500
EUROPE DOW JONES 30
ASIA DEVELOPED
NASDAQ VALUE
MP VALUE
INDUSTRY SECTORS
REAL ESTATE
GROWTH
EMERGING MARKETS
SMART BETA SMALL & MIDCAPS
SMALL CAP
Market Portfolio Funds like VT & AWCI are <1% of assets in all equity index funds US Index Funds & ETFs
International (xUS) Index Funds & ETFs
33
Why are investors doing this? We can’t know what motivates each investor, but since at Elm we are also not investing in the straight-up version of the Market Portfolio, maybe our thinking will be representative of others. In short, while we believe that MPT is a great start for building a portfolio, there are a number of assumptions in the theory that are not realistic and lead us to go beyond a market cap weighted portfolio in constructing our Baseline portfolio, such as public equity markets being incomplete, inefficient, unrepresentative and driven by more than just the single risk factor of Beta. In addition, there are tax and cost benefits in going beyond a single holding of a Market Portfolio fund. We’ve described these in more detail in the box below.
WHY INDEX INVESTORS LIKE US ARE NOT INVESTING IN MARKET PORTFOLIO FUNDS Public equity market is incomplete. Examples include the under-representation of large asset classes, such as real estate or emerging market equities, the fact that different regions have vastly different proportions of private relative to public companies, and, certain markets may not be freely accessible to international investors like mainland China. Markets not perfectly efficient. Market cap weights have a tendency to overweight overvalued markets and underweight under-valued markets. Remember the Nikkei in 1989? More than just Beta driving returns. Most investors believe there are other sources of risk premia such as small caps or value stocks. Similarly, investors may only go passive in certain geographies or sectors where they feel the market is completely efficient, and seek alpha in more niche areas. Home bias 1. Investing in one’s home market is more attractive than investing in foreign markets which carry currency risk and tend to be less relevant to one’s future consumption.2 An extreme case is Warren Buffett’s recommendation for nonprofessional investors to hold only the S&P500 for their risk asset allocation.3 Tellingly, Vanguard calls its most popular index fund that invests in only US equities the ‘Total Stock Market Index Fund,’ which is probably not unrelated to why the US national baseball championship is called the ‘World Series.’ Tax benefits. And having multiple holdings may allow a portfolio to be managed more tax-efficiently. For example, it provides more opportunities to realise short-term capital losses for US investors. Cost savings. These Market Portfolio funds aren’t the most cost effective. Vanguard’s VT is 14bp and iShares ACWI is 33bp. An investor would save 6 to 25 bps in fees by combining a US ETF, VTI @ 5bps, with an x-US developed market ETF, VEA @ 9bps, and an emerging market one, VWO @ 15bps.
Conclusion: most index investors are active index investors. While it’s undeniable that passive index products have witnessed great success, and investing has become more democratised as a result, we think it’s a stretch to say that passive indexing is taking over the world. Instead, investors are moving away from traditional, higher cost forms of active management and building more complex, granular and nuanced portfolios themselves using index products. At Elm, this is exactly our approach, which we call Active Index Investing®. If you’ve decided you want to put part of your savings into index funds, but feel you should be able to do better than putting it all into one global market cap weighted fund, then please take a closer look at what we do.
Notes: 1 Besides the reasons that we at Elm don’t invest in the cap weighted Market Portfolio as listed in the sidebar, there are other explanations for why index investors are doing likewise. For example, investors may make a sector by sector decision to go passive vs active. Also, many investors are susceptible to line item bias, or naïve diversification, which is the feeling that the more lines they see on their brokerage account, the more diversified they feel, even if those products are almost identical. Studies by Professor Richard Thaler and others have found that investors like to spread their investments over many options on the menu, even when some investments are overlapping or even dominated. For example, investors will invest in two S&P500 index funds with different fees. Benartzi and Thaler, Naive Diversification Strategies in Defined Contribution Saving Plans, (2001) and separately, Fisch and Wilkinson-Ryan, UPenn, Why Do Retail Investors Make Costly Mistakes? An Experiment on Mutual Fund Choice (2014). 2 Kim Stockton of Vanguard 2015: ‘… the U.S. equity market cap is about 49% of the global equity market, yet U.S. investors have 71% of their assets invested domestically. The U.K. equity market is roughly 8% of the global equity market, yet U.K. investors have about 50% of their assets invested at home. And in Australia, resident investors have a 70% overweight to domestic equities relative to their 3.5% share of the market.’ https://advisors.vanguard.com/iwe/pdf/FASSICTR.pdf 3 While it is true that S&P500 companies derive close to 50% of their sales from outside the U.S., limiting one’s investment to the biggest 500 US companies leaves one pretty far from the Market Portfolio, as it covers less than 50% of companies on a global basis and 80% of total US market cap.
