" class="no-js "lang="en-US"> EXCLUSIVE: “Between Two Worlds” – Peter-Jan Van De Venn, Mobiquity; John Wilson, Avaloq and David Semmens, Wealthify in ‘The Fintech Magazine’ - Fintech Finance
Wednesday, May 31, 2023

EXCLUSIVE: “Between Two Worlds” – Peter-Jan Van De Venn, Mobiquity; John Wilson, Avaloq and David Semmens, Wealthify in ‘The Fintech Magazine’

You might be surprised by how fast and how far traditional wealth management is adopting digital technology. Peter-Jan Van De Venn from Mobiquity, Avaloq’s John Wilson and David Semmens from Wealthify aren’t!Peter-Jan Van De Venn, Mobiquity | Fintech Finance

We’re all aware of the explosion of retail trading apps that sofa investors lapped up during the pandemic, which minted money for robo-platforms, propelling Robinhood to an IPO in 2021. But how far have things truly changed for the rest of the wealth management industry, including brokers, advisers, institutional investors and market-makers? And, perhaps more importantly, how will they change in future?

The first prototype virtual reality (VR) private wealth management assistant, Cora, emerged a few years ago. A digital take on the personal wealth manager’s role, these virtual assistants were seen by some as a heretical and unnecessary intrusion into an industry where real handshakes were a hallmark at the time. Then COVID threatened to disrupt those relationships, and even Cora and co now seem pretty tame compared to the step change represented by avatar trading in the metaverse – a development Wall Street already thinks will be worth billions and will likely expand the newly-democratised retail investment market still further.

So, how soon will you be ‘meeting’ your broker virtually on the corner of Bull Avenue and Bear Lane in your own StockCity – a version of which was developed by Fidelity Labs as long ago as 2014 – watching little blue-bird harbingers of social media doom flock around skyscrapers representing your investments, the property’s relative height indicative of real-time performance?

Not quite yet, perhaps, but according to a report released in November by digital transformation consultancy Mobiquity, most companies accept that embracing digital technology is the way ahead – and a surprisingly large number, particularly in the UK and US, are already using virtual reality tools most days of the month. VR is right up there with open banking (#1), client dashboards and video-conferencing as among the most important digital tools for them to execute day-to-day business.

The Digital Opportunity For Global Wealth Management report was based on research among 400 wealth management executives in the Netherlands, Switzerland, UK and US. It showed that the vast majority (80 per cent) have adopted, or are adopting, digital tools to improve both speed of execution and reaction to volatile markets, efficiency, and customer relations, as well as to reduce the cost of doing business – although how far they are using technology to address more fundamental structural changes in wealth management is less clear.

The ‘digital champions’ among the Mobiquity cohort were, it said, ‘using augmented and virtual reality to enhance both the employee and customer experience, artificial intelligence to make faster, more efficient and effective use of the huge quantities of data being generated that underpin financial behaviours, and open banking to allow seamless transitions between financial products and pots of wealth from across multiple providers’.

David Semmens, Wealthify | Fintech FinanceJohn Wilson, managing director for the UK and Ireland at Avaloq, a software and banking platform-as-a-service supplier to the wealth management industry, headquartered in Switzerland, says KPIs for wealth managers are still determined by assets under management, inflows and outflows, the split across advisory, discretionary, and exo-transaction models; cost to serve, number of customers, number of transactions, and revenues and margin. But he would add another to this list.

“Risk profiles have changed, in terms of the way in which companies have adapted over lockdown,” says Wilson. “So, I would say, for any wealth manager who has managed to fully integrate technology in order to maintain client relationships, that’s a success metric.”

Peter-Jan Van De Venn, strategy director at Mobiquity, would agree.

“Customer servicing is one of the key differentiators for wealth managers,” he says, “and our research showed that wealth managers themselves view keeping up with digital customer demands as an important success factor. For a traditional, face-to-face, advice-heavy business, that’s a huge step forward, I would say.”

It’s not hard to identify the drivers. Writing in the report, Van de Venn pinpoints them as being the falling cost to build, implement and maintain the digital solutions needed to meet the complex investment affairs of ultra-high-net-worth individuals; the rapid improvement in artificial intelligence and machine learning algorithms that can accelerate and boost the accuracy of predictions and decisions; and the emergence of an open banking and API economy to support the collection of distributed financial information and create better insights. Couple those with a realisation, during the pandemic, that online communication and collaboration can be as efficient and desirable as face-to-face – even among older, more traditional investors – and the direction of travel seems clear, although Wilson points out that how fast you go depends on the geography you’re in.

“The UK, for example, has a particularly digitally-savvy population and there’s a lot of comfort with self-directed investments, hence the growth of direct-to-consumer platforms. Whereas, in Switzerland, you still see a lot private banking, discretionary fund management, and advisory activity,” he says.

