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Panel V: Bespoke 2.0: how tech is expanding the scope of the wealth industry

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Private banking and wealth management might sometimes look like the last hold-out against fintech disruption. But experts say talk of competition between technology and the human touch is misplaced: the opportunities for partnership are vast.

More than perhaps any other part of financial services, private banking and wealth management has always been a people business. At its heart are trusted relationships between client and adviser that frequently stretch far beyond the performance of a portfolio.

But just as with any other part of financial services in 2020, the pursuit of improved service and efficiency is paramount. Technology that leverages big data might seem to be an odd bedfellow of the bespoke, personal world of the wealth manager, but applications abound for advisers and their clients. The challenge is to use them to enhance the service rather than obstruct it.

According to Christopher Sparke, global head of advisory solutions at Refinitiv, the focus now is on aligning the retirement and wealth goals of clients with their broader goals in life – and creating a more bespoke service to allow that.

“It’s an expansion into holistic wealth planning as opposed to just beating a benchmark,” he says. “There is a big focus on client centricity and tools and services that allow wealth management firms and private bankers to get much closer to the customer.”

That means investing in technology that can surface relevant information about a client to allow advisers to create a much more bespoke plan.

“When we think about what digital means, a number of customers are saying we want our private bankers to be more intelligent in the way they are surfacing information to the cloud,” he adds. “And some private banks are saying: ‘Well why not just deliver that directly to our customers?’ So it is about solving for scale, enabling more efficient use of time and a more bespoke feeling into the distribution arms of the bank.”

It’s an expansion into holistic wealth planning as opposed to just beating a benchmark
Christopher Sparke, Refinitiv
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For Evgeny Kochemazov, chief investment officer for A-Club at Alfa-Bank, technology is a problem solver and a game changer when it comes to bank and client relationships, but it is important to appreciate and value the personal relationship.

“We are ‘phygital’ – we are used to mixing the physical and the digital communication channels,” he says. “The ultimate aim is that the client can choose what fits him or her best.”

He breaks down the technological applications to the private banking industry into two categories. “The first is helping us interact with clients so we can sell products in a more efficient way and report to our clients in a more efficient way,” he says. “The second type of technology helps us to be much more efficient internally, so that our investment advice is scalable.”

While traditional private banks and wealth managers are grappling with these challenges, sitting alongside them are the raft of non-bank fintech firms that are increasingly looking to push into similar territory – and already have a lot of the technical expertise the big firms are seeking.

For Craig Iskowitz, chief executive and founder of Ezra Group, a provider of technology and strategy solutions to the wealth management industry, disruption may not always be obvious yet, but it is just over the horizon.

The ultimate aim is that the client can choose what fits him or her best
Evgeny Kochemazov, Alfa-Bank
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“The wealth management divisions of banks are seeing a lot of threats from firms like Acorns, MoneyLion and Stash,” he says. “They are not bringing a lot of assets, but they are gathering a lot of users and a lot of accounts – about 12 million.”

Right now many of these are people who don’t have a lot of money, he notes. Acorn has only about $1 billion of assets in its 4.5 million accounts. “But these are people that do have a lot of time,” he adds. “They are upwardly mobile and are the feeder ground where the traditional wealth management firms normally pull from.”

The frequency and intensity of interaction is another differentiator. Mobile apps and fintech firms actively press for very frequent interactions with clients, often by broadening the scope of those relationships.

“They will get involved not just in the new investments that a traditional office might focus on but also looking at your liabilities, your budgeting – they will wrap you around with services and information,” says Iskowitz. More assets will move towards these areas, he argues.

Today clients are really overwhelmed with information
Craig Iskowitz, Ezra Group
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It’s a fine line between wrapping oneself around clients and overwhelming them – avoiding that is a challenge that Kochemazov is all too aware of.

“Today clients are really overwhelmed with information about bonds and stocks,” he says. “They need a filter to help them find the crucial information they need to take a decision on asset allocation. One of our priorities is helping our clients filter this information. And sometimes that means designing the communication process in a way that omits the relationship manager.”

Francois Botha is founder of Simple, a company that services family offices and their leaders. He sees a similar challenge but notes that alongside the filter is a demand for more consolidated views – something that technology can help with, particularly in the field of application programming interfaces (APIs), the software that sits between other software and makes communication between the two possible.


“We are seeing a desire for solutions that can give clients a single consolidated view and these are becoming more available with better connections into banks,” he says. “APIs are becoming better and open banking is promoting this on the retail front and on the private banking front. But there’s still a lot of information that’s not readily available on an API level and this is the challenge that many tech startups are trying to solve.”

As much as filtering that noise should benefit clients, it also stands to help advisers do their jobs better, according to Sparke at Refinitiv.

“It’s not just so that your client can directly receive relevant information, it’s also so that the adviser can increase the alignment with the client’s goals,” he says. “It’s about increasing the value of that information. How should I prioritize the actions I take this morning, whether it is after a fall in the S&P or the results of an election? How do I look at which customers are most impacted?”

Wealth and crypto: the odd couple?


Do cryptocurrencies have a place in wealth management? Craig Iskowitz, chief executive of Ezra Group, has no doubt that the attitude of traditional advisers and their clients will need to change.