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Innovations in Bond Portfolio Management Adrian Gostick, Managing Director, BondIT
Over the last few years the world has seen a dramatic growth in robo-advisory solutions to automate the process of asset allocation, and the construction and management of appropriate portfolios. Despite the proliferation of solutions now available, numbering in the hundreds, there has been little focus on solving the challenge of creating and managing fixed income portfolios using actual bonds, rather than ETFs. Addressing the challenge of providing a robo-advisory platform for individual bonds is what BondIT, an Israeli company headquartered in Herzliya, has been focused on since it was established in 2012. Automating the construction, optimisation and management of fixed income portfolios is a much more complex problem to solve than for asset classes like equities or ETFs, but with a market size more than double that of global equities, and with more than triple the daily volume, is a market ripe for disruption. BondIT’s expertise in managing big data, and in the application of proprietary machine learning algorithms to the world of fixed income data, has enabled the company to build a platform on which advisors and asset managers can automate the construction, optimisation and ongoing management of fixed income portfolios. “Using the BondIT platform allows a user to construct a customised portfolio, taking into account investor constraints such as ratings, liquidity, bond types, etc., and optimised to hit portfolio targets with minimal risk, in a matter of seconds” states Adrian Gostick, Chief Revenue Officer for BondIT. “The same process in a private bank could take several days” adds Gostick. Today the bond advisory process remains a very slow and manual process, with Excel the standard tool used to try and select appropriate bonds for an investor. Very often recommendations are based on inventory an institution wants to push rather than putting the needs of the customer first. For organisations to scale their business they must either add people, or look to technology solutions. Private banks and wealth advisors are starting to wake up to the opportunity that solutions like BondIT’s can bring. “Over the last year, we’ve seen a number of banks looking to engage in conversation with us as the realisation grows that a partnership approach can accelerate digital transformation” explains Gostick. “And using a platform that tailors investment advice to an individual investor, and can demonstrate this with detailed audit trails, helps ensure organisations meet their fiduciary responsibilities towards their clients”. As well as automating the construction of fixed income portfolios, the BondIT platform provides alerts and rebalancing suggestions to ensure the portfolios remain optimal and within the mandates and constraints of the investor on an ongoing basis. At all stages of the workflow detailed analytics are available to show the impact of any changes in terms or returns and risk in the portfolio. “As well as traditional measures like duration and VaR
37
the platform shows where in the portfolio the risk is coming from, for example by sector of issuer, or currency denomination of the bonds” Gostick explains. BondIT recently entered into a strategic partnership with Wind Information in China, the leading provider of fixed income data for the Chinese market. “As the Chinese market continues to open to investors, and with Chinese bonds soon to be included in global fixed income indices, providing a platform to build portfolios, powered by the most comprehensive data available for the China market, will significantly help customers enter what can be an unfamiliar and somewhat opaque market” mentions Gostick. BondIT is looking to build on its initial success by exploring how the incorporation of behavioural data into the platform can increase trade conversion rates, and by integrating into liquidity venues to take into account available inventory and ensure ideas generated can be transacted. “The fixed income markets are only just waking up to the fact that there’s an increasing amount of data that can be leveraged to bring efficiencies to the market” says Gostick. “Whenever someone is making a decision on the construction or composition of a bond portfolio we want to support that process”.
FinTech compliance Control, alter or delete? Andrew Frost, Director, Lawson Conner
This article explores the challenges faced by FinTech start-ups and why compliance and regulation is an imperative consideration from the outset in order to avoid delays and the potential loss of revenue at launch. It will also explore the Appointed Representative (AR) model, unique for UK regulators, which may be considered as a fast, efficient and a proven concept for an alternative option for FinTech companies who are ready to launch.
NAVIGATING THROUGH THE REGULATORY LANDSCAPE
One of the main challenges for the launch of a FinTech business is the navigation through the complex regulatory landscape. It can prove troublesome to understand, develop and implement a compliance and regulatory framework and to obtain the required regulatory permissions to get started. As a result, a launch may take six to 12 months which, if unplanned for, can lead to firms losing out on planned revenue as their product sits waiting to launch but without the ability and regulatory permissions to do so.
CAN REGULATION BE AVOIDED?
The Financial Services and Market Act states any firm or individual who carries out a regulated activity in the UK must be authorised or registered by the Financial Conduct Authority (FCA)1. However, some firms may only require to be registered, with some types of company and individual not requiring authorisation. It is highly recommended that a start-up firm seeks legal advice in order to establish if they require authorisation. Failure to do so may result in prosecution.
APPOINTED REPRESENTATIVE â&#x20AC;&#x201C; AN ALTERNATIVE PATH
A quicker and easier method of entering the UK market is to become an AR of a Principal Firm (PF). The PF holds FCA authorisation and can appoint individuals or firms to carry out regulated activities. However, the FCA states that there must be a written contract between the two parties documenting the arrangement. Becoming an AR provides many benefits as the authorisation period can be reduced significantly from many months to a number of weeks. In addition to this, creation of compliance policies and procedures and governance are all managed by the PF, allowing the AR to focus on its core business.
Notes: 1 The Financial Conduct Authority
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The majority of regulatory risk is also removed from the AR as the PF takes full responsibility for ensuring that the AR complies with FCA rules. Therefore, the AR can be assured that their compliance regulatory duties are being managed by an experienced firm. ARs have the option to become authorised themselves and often operate as an AR whilst they complete the application process and await approval.
THE FINANCIAL CONDUCT AUTHORITY â&#x20AC;&#x201C; A HELP OR A HINDRANCE?
The FCA has taken a number of steps to support start-up firms including the launch of their Innovation Hub, an advisory team which enables entrepreneurs to start innovative new companies. The types of support offered include: A dedicated team contact for innovator businesses Help for these businesses to understand the regulatory framework and how it applies to them Assistance in preparing and making an application for authorisation, to ensure the business understands the regulatory regime and what it means for them A dedicated contact for up to a year after an innovator business is authorised The FCA has also launched its Regulatory Sandbox initiative which is a safe and confined environment where innovative products, services and business models can be tested under the close supervision of the regulator. This allows firms to fully understand the compliance and regulation implications of their industry, enabling them to be fully prepared for launch. As such, the FCA is committed to be a cornerstone for one of the best ecosystems for financial innovation in the world.
CONCLUSION
The UK and financial services industry is tightly regulated and navigating through the increasingly complex regulatory framework is a huge challenge but a very critical component for the success of any FinTech firm. Regulatory obligations will not go away and firms need to ensure that all of these are fulfilled. A culture of compliance must be put in place with up to date and continuous training being offered to all staff as well as a compliance officer role being introduced. In order to be compliant and satisfy the regulations, a solid infrastructure centred around people, processes and procedures is needed. On-going compliance requirements including the preparation of regulatory filings, implementation of a sound risk management framework as well as tax, payroll and accounting submissions can take the focus away from the launch and growth of the business. Although overcoming compliance and regulation can seem a daunting task, the FCA is making a conscious effort to become more approachable and has implemented a number of initiatives such as the Innovation Hub and Appointed Representative Services model which can help guide FinTech start-ups into the market. The regulatory framework in place in the UK today, coupled with the worldâ&#x20AC;&#x2122;s best innovators and capital in London, is considered to be the best ecosystem for financial innovation. Compliance and regulation should not be feared but embraced in order to fully optimise the opportunities of success.
