The huge uptake of digital technology by clients as a result of Covid-19 is here to stay and this poses questions for how the wealth management industry can tread the fine line between retention of the personal touch and enhancing it via the use of digital solutions and other technologies.
“In Asian markets technology take up is more marked. We see also a leapfrogging of technology by private banks. They are not hindered by legacy systems and they also have a much more progressive culture that accepts and embraces new technology – thus uptake of new technologies and in particular everything that is digital is far greater,” says Matthias Plattner, Head of Channels and Innovation at Julius Baer.
He says that in Asia ecosystems such as WeChat are already embedded into society and that this gives the private banks a different nexus in that they need to be a part of these ecosystems. “Any successful wealth manager needs to provide their clients with the channel of their choice and be available with the right information far more quickly than in past eras, with clients often expecting a reply in seconds,” says Plattner.
Indeed, the expectation of instant communications feeds the need to augment the adviser and arm them with e.g., real time information personalised information about clients. At the same time, private banks should offer very convenient digital solutions for everything that is of high frequency but lower added value in nature – in a secure and protected way.
“By doing this we can free up the adviser and enable bespoke private banking solutions to clients. It is important to remember that the further up the value chain you go the less digital self-service can generally be brought into play. For certain cases, we have developed a ‘meshed’ solution called ‘assisted’ solutions whereby the relationship manager prepares everything for the client in the digital solution.
Ecosystems
Following on from that aim, this enhanced service can only be provided if the bank is able to get in front of the client in the first place. This is where ecosystems come in. In a world where super apps and personalised ecosystems are fast coming to the fore then the most pressing question, he says, is how to get embedded into the client’s ecosystem in the first place.
“A part of this is creating an ecosystem within the private bank. This is already done to the extent that we operate on an open architecture basis to offer whole of market best of breed investment products. The ecosystem provided by the wealth manager needs to be a one stop shop for the client and the bank needs to decide where and how to provide as broad a range as possible without threatening its own core business areas,” he says.
Trend evaluation
“But to get the best results in terms of getting in front of the client or deciding what to offer them and how to best use technology, we need to be on top of the technological trends and how they fit into our world,” says Plattner.
He explains that to do this the bank has a trend lab where it looks at all industry trends and then puts them into one of eight clusters. The aim is to be able to identify a trend, have a common terminology and thus an understanding around it. From there the next step is to determine the relevance, maturity and likely impact. This is reviewed each quarter. “This process helps us to see what is happening in the world in a more structured way so that we can decide how relevant and impactful it is likely to be on our industry and our business. We call this structured serendipity,” he says.
Plattner thinks that the tokenisation play, in particular, is promising since it allows for greater liquidity in assets that are held privately or not traded very often; real estate or art are both good examples of this. He also mentions utility coins that use blockchain for a settlement process that is faster and more efficient.
“Often we find that themes emerge that combine two or more elements,” he says
“Although each technology is important in itself there is no single one that is more important. In fact, we see it as the combination of a number of technologies that are shaping play; cyber, tokenisation, AI and natural language processing, the cloud, IoT and mobile technologies all have a part to play,” he says.
He gives the example of AI and cyber security – describing it as a double-edged sword. “Cyber attackers want to find new loopholes and exploit them quickly. Banks want to find anything out of the ordinary and move to close the loophole just as quickly and AI can help both sides. Clients of wealth managers are also vulnerable from a privacy and reputational risk point of view so again the attack vectors need to be robustly protected from the bank’s viewpoint,” he says.
He also says that AI and now ML systems are looking to make sense of financial data and algorithmic trading. “There is also an element of sentiment reading in play now and this gives banks the ability to read both the mood of the market and the mood of the client too. The way that clients feel about their portfolio and investment is a leading indicator of satisfaction and it can also give some balance to wealth managers who are looking to be at the forefront when it comes to meeting their clients’ needs.”
The IoT, meanwhile, has increased connectivity and from there the creation of bigger ecosystems and super apps starts to gain traction. “This is a massive trend where connections around a transaction are formed and one action can trigger other, relevant ones. It unbundles the value chain,” he says.
Partnership
Key to making any of these technological advancements accepted and getting them a decent case use is a partnership approach between, for example, FinTechs and banks. Covid-19 opened the floodgates when it came to the need to have digital tools and the tech companies showed they had a good understanding of what the industry needed, but one element that is always hard to get over is that vendors want to scale and gain mass adoption while banks need something that is easily customisable.
Consequently, there is a real need to work alongside vendors and support them to develop solutions that the bank actually needs and can use. “To this end we have an incubator and a big part of that is not just getting to the proof-of-concept stage but also working out how a proposed product would integrate with the bank’s broader ecosystem,” he says.
“Going forward, we feel that the biggest play is the augmentation and personalization play as this will equip banks to attract and retain customers, but we always need to remember that our industry is all about the service so it’s automated where you can augment the service but manual where you can’t,” he concludes.
This interview was part of TWM's recent APAC Wealth Technology Landscape Report (2021). Click here to access the full report.