In that latter kind of environment, wealth managers are caught between a rock and hard place: how to strike the right balance between digital and human by choosing which elements of the wealth management service can be fully automated and those that can be augmented with digital tools. Open finance, permissioned data-sharing and trust are all related components in that debate. The last is still a particular concern among many providers who have built a reputation on zealously guarding client information. Singapore has just enabled the permissioned sharing of information on assets and investments over its Singapore Financial Data Exchange (SGFinDex) platform, which leverages the country’s national identity pass. The industry there believes that gives both providers and customers confidence in using digital tools.

“One of the barriers to digital implementation we saw in all regions was privacy concerns,” confirms Van de Venn. “Having a good, personalised, digital wealth management offering requires access to as much data as you can get, and that’s governed by regulation. But as far as the technology to collect it goes, I think it’s important for those wealth management companies to take that step, go through the digital transformation, change the architecture from the bottom up, because that future-proofs them for keeping up with customer demands.”

His comments are aimed at the 20 per cent or so of companies who told Mobiquity that they do not have plans to increase digital services.

David Semmens, chief investment officer at Wealthify, an online investment service that lets users choose the risk level they’re comfortable with and then builds the plans and manages them on their behalf, points out that firms don’t have to invest in the technology themselves. Wealthify has been engaging digitally from the get-go and is now taking a platform-as-a-service approach to offer other, more analogue, wealth managers the same advantage.

“We’re a digital-only business, accessed via our app or website, so we don’t rely on face-to-face interaction,” says Semmens. “But we work with other wealth managers that are looking to build digital into their proposition to service smaller clients who are unable to afford advice. They are referred to us, sometimes through a co-branded customer journey, and self-serve through a non-advised discretionary investment service until they reach a scale that makes them viable for the wealth manager.

“Clients will access a diverse portfolio of investments with low fees and a low minimum investment via web or app. It’s all about inspiring anyone to build their future wealth,” says Semmens. “First and foremost, wealth management is a relationship business,” agrees Wilson, “so it’s always going to be human-centric, whether it’s face-to-face or not.

“With 80 per cent of wealth managers confirming their commitment to digital, we need to manage that transition quite sensitively, from a human perspective. At Avaloq, we prioritise persona-based design thinking, so we start from the perspective of the end user, the relationship manager or independent financial adviser and go through the middle and back office, looking for key personnel – whether that’s ops, risk or compliance – to make sure we are looking at the user experience through their eyes.”

He believes the forced reliance on virtual communication channels during the pandemic has persuaded relationship managers that they need to be in contact with clients more, not less – ‘quantity of time is quality time’ as Wilson puts it.

“What we see happening is an uptick in conversational banking – having an ongoing dialogue with your client in a digital way. And how do we communicate with each other outside of work? It’s typically with instant messaging apps, WeChat, WhatsApp, etc. So, we developed a standalone digital product called Engage, which is effectively WhatsApp for the relationship manager in a compliant environment, with the backup of customer relationship management (CRM), customer lifecycle management and access to your client’s portfolio details. So, as a wealth manager, you could have a regular, unintrusive dialogue with a client, which puts you front of mind with them. It allows you to offer insights and keep up with key events in your client’s life. It’s a lovely merging of digital and client-centricity.”

“When a customer wants to talk to us, they can use our own in-app and web chats rather than WhatsApp, but I agree it’s about personalisation,” says Semmens. “Looking ahead, what customers are going to want is to impose their choices on the service.”

Van De Venn highlights three immediate returns on investment that typically emerge as part of a digital transformation.

“One is that it improves the customer experience, of course; if the servicing goes up, that’s more insight, and if you can do more yourself, customer satisfaction goes up. Secondly, operational costs go down. If you do it right, servicing will become cheaper per client. And the third, very important return in a heavily-regulated environment like wealth management, is that digitisation and automation lead to more control, because whatever you or your clients do is more auditable, more traceable and that makes regulators happy.”

But he adds a note of caution: “Listen to what your customer wants, but also make sure that you look at technical feasibility, and viability, because it is key to have a business case that is actually working.” Semmens sees the white-label option ticking that viability box for more firms.

“Big asset managers and wealth management providers come to robos like Wealthify because it means they can add their own branding to an existing digital proposition. By doing this, they are introducing more people to affordable investing,” he says. “We’re seeing a rise in popularity of investing, particularly in Europe: people will get more involved, beyond the recent speculative, short-term investing phenomenon. And that’s going to be very interesting.”

According to Citadel Securities, a global market-maker for broker dealers and institutional investors in the US, retail traders accounted for about one-fifth of stock market trading in 2020, and as much as a quarter on America’s most active trading days – a massive swing in the investment demographic, which had a big impact on equity trading volumes and stock price movements. Citadel itself, which is said to be eyeing an initial public offering (IPO) this year, has built its success on a combination of award-winning automation and human relationships.

While from opposite ends of the industry, both it and Robinhood demonstrate how digital technology can elevate wealth management businesses. So, what about that 20 per cent of respondents in the Mobiquity report who said they wouldn’t be using digital tools beyond the pandemic?

“My hunch is that it’s just a matter of time before they do adopt them,” says Van de Venn. “You have to be ready to serve that future generation in the digital way that they demand.”

And if that’s watching blue birds hover over StockCity, so be it.


This article was published in The Fintech Magazine #23, Page 10-11

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