Robo-advice in the context of the populist age Ben Stokes, Managing Director, Actual Intelligence
One of the defining themes of recent times is the rise of populism in Western Societies, characterised by events such as Brexit and the election of Donald Trump as US President. Initially, commentators struggled to understand the cause, but have since reached consensus that large swaths of populations felt excluded from the wealth created by globalisation. Leading politicians such as Theresa May have highlighted (in her recent address to the WEF at Davos) how politicians in the West should not forget those within society where â&#x20AC;&#x153;life remains a struggle as they get by, but donâ&#x20AC;&#x2122;t necessarily get onâ&#x20AC;?. Acknowledging this exclusion is the first step in enabling societies to become more inclusive. Keeping this in mind, exclusion can be identified and acknowledged in many verticals of the service industry. In our industry, this trait can be seen in traditional approaches to wealth management. Skilled investment advisers command substantial fees to provide investors with effective investment advice. Historically these fees would form part of the Annual Management Charge (AMC) of the investment fund bought by investors. However, in the UK this mechanism was removed by the FCA as part of the Retail Distribution Review (RDR), resulting in investors needing to pay upfront for investment advice. Where investors had only small amounts of capital to invest, this could often exclude them from obtaining the necessary investment advice and ultimately from participating in the investment process. Despite demand for investment advice remaining high across all socio-economic sectors, a two-tier system began to proliferate, where the rich have access to expensive private wealth management services and therefore have the ability to get richer, whilst the poor are excluded from wealth management services altogether and remain as they were. Apart from the standard functionality, there are two key elements that set Robo-advice apart from historical wealth management offerings. Firstly, investors can access the service at very low minimum threshold investment amounts, and secondly, investments carry a very low management fee (charged to run the portfolio). Combine these elements with relatively sophisticated risk profiling and investment goal determination, intuitive customer UX, and robo-advisers provide a channel that offers investment advice to everyone, regardless of how much money they have and their level of financial knowledge. These platforms go some way to democratising participation in capital markets and can ultimately provide a level playing field for inclusive wealth creation.
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Leverage Envestnet’s Client Portal It’s a digital platform with configurable modules that aggregates personal finances with investment accounts, all white-labeled for the advisor.
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Join the digital revolution. Learn more at envestnet.com/clientportal. ENVESTNET RESERVES THE RIGHT TO ADD TO, CHANGE OR ELIMINATE ANY OF ITS SERVICES WITHOUT PRIOR NOTICE. APPROVED FOR INVESTMENT PROFESSIONALS ONLY. IT IS NOT INTENDED FOR PRIVATE INVESTORS. © 2017 Envestnet, Inc. All rights reserved.
Babel Systems’ Developer Sandbox API removes hurdles for developers to build, test & launch innovative client-facing propositions Babel Systems recently launched a new Developer Sandbox as a part of its commitment to enabling innovation. The API provides easy access to Babel’s fully functional frontto-back office infrastructure. The service has been designed to enable investment companies and new entrants to focus on creating unique product offerings, exceptional user experiences and optimised customer service.
WHAT IS BABEL?
Babel is an advanced web-based securities processing platform for automated real time processing of equities, bonds and funds. Designed for wealth managers, online trading providers, investment platforms, robo-advisers and stockbrokers, the platform includes modules covering: order processing, settlement, custody, accounting, fees and charges, corporate actions, compliance, payments and portfolio management. Its modular design allows companies to select components to suit their needs and to increase the scope or capacity of the solution when necessary.
THE DEVELOPER SANDBOX API
The solution provides RESTful-based API integration with all of Babel’s front office functionality allowing new clients to be created and maintained, place orders, view their portfolios and show performance. The web-based API functionality includes: Support for tax wrappers such as ISAs, Lifetime ISAs, JISAs, SIPPs, and SSASs Single, Joint, Trusts and Corporate accounts Forms processing including W-8BENs, ISA Declarations Real-time execution of equity and bond trades Fund Order processing Modelling Average, LIFO, FIFO and CGT calculations TWRR reporting Babel Systems’ founder and CEO, Steve Wise, says “With time to launch critical in the current market, the Babel API allows firms to focus on building their propositions, unique algorithms and user experiences without having to re-invent the wheel building their middle and back-offices.” The use cases enabled by Babel are wide-ranging, within the last 6 months Babel has undertaken several projects to provide FinTech propositions with connectivity to the Babel ‘Books and Records’ system enabling them to provide the following types of functionality via their own front-end technologies: Client onboarding Account funding
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Investment selection both discretionary and execution only Portfolio view including performance monitoring
RAPID IMPLEMENTATION
The use of the Babel Sandbox environment enables clients to start developing their system with no delays. An initial kick-off meeting takes place between Babel and the business and technical staff to outline the scope of the project including working assumptions relating to: Base currency Instrument coverage Dealing arrangements Custodial arrangements The firm is then configured within the Babel Sandbox and a technical walkthrough of the developer and integration documentation is completed. At this stage the firm is ‘good to go’ and, in Babel’s experience, can typically have a working prototype within a few days. In parallel with the development activity, the firm can progress with all the other activities necessary for launch including regulatory approval and custody agreements. The Babel team draws on 30+ years of trading technology experience to provide expert advice and support, full API Documentation and developer support, plus access to a comprehensive technical Wiki site. For more information about Babel Systems or the Sandbox API please contact Justin Belcher on +44 7906 211032 / Justin.belcher@babelsys.co.uk or visit www.babelsys.co.uk
ABOUT BABEL SYSTEMS
Babel Systems is a London-based FinTech company that created the most modern API-based trading and accounting solution. Babel’s client base includes Nutmeg, a recognized market leader in Robo-Advice, and other progressive Wealth Managers. Babel’s modular platform provides Order Processing, Settlement, Custody, Accounting, Fees and Charges, Corporate Actions, Compliance, Payments and Portfolio Management for an international marketplace. Babel is truly multi-currency and multi lingual. Babel systems is part of InvestCloud Inc.
ABOUT INVESTCLOUD INC.