“It’s going to be here sooner rather than later,” he says. “The wealth management industry has pretty much ignored it up to now and just figured it would go away. They saw it as a scam.

“But it’s not a scam. It’s an industry that is here to stay. It’s an asset class that is here to stay. I saw a statistic that said 70% of financial advisers reported that their clients held some sort of crypto, which is mostly bitcoin, but only 6% of them advise it to be a part of the portfolio. You’re going to see that number explode.”

For that to happen, it will take firms of the scale of Vanguard or Charles Schwab to make a move, Iskowitz says. “Then you’ll see the floodgates open.”

Some of the disruption that traditional private banks and wealth managers might face reflects the broader shift towards passive investing strategies. If what clients want is direct access to data and the kind of functionality that a fintech can provide, is the traditional wealth manager’s relationship with its clients threatened?

That remains to be seen: what might be more at play is an expansion of the industry into areas of mass affluence.

“Some of the world’s leading private banks are looking to move down from the ultra-high net-worth target base that they used to have,” says Sparke. “In the US, JPMorgan You Invest is an example of a complete self-directed robo-site that is a goals-based investment platform specifically looking to target people that don’t necessarily have the assets to justify a private banker dedicated to them.”

Platforms like this are looking to use technology to provide a similar bespoke service to the human equivalent. Customers can enter their goals, their retirement plans and their appetite for risk. An engine can then calculate a potential portfolio.

“Through that lens, I don’t see that as a disrupter,” adds Sparke. “That’s just a way of driving what is a more bespoke service to a wider set of people.”

Iskowitz notes that robo-advisors and digital advice channels like Wealthfront are offering “direct indexing” tools that combine passive investment with bespoke tax management, by allowing investors to modify the make-up of an existing index in which they are invested.

“It’s all automated, it’s scalable and it appears bespoke to the clients,” he adds. “They get a feeling they’re being tailored to.”


In 2020, even traditional clients often want that hybrid. Botha says clients might now ask why they cannot see everything on their mobile device or transact on it. Why should they always need to interact with a banker?

“Perhaps that is the next generation mindset really when it comes to banking,” he says.

Another logical conclusion of the kind of consolidated view that a technology platform can provide is that it may accelerate the fragmentation of service provision as customers increasingly look to shop around, adds Botha.

“I might choose wealth management from one bank, transactional banking from another and investment banking from another, and then map it all in a suite from a fourth provider where all of this comes together,” he says.

Kochemazov at Alfa thinks that Russian banks are, for the moment, a little more insulated against disruption than their peers elsewhere. He looks back at what he calls the “mini banking crisis” in Russia in 2017, in which even big institutions suffered. Now more than ever, Russian clients say they value reliability and size, he notes.

Also, with Russian central bank regulation of many of the financial services that fintechs look to provide in the country, it is typically cheaper for banks to either buy these fintechs or develop the same service in house.

It’s not about a wealth manager going golfing with the patriarch anymore
Francois Botha, Simple
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Using technology to help clients visualize their investments and how they are meeting their goals is one thing, but developments in artificial intelligence can go much further than simply suggested portfolio allocations or convenient consolidated views. Iskowitz thinks that one of the most interesting recent moves is in helping advisers to judge clients’ risk profiles through analysis of their body language and other non-verbal cues.

“This was launched by Cetera Financial in 2017 and is just coming into production with a company called nViso,” he says. “Everyone in the wealth space has to do risk profiling and it’s a series of questions. And those questions, psychologically, never give the right results as far as I’m concerned.

“But you can’t hide your face – you can’t hide your emotional reactions to things. So these tools have the client watch a series of little vignettes about health issues, retirement or other things that might cause fear and anxiety, and measure the reaction of their face.”

Combining those results with the results of thousands of other clients allows the system to make suggestions to the adviser as to what might be appropriate for that client.

Technology that uses biometric analysis has other applications too. Much of this is around areas of fraud protection and know-your-customer processes, but it might also prove to be an increasingly key part of the interaction with the older generation of client that is such a big segment of the wealth management space.

Private banking and wealth management professionals broadly agree that older clients are more familiar with technology now than ever before – many use smartphones and tablets in their personal lives and show little reluctance to embracing the same in their financial lives.

“With every bank there are a number of retrograde clients who use only paper orders and who need to see every document in hard copy, but most have no problems,” says Kochemazov. “They have no problems using mobile phone applications and I believe that later this year when we introduce biometrical confirmation of transactions on our mobile app, they will also use it.”

Botha says that the generational challenges of service provision extend further than just to older clients. “We see this change all over – it’s not about a wealth manager going golfing with the patriarch anymore. It’s about sitting with a next generation client in a juice bar and discussing how to save the world.

“Technology can play an enabling role, but it should be transparent and in the background, so you can focus on these customer interactions.”

For Iskowitz, the pertinent question is that while older clients might be familiar with the use of technology in their personal lives, do they know how to use it effectively and safely?

“Things like biometrics are going to be huge to protect senior citizens online when it comes to money movement,” he says.

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Mark Baker is Deputy Editor. Prior to joining Euromoney magazine he was based in Hong Kong as managing editor, Asia, for the Capital Markets Group. He previously edited EuroWeek magazine and was also deputy editor at International Financing Review.
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