Headquartered in Los Angeles, InvestCloud empowers investors and managers with a single version of the integrated truth through its unique digital platform. Today the InvestCloud platform supports over $1.6 trillion of assets across some 660 institutional customers. InvestCloud creates custom solutions for better decision-making. From Client Communications (Client Portals and Reports) and Client Management (Advisor Portals) to Digital Warehousing and Data Analytics, InvestCloud offers first-class investment platforms for successful investing that are rapid to deploy and hypermodular. Customer segments include wealth managers, institutional investors, asset managers, family offices, asset services companies and financial platforms. For more information, visit www.investcloud.com
objectway.com objectway.com
HY HB YR BIRDI D
DIG D II T GA I TLA M L EMEETEST H S UHMUA MNA N
WEALTHMANAGEMENT MANAGEMENT WEALTH ATTHE THEDIGITAL DIGITAL AT FRONTIER FRONTIER Thedisruptive disruptivehybrid hybridadvisory advisory The platformcombining combininghuman humaninteraction interaction platform with digital capabilities with digital capabilities objectway.com/HybridAdvisory objectway.com/HybridAdvisory
Optimo Optimo
BUILDING OPTIMAL MODEL PORTFOLIOS BUILDING OPTIMAL MODEL PORTFOLIOS
READ THE READ THE ARTICLE ARTICLE
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Delivering a high quality investment outcome through portfolio optimisation Objectway
Strategic asset allocation is the basic framework of the investment process and the first important choice to do. According to Morningstar and its famous research of 1986, about 93% of the returns from investment were due to asset allocation. Today, the landscape is roughly the same: market movements and asset allocation, as stated by Morningstar 2010 updates, make more than 90% of returns. The remaining part is due to active portfolio management. A wide set of studies and market analyses confirms this finding, supporting the notion that strategic asset allocation is the most important decision in the investment process. From a portfolio managerâ&#x20AC;&#x2122;s perspective, a wrong asset allocation process, in fact, may cause bad model portfolios assigned to customers, delay in adapting to market changes and lack of information tracing. Moreover, the complex set of variables to manage needs a structured rules system and tools for selection, pruning and normalisation, simpler analysis process, proven strategic choices, less manual processes, operational risks minimisation, certified algorithms and MiFID compliance. In such a scenario, we recognised a specific request for outsourcing this operating risk and created Optimo, our model portfolio construction solution. Optimo allows managing the analysis of both strategic and tactical asset location inputs, by using optimisation approaches based on the mathematical methods developed by Black-Litterman. Leveraging on real time portfolio adjustments, Optimo reduces the complexity of asset allocation process and provides a valuable solution to define strategic and tactical asset allocation through MiFID-compliant portfolio generation. The result is the legendary efficient frontier: the optimal combination of risk and return. In order to drive the best portfolio selection, other parameters are available, such as rolling volatility or long term volatility, Value at Risk, Conditional Value at Risk, or relative measures as tracking error volatility and so on. An efficient and dynamic model portfolio construction provides agile and swift reaction to market fluctuations, with a balanced management of strategic bedrock and tactical concepts. Asset managers and investment advisory teams can now leverage on Optimo to assist in the complex task of managing their clientsâ&#x20AC;&#x2122; wealth.
ABOUT OBJECTWAY
Objectway is a leading provider of financial software and digital solutions to the worldwide financial services industry, with clients in 15 countries. Its awardwinning software platforms are the trusted choice of leading wealth and investment management firms across the globe - from EMEA to Canada to Central America. From its offices in Italy, UK, Belgium and South Africa, Objectway has more than 500 employees supporting approximately 100,000 investment professionals to manage more than one trillion euros in wealth.
Smart Beta – a tool for precision and control Caroline Baron, Head of UK Distribution, Invesco Powershares
This article is for delegates and recipients of materials from Robo-Investing. It is not for consumer use. Understanding of smart beta products and how they can be integrated into a portfolio is increasing belief that these strategies will become widely accepted, according to research carried out on behalf of Invesco PowerShares in 2016. “Smart Beta a tool for precision and control”, conducted by independent company CoreData amongst users1 and non-users of smart beta in the UK, France, Switzerland, Italy, and Germany, looks specifically at the drivers, challenges and implementation of smart beta and the potential for future adoption.2
INCREASINGLY POSITIVE ATTITUDES TOWARDS SMART BETA
Of the users surveyed in 2016, 71% agreed that smart beta will become a widely accepted investment over the next few years, compared to 60% in 2015. From a country perspective, confidence in smart beta becoming more widely accepted was strongest in France (79%) and the UK (78%). Building upon this, 73% of smart beta users now recommend smart beta to colleagues and investment professionals. Caroline Baron, Head of PowerShares ETF Distribution - UK: “Smart beta is increasingly seen as a tool of choice among users in meeting investment objectives and is playing an increasing role in investment portfolios across Europe. Although many users have implemented smart beta in varying ways, highlighting its flexibility, there is a general consensus of the efficient nature in which smart beta can potentially deliver on investment objectives.”
ALLOCATIONS TO SMART BETA BY USERS EXPECTED TO INCREASE
Not only are users revealing increasingly positive attitudes towards smart beta, they are also acting on their confidence and turning it into higher allocation: 71% of users state that they would increase their smart beta allocation over time. Trends are similar at a country-level across Europe, but the UK stands out with 78% of investors surveyed stating that they would increase allocation. None of the survey respondents in Italy, France or Switzerland had plans to decrease their smart beta allocation. The 2016 research also found that current users of smart beta have increased their forecast for uptake of these strategies going forward. Last year UK users expected allocations to increase to 20%, but this figure has increased to 25% in 2016. Similarly, users in Switzerland also expect their allocation to increase significantly over the next three years (17% in 2016 vs. 12% in 2015). For French users, the overall story is very similar to the other European countries, with an average current allocation at 11% of the overall portfolio, expected to increase to 19% in the next three years.
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Caroline Baron continues: “This valuable research shows that smart beta is increasingly being seen as a way to provide greater control in meeting investment objectives, and it is playing an increasing role in investment portfolios throughout Europe. Smart beta’s underlying theoretical framework originated in academia, but it has now been brought to the investing public. Offering a wide array of strategies, these span factors, regional and global equity exposures and, more recently, across asset classes, with growing opportunities in the fixed income space.”
DIVERSIFICATION A KEY OBJECTIVE FOR INVESTING IN SMART BETA STRATEGIES
According to the research, a commonly cited objective when investing in smart beta strategies is diversification, which can help improve the risk adjusted return of a portfolio. The need for control is another major theme spurring investment in smart beta. Smart beta users in France responded that the desire to control risk factors was the most important reason for investing. In general, users mentioned several factors which are linked to control, the first being transparency and second being the systematic rulesbased nature of these strategies. When asked directly, 63% of users agreed smart beta offers greater control than any other investments. In addition, due to their systematic nature, smart beta strategies tend to work as expected and thus have the potential to deliver on desired investment outcomes. 96% of users surveyed believe that smart beta investments have met their expectations, a 5% increase from 2015.
CHALLENGES WHEN INVESTING IN SMART BETA NOW EASIER TO OVERCOME
Lastly, the growth of smart beta ETFs provides ready-made solutions that can be easily incorporated into portfolios. Although there are some unique challenges when investing in smart beta, these are rated relatively low and users are finding some of them easier to overcome compared to last year. There is a significant increase in investors agreeing that implementing smart beta within their portfolio is straightforward (52% in 2015 vs 67% in 2016). Furthermore, nearly two thirds of users agree that smart beta strategies can complement existing active and passive strategies, meaning no portfolio overhaul is needed to implement smart beta into their portfolios. Caroline Baron concludes: “The most resonating message from this research is that user confidence and use of smart beta is expected to grow over time. Although investors implement smart beta in various ways – highlighting the flexibility of the products – the general consensus is that the strategies have the potential to deliver on investment objectives. We are now at a point where investing in smart beta has become easier, with previous barriers diminishing.” 1 Smart beta ‘users’ are defined as respondents who have invested in smart beta strategies while ‘nonusers’ are those that have zero allocations. 2 Survey sample and methodology: The respondent pool represents a spectrum of industry practitioners and is primarily comprised of portfolio managers, CIOs, gatekeepers, and fund analysts; who are both users and nonusers of smart beta. 360 interviews were captured through an online questionnaire and 20 via telephone-based interviews. This was broken down into 270 users and 90 non-users for the quantitative phase and 16 users and 4 non-users for the qualitative phase.
POSITIONING SMART BETA TO CLIENTS (%) OVERALL
UNITED KINGDOM 73 66 19 17
GERMANY
85 57 30 15
ITALY
65 73 21 15
FRANCE 65 63 20 18
SWITZERLAND 72 63 11 13
79 72 15 26
Multiple responses. Smart beta users only. Sample= 237
As As As As
an alternative source of return a diversification strategy a lowÂcost investment a hedging strategy
POPULAR EQUITY ASSET CLASSES FOR SMART BETA (%) EUROPEAN EQUITY
US LARGE CAP EQUITY
5
DOMESTIC EQUITY
12 26
40
55
26
43 45 48
EMERGING MARKETS EQUITY
ASIA PACIFIC EQUITY 18
18 30
US MID AND SMALL CAP EQUITY 16
18
29
52
Multiple responses. Smart beta users only. Sample= 270
53
66
Currently invested Would consider investing Would not consider investing
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ABOUT INVESCO POWERSHARES
PowerShares was founded in the U.S. in 2003 on a vision of delivering investment performance through the benefit-rich Exchange Traded Fund (ETF) structure. In January 2006, PowerShares expanded its vision by becoming part of Invesco Ltd, whose global presence took the Invesco PowerShares story beyond the U.S. When the first ever ETF was launched in 1993, its purpose was simple - to track the S&P 500 Index while trading on a major exchange. Since then, many traditional ETFs have been designed to mirror a number of different benchmark indices. Not all ETFs, however, seek to simply track a measure of a market. Invesco PowerShares offers a selection of ETFs that track â&#x20AC;&#x153;next generationâ&#x20AC;? indices: indices that go beyond merely tracking a particular market. These indices attempt to outperform the performance of a particular market through intelligent security selection and weighting. www.invescopowershares.eu
IMPORTANT INFORMATION
Where Invesco Powershares has expressed views and opinions, these may change without notice. The report is for information purposes only and is not an offering. It is not intended for and should not be distributed to, or relied upon by, members of the public. Circulation, disclosure, or dissemination of all or any part of this report to any unauthorised persons is prohibited. Issued in the UK, by Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH. Authorised and regulated by the Financial Conduct Authority. This article is for delegates and recipients of materials from Robo-Investing. It is not for consumer use.
Bonfire of Regulatory Lawyers the disruptive effects of Regtech Jane Walshe, Founder, Enforcd
Let me tell you a secret about regulatory lawyers. They tend to be clever people. That’s not the secret. It’s a fact that you don’t get a job in a high ranking law firm - the sort that recruits and trains people to be reg lawyers, if you’re not up to scratch.Their intelligence cannot be in doubt. In fact it’s one of the reasons they’ve been so slow to adopt technology to aid the delivery of services to their clients. The secret is that they know that technology is capable of doing up to 80% of their job for them - and you can’t charge out a piece of software at $750 per hour. But they’re far too clever to let you or I know that. Around 80% of the job of the regulatory lawyer is ‘grunt work’. Looking things up. Working out how a, b and c fit together. And where the European Commission commented on c, and said it should revert to being more like b, but only if x and y are satisfied. You get the idea. It’s research. It requires a good deal of concentration and a high level of attention to detail and professionalism. It’s difficult. You need to have a good brain to do it well. A good brain, or a really good piece of Regtech. What is a software programme if not a set of rules, choices and assumptions? What is a piece of law or regulation if not a set of rules, choices and assumptions? Software programmes, and law, are conceptually indistinguishable. This is one of the reasons why it is so unfathomable that there aren’t more legal rules engines that firms can tap into, that will tell them at the touch of a button which requirements apply to their operation - based on their location, client type, product type and so on. Some nifty software that would disintermediate the lawyers. In order for such a product to work, quite a few lawyers would be needed in the initial stages to populate the tool and to ensure accuracy; in time though, AI is likely to be able to perform most of this function, reducing the role of the lawyer further still. Some law firms are innovating and creating impressive software tools that help clients, but far fewer than one would expect, given the prevalence of smart technological solutions in all other areas of our lives. The embedding of legal and regulatory requirements in to a firm’s workflow is one of the most exciting areas for Regtech to delve into. Imagine - a compliance officer gets an automatic alert to update a policy because the policy is hooked into a live feed of the law and regulation that applies to it; the alert contains the text of the updated requirement, together with a couple of lines of explanation perhaps. At least one large bank is working on this type of project. Imagine a step further - each interactive policy contains live links to the requirements it is reflecting, together with links to examples of the consequences of those requirements having been breached in the past (enforcement actions), and further links to internal training to mitigate the risk of problems occurring again. This is all to come.
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So, should regulatory lawyers be worried? Itâ&#x20AC;&#x2122;s been accepted for some time that not so many lawyers will be needed in future, across all areas. However, good reg lawyers do not have too much to panic about just yet. Their counsel will still be needed because there are so many grey areas in the law, and contradictions between different countries. Brexit alone will keep them busy for another 5 years. Further a lot of what the market does is not as a result of the letter of the law, but as a result of what everyone else is doing and they need the lawyers, who sit in the middle of the group, to communicate this (confidentially). Also they serve an important role as an insurance policy - someone to blame if a decision turns out subsequently to be wrong. Indeed, itâ&#x20AC;&#x2122;s an opportunity for reg lawyers to go less grunt work, and to be freed up to focus on adding value at a strategic and business level, which is what the really good ones do already.
Robo-partnerships set to rise for fund houses – a Q&A with Anthony Christodoulou
The following text is a transcript of a portion of a speaker’s video presentation made at the Financial Times Ignites. This transcript solely represents the view of the individual who spoke, and not the view of Ignites Europe or any other group. Source: Ignites Europe, 17 January 2017 Robert Van Egghen, reporter, Ignites Europe “Hello and welcome back to Ignites Europe. Today I’m joined by Anthony Christodoulou, founder of media and consultancy Robo-Investing Now, Anthony, there are 64 robo-advisers in Europe, 11 of them launched in 2016 and a similar number launched in 2015. But when you look at the numbers – their customer acquisition rate, their profitability – they aren’t really performing that well. Is 2017 going to be the year when they crash to Earth?” Anthony Christodoulou, founder, Robo-Investing “Well, it’s an interesting question, Robert, and one that’s been talked about a lot. There’s been a lot of good research that’s been done on this. And what I’d say is that these businesses need time to grow. There’s a lot of venture capital that’s funding and backing those businesses. But more importantly what we’re seeing and what we’ll see in 2017 is actually a lot of these businesses start to develop alternative sources of revenue. And what I mean by that is a lot of them will start offering [business-to-business] services. So, as well as going directly to customers and offering direct investment solutions, they’re also going to start offering their solutions to existing asset and wealth managers to be able to act as a separate distribution channel for their solutions.” Robert Van Egghen “Because I would say we are in a climate at the moment, both from a regulatory point of view if you look at the [Financial Conduct Authority] study and also a commercial point of view where the sentiment is turning against active funds, saying that active managers don’t deliver for investors, and becoming more pro-passive. So that should surely benefit robo-advisers going forward.” Anthony Christodoulou “I think it will and I think the issue there is one of language and positioning of solutions. So what we’re seeing is a shift from selling products towards selling solutions. And this means the language that we use in the industry to educate investors is one that’s shifting much more towards goal-based investing and outcomes, which are much more relevant in matching risk and returns for investors. And what that effectively means is that, in that environment, you will see less talk of whether something is outperforming or something is active, as opposed to something being passive. In a world where we have rule-based and algorithms driving underlying solutions, investors are much more concerned with their matched expectations towards what they are trying to achieve in terms of returns and their lifestyle planning.”
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Robert Van Egghen “You mentioned their goal-based investing, helping investors achieve their investment goals. That’s not really something that, traditionally, an asset manager has really done.” Anthony Christodoulou “I think it has been involved in certain parts of the industry. Certainly in the pensions world and the retirement sector goal-based investing and target dates approaches, and the modeling and the portfolio management skills have certainly been prevalent in that world. And actually what we’re seeing is a lot of quantitative techniques and institutionalised processes now being offered and actually powering a lot of these underlying automated solutions for retail investors. So I think it’s a very, very good thing because it’s providing retail investors with far more, let’s say, advanced and more sophisticated portfolio management techniques.” Robert Van Egghen “So would you expect, then, to see more partnerships and collaboration between established firms such as asset managers with the robo-advisers?” Anthony Christodoulou “Absolutely. Well actually if we look at the US as an example of what we’ll likely see continue in Europe, we’ve seen a number of strategies deployed by the incumbent firms. Some of them have chosen to build their own proposition, such as Vanguard and Schwab. Other ones have decided to collaborate or partner or indeed acquire – so BlackRock acquiring FutureAdvisor, you had other firms such as Invesco also partnering with firms – Jemstep in the US. And a lot of these partnerships and collaborations are done to empower their own adviser networks with digitally automated solutions because that helps them scale their business and actually retrain existing clients at a profitable level.” Robert Van Egghen “So even though a lot of the initial disruption has come from outside the industry, ultimately you expect the winners going forward to be the established firms.” ` Anthony Christodoulou “I think it’s going to be a combination. No one necessarily needs to win or lose. What we’re going to see is that the start-up firms are likely to start reinventing their business models, and established firms are looking at digitising parts of their investment process. So robo-tools will become a means with which existing advisers can service their clients. The biggest threat, I believe, to the industry as a whole could come from an outside firm, someone who has either high-technology enabling tools or a strong brand with the retail community. But even then you’re likely to see them partner with an existing asset manager who powers their solutions. But I think what we’re looking at in 2017 is greater collaboration and partnerships by both startups and existing asset managers.” Robert Van Egghen “OK Anthony, thank you very much.” Anthony Christodoulou “Thank you.”
Speakers Thomas Bloch Co-CEO, Vaamo Prior to founding Vaamo, Thomas spent more than 8 years with JP Morgan in investment banking and the European Financial Institutions team in London and Frankfurt, as Vice President in charge of banks in German-speaking and asset managers across Europe. He is also a mentor at Startupbootcamp FinTech and a co-founder and advisory board member of Green finance consulting.
Phil Blows Account Director, Wealth Wizards With a background in FinTech and Asset Management, Phil is a strong endorser of technology and how it can improve the world we live in. While working at leading UK robo-adviser Wealth Wizards, Phil has championed innovative financial advice solutions in the workplace and collaborated with partners to ensure better retirement outcomes for employees. Phil has previously worked Moneycorp leading the intrapreneurial division delivering advisory services to retail clients.
David Bower Marketing Director, Invesco Perpetual David joined Invesco Perpetual in January 2013 and is responsible for Marketing across the UK, Continental Europe the Middle East and Africa (EMEA). David has over 20 yearsâ&#x20AC;&#x2122; experience in the investment industry, working in finance, client services and marketing positions. In 2007 he joined Barclays Global Investors (acquired by BlackRock in 2009), where he held several senior marketing positions.
Francesco Brenna Partner, IBM Global Business Services Francesco is the Lead Partner for IBM Global Business Services Watson for Banking & Financial Markets in Europe. His responsibilities include selling and delivering transformational change projects in the Banking and the Wealth Management sector, with a focus on Cognitive Computing, Advanced Analytics and Digital Banking.
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Speakers Susanne Chishti CEO, FinTech Circle Susanne is the CEO of FinTech Circle, Europe’s 1st Angel Network focused on FinTech opportunities and the FinTech Tours. She is also Co-Editor of the Bestseller “The FinTech Book” - the 1st Crowd-Sourced Book on FinTech globally. Recognised in the European Digital Financial Services ‘Power 50’ 2015, an independent ranking of the most influential people in digital financial services in Europe. Susanne has been selected as one of the 100 leading Women in FinTech.
Andrew Davies Co-founder, Idio Andrew is a co-founder of Idio, a content intelligence platform that powers predictive customer experiences for clients like JP Morgan, Intel, and Fitch Group, with offices in London and New York. He previously co-founded a digital agency that built highscale social media analytics systems for clients including O2, ITV and Number 10, and worked for Deloitte Consulting in their TMT division.
Vincent Denoiseux Head of Quantitative Strategy, Deutsche Passive Asset Management Vincent has 12 years of experience in quantitative research, derivatives structuring and portfolio construction. Previously, Denoiseux was building fund linked investment solutions at Exane Derivatives (BNP Paribas), particularly on hedge funds and liquid absolute return strategies. For six years, he has been a lecturer in Quantitative Portfolio Management at Ecole Centrale Paris.
Clara Durodié Founder, Cognitive Finance Clara is a business technologist and thought leader in Artificial Intelligence (AI) solutions for Financial Services. She established Cognitive Finance Group, an advisory and investment firm specialising in applied AI. Prior to this, she served as an Executive and Board Director at Ackermans & van Haaren (AvH), a financial services company in London and Luxembourg.
Speakers John Egan Senior Director, Anthemis Group John manages engagements with top tier global financial institutions in the retail banking, insurance and wealth management sectors. John is an economist, entrepreneur and thought leader focused on strategic innovation in finance. Previously, John founded and sold engineering and finance businesses, earning multiple entrepreneurship awards including Emerging Entrepreneur of the year.
Chris Flood Reporter, Financial Times Chris Flood is a reporter at the Financial Times and FTfm providing coverage of robo-advice, exchange traded funds, indexing, smart beta and the debate between active and passive management. Before joining FTfm, Chris reported on commodities, UK and European equities as part of the FTâ&#x20AC;&#x2122;s markets department as well as writing a weekly economic outlook column.
Adam French Co-founder, Scalable Capital Adam is co-founder and Managing Director of digital investment manager Scalable Capital. Prior to this, he spent the last 7 years working in London in the financial services industry at Goldman Sachs. As Executive Director of Commodities Trading, he was responsible for the commodity structured products franchise including risk management and developing client solutions.
Andrew Frost Director, Lawson Conner Andrew holds a degree in Economics from the University of Technology in Sydney and is a chartered alternative investment analyst. He leads the Lawson Conner investment management team and is responsible for the ongoing growth of the fund incubation, wealth management and FinTech businesses of the Lawson Conner Group
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Speakers Alexandre Gaillard CEO, InvestGlass Alexandre Gaillard is CEO and founder of Geneva-based InvestGlass SA. Fully aware of the speed and dynamism of the disruptive robo-advisor space, InvestGlass has designed a platform that uses artificial intelligence to efficiently contextualise information for relationship managers and wealth managers. He also the co-founder and Vice President of SwissFinTech National Association.
Paolo Galvani Chairman, Moneyfarm Paolo is the chairman and co-founder of MoneyFarm. Prior to MoneyFarm Paolo cofounded prestiamoci.it, working in FinTech before it had the name FinTech. Former CEO of Sella Capital Management SGR and Deputy Head of the Private Banking unit, Paolo brings a wealth of experience from both the asset management and investment banking industry.
Maria Jose Jorda Garcia Head of Customer Experience, BBVA Maria is the head of customer experience and transformation at BBVA. She acquired financial expertise working for global leading banks like UBS and Credit Suisse and innovation experience working at the Innovation Lab of BBVA. She currently leads a project to create new experiences and value propositions for Millennials and involved over 1,200 people from BBVA and other firms across the world.
Victor Haghani Founder and CIO, Elm Funds In 2011 Victor founded Elm Partners, an active index investment fund. He started his career in 1984 in the bond research department of Salomon Brothers and then became an MD in the bond arbitrage group run by John Meriwether. In 1993, he co-founded Long Term Capital Management (LTCM) with seven other partners. Since then, he has been involved in a variety of activities, including consulting and board assignments, becoming a name at Lloydâ&#x20AC;&#x2122;s.
Speakers Bertrand Hassani Head of Research and Innovation, Santander Bertrand joined Santander in July 2012. He aims to develop novel approaches to measure risk (financial and non-financial) and integrate them in the decision making process of the bank relying on methodologies coming from the field of data science (data mining, machine learning, A.I.). Bertrand is a specialist in Basel II/III risk measurement and management for SIFI’s. He is also an active associate researcher at Paris Pantheon-Sorbonne University.
Rob Hudson Head of digital distribution, Aberdeen Asset Management Rob is responsible for developing new digital distribution channels for Aberdeen Asset Management. Previously, Rob was MD of Charles Stanley Direct where he was responsible for the successful launch and fast growth of a new direct –to-client investment platform. Rob started his career with Hargreaves Lansdown in its earlier years (1994-1999).
Rohit Krishnan Vice President, Eight Roads Ventures Rohit is Vice President at Eight Roads Ventures, a global VC firm that manages $4Bn of capital across UK, India, China, US and Japan. He focuses on companies that are disrupting enterprises using big data, analytics and AI. Previously he co-led the European effort at McKinsey ‘Fast Growth Tech’, working with leading entrepreneurial companies and investors in UK, Scandinavia, Southern Europe.
Anna Lane CEO, The Wisdom Council Anna co-founded The Wisdom Council in 2013 following seven years as Managing Director of Lane Consulting, a specialist wealth management marketing consultancy. Anna worked in the City for over 20 years, in roles including Head of International Marketing for JP Morgan Private Bank and Morgan Stanley Investment Management.
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Speakers Michael Mellinghoff Managing Director, TechFluence Michael is a seasoned investment professional with over 15 years of experience, spanning both the traditional banking and FinTech world. His career includes positions on management board and supervisory board appointments in Commerzbank Asset Management and DZ Bank Group. Since 2010, Michael has also worked with German FinTech pioneer sharewise.com, a stock centric community for investors.
Alan Miller Founder and CIO, SCM Direct Alan Miller co-founded SCM Private in June 2009; a modern and efficient investment management company that actively manages ETF portfolios. In September 2014 SCM launched three new revolutionary Direct to Consumer web platforms, SCM Direct.com, SCM 50.com and MoneyShe.com. Alan was formerly the CIO of New Star from early 2001-2007.
Devie Mohan Co-founder and CEO, Burnmark Devie is a FinTech industry advisor and analyst based in London. She is the founder of a FinTech research and collective mentoring firm that supports FinTech startups with advice and data. She writes extensively on FinTech and digital banking and is a columnist with several online publications. She has been listed in the Top 10 of City AM newspaper’s FinTech Powerlist and in Innotribe’s FinTech Power Women list.
Marco Parini CIO, CheBanca Marco joined CheBanca in 2008 as part of the start-up of the new retail bank of Mediobanca Group. In 2012, due to the launch of investment services for the bank’s retail clients, assumed the responsibility both of the brokerage and the investment advisory divisions. In 2014 he was made responsible for the launch of the asset management services.
Speakers Richard Peers Director of Financial Services, Microsoft Richard is the Director of Financial Services at Microsoft. He is the industry lead for private and retail wealth. This includes developing the market and partner ecosystem. He specialises in emerging technologies and building strategic alliances within digital banking.
Alois Pirker Research Director, Aite Group Alois has published extensively on topics covering the investment advisor space, financial planning, separately managed accounts, and advisor-focused platforms and tools. Previously, Alois was an analyst within Celentâ&#x20AC;&#x2122;s securities & investments group, where he advised clients on new strategic technologies in the financial services. Alois has been quoted The Wall Street Journal, Bloomberg and Reuters.
Andrew Power Partner, Deloitte Andrew is a Partner in Deloitteâ&#x20AC;&#x2122;s UK Consulting group, who specialises in working with Retail Financial Services companies. He has over twenty-five years of consulting experience, on strategic, organisational, regulatory, operational and technology issues. His work includes extensive reviews of distribution channels, including digital, platforms and robo-advice.
Paul Resnik Co-founder and Director, FinaMetrica Paul co-founded FinaMetrica which provides risk tolerance profiling and a comprehensive Toolkit including several suitability algorithms. Since its 1998 Australian launch, FinaMetrica has completed almost one million risk profiles for over 5,500 human financial advisers which includes 5 Robos in 20 countries. FinaMetricaâ&#x20AC;&#x2122;s algorithms map risk scores to the multi asset portfolio suites of more than 30 investment managers including several of the worlds largest.
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Speakers Angelique Schouten CEO, Ohpen UK Angelique Schouten has over a decade of experience in retail banking, insurance, asset management, and FinTech at companies such as Aon and ING Group. She was responsible for running the first direct-to-consumer robo-advisor in the Netherlands at Ohpen before switching to the software division of the company. In 2016, she established Ohpen’s operations in the UK and was appointed to CEO of Ohpen UK.
Heiko Schwender Senior Investment Manager, Commerzventures Heiko is one of the founding members of CommerzVentures. An investment banker by trade with a passion for technology innovation, he has been providing corporate finance advice to tech companies and banks for years. He continued his career at Commerzbank’s group strategy department, where he co-headed the overarching digitisation and innovation topics for the bank.
Paolo Sironi FinTech Thought Leader, IBM Paolo Sironi is IBM thought leader for Wealth Management and FinTech Analytics. Prior to IBM, he founded a FinTech which became a part of IBM (2012) following the acquisition of Algorithmics, world leader of risk management solutions. Paolo was previously head of market and counterparty risk modeling at Banca Intesa Sanpaolo. Paulo is a recognised author of books about portfolio management and FinTech innovation.
Martin Stead CEO, Nutmeg Martin joined Nutmeg in 2015. He joined Nutmeg from EDF Energy where he sat on the B2C Executive Team which oversaw the £3 billion highly-regulated retail business. At EDF Energy he led acquisition of new customers, customer retention, product and proposition development, digital sales and service, and all aspects of marketing. Martin was recognised with a Marketing Society Fellowship in 2013.
Speakers Richard Theo CEO and Co-founder, Wealthify Wealthify.com is a UK robo-investing service which promises to democratise investing through simplicity, low fees, low minimum investments and social engagement. Richard is an entrepreneur with a passion for technology that has driven him to establish technology-based companies most notably ActiveQuote. It employs 130 people in Cardiff and provides the Health and Protection Insurance comparison services to some of the UK’s leading price comparison brands on a white label basis.
Jane Walshe CEO, Enforcd Jane is Co-founder and CEO of Enforcd, a member of the Bank of England’s FinTech Accelerator. She is a barrister of 17 years and a Fellow of the Chartered Institute of Securities and Investment, with extensive experience of domestic and international regulatory affairs, including AML, KYC and financial crime related issues, senior management behaviours and governance.
Shane Williams Co-head, UBS Smart Wealth Shane is Co-head of UBS SmartWealth. With 20 years’ experience and after joining UBS in 2006, Shane has played a significant role in key innovation and transformation projects within the bank. He is also involved in the Blockchain innovation lab in Canary Wharf. Before joining UBS, Shane occupied development and operations roles at the Dutch bank ABN AMRO and at Ford Motor Company.
Blake Wood Senior VP Innovation, Envestnet Blake leads the Program Innovation team, which supports the business development efforts, strategic client engagements as well as product release communications. Blake has over 15 years of experience and has previously worked at Ameritrade and he Chicago Stock Exchange. As of September 2016, Envestnet supports over 51,000 advisors, and 3.6 million investor accounts and over $1 trillion in total assets.
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About Us Robo-Investing Europe 2017 is produced by Anthony Christodoulou. He has over 18 yearsâ&#x20AC;&#x2122; experience in wealth management, with senior roles at leading global financial institutions. He has founded several start-ups and was a pioneer of automated index investment solutions in the UK. Robo-Investing is an independent media, events and consulting business specialising in robo-investing, digital wealth and ETFs. It has developed an extensive network of practitioners across consulting, technology and investment management. Clients have included entrepreneurs, technology firms, fund managers and global financial institutions.
Contact info@robo-investing.co.uk www.robo-investing.co.uk Twitter: @roboinvestor #letstalkdigital
Website : www.roboÂinvesting.co.uk
Email : info@roboÂinvesting.co.uk
Twitter : @roboinvestor