The Evolving World of FinTech, Robo, AI, ML, Data, Analytics & Digital Solutions​​​​​​​

The October 22 Hubbis Digital Dialogue delved deeply and intently into the growth of the influence of FinTech in Asia and at the universe of digital solutions being promoted and rolled out across the region’s offshore and onshore wealth management markets, including assessing what impact the pandemic has had in accelerating the rollout of digital solutions. What is 100% clear is that the role of digital technology and solutions have been rising in prominence in recent years and even before the pandemic were at the position of being an absolute necessity for any serious wealth management institution competing in any segment of the market. Where precisely along this chain will robo-advisory, AI, Machine Learning, and data analytics be either in even greater demand in the months and years ahead, or win through to become a mainstay of any private bank or wealth management firm’s offering? How are the wealth market incumbents and the new entrants improving their digital platforms and capabilities, and where are they investing? How can banks and wealth managers best leverage technology to better serve the mass-affluent segment better, achieve scale and improve their overall proposition? How must they evolve their operating model and adapt their cultures? How can they reduce costs at the same time as increasing productivity and profitability? Can they build digital solutions that see to the clients’ needs first, and then work backwards from there to implement the optimal outcomes for all parties? How then do these banks and firms decide what solutions to acquire, and then how to work with the FinTechs and other digital solutions providers? Having committed to spend, how do they ensure they are getting what they bargained for, and achieving value for money and a significant advance? Do banks and firms buy one product/solution or take a more modular approach? Do these banks and firms buy only the solution, or do they also farm out the operation and servicing of the solution? How can robo-advisory, language processing, enhanced data, state-of-the-art analytics, AI, and machine learning come together to improve client engagement and the efficiency and capabilities of the forward-facing advisors? These vital topics and points of debate were discussed by our panel of experts in what proved to be a remarkably informative virtual dialogue.

Sponsors: Comarch, Tradesocio, Crealogix, Asset Control, Canopy and SIX

An expert opened the discussion by commenting on how wealth management (WM) is in a very state of digital evolution and that for his firm, the whole open banking movement is proving a game-changer. “For me, the priorities in Asia are personalising the digital experience, accelerating innovation, and leveraging ecosystems.”

He elaborated on the concept of a personalised experience, which requires a digital-first approach to enhancing customer engagement. He explained that today's digitally savvy customers expect the highest standards of service, anytime and anywhere, producing interactions that are convenient, and result in enhanced trust, where everything is personalised and relevant, where the whole information content is open, and very easily also extendable. “And it is vital to offer this in a conversational approach that makes it, of course, immersive for the clients,” he added.

Agility required

Accelerating innovation, he explained, means WM players increase agility and ensure faster time to market for new offerings. “That is so important because there are many digitally native FinTechs and BigTech challengers in this market, trying to disrupt,” he reported. “The route to success is increasingly a buy and don't build approach, which allows speed and very flexible customisation, as well as an API based orchestration.”

As to leveraging ecosystems, he explained that for his firm, it means WMs have to be able to implement a platform that is scalable within an open banking environment.

“Legacy technology has become more and more complex and costly to maintain,” he reported, “so WM players have to build a new customer layer, which is integrating all the internal sources, but especially integrating many third-party systems. And so, there is the route to success, it is software as a service-based and cloud-based capabilities, it has to be a scalable, open banking architecture, it has to make possible ecosystems with seamless connections, and such a banking environment also has to allow the firms to address multiple market segments, including potential extensions such as retail, or SMEs, if they later want to go into these markets.”

Post-Event Survey

Hubbis took a poll of our delegates after the event to determine how well digitisation is progressing in the Asian wealth management industry. We found that there is general positivity about digitisation and the solutions FinTechs can provide, but that there is more understanding required by the industry of how to select and apply solutions, and more need for the FinTechs to better liaise with the industry to communicate and then deliver their solutions. The global private banks appear to be ahead of the game, which is not surprising given their vast financial and human resources. The great applicability is for the broad democratisation of the world of investments, in other words for the mass affluent and retail spaces, although there is no doubt that the younger generations of HNW and UHNW clients will expect more digital engagement and better digital solutions.

Expert Opinion - Dr Richard Dratva, Vice-chairman of the Board of directors and Chief Strategy Officer, CREALOGIX: “Digital Transformation is where we need to be to better serve our clients in the evolving world of technology and ecosystems. Listen to your customers, embrace the digital culture, and welcome change. Be open for success.”

Expert Opinion - Stef Nielen, director of strategic business development at Asset Control: “Robo, AI, and ML can boost the skills of the RMs and the experience of the end clients by performing the investment suggestion and execution work, in other words, clients will be far more self-serving going forward. This is what you want as a wealth management firm, as it helps scale the business. The role of the RM will shift more towards one that educates his audience and that of a risk controller.”

Another guest highlighted how for their business, they are expanding in data analytics, putting the firm’s data in the cloud, where it is accessible to customers, mostly private banks and other WMs. “Accessibility of the data is essential, so capabilities around that are critical, including for FinTechs, because it allows them to bring the data they need into their platforms.”

He expanded on this, noting that analytics is all well and good, but the quality and integrity of the data is crucial, as a first step. “This is an area we are really focusing on over the next two to five-year horizon,” he reported, adding this will give the banks and other players the level of tailoring and relevance to help drive them forward with customers.

We are the market leader in data quality software solutions for financial data,” came another voice. “Focused on business user enablement, we help clients simplify complexity and ensure users across buy and sell-side make the most of their data assets by providing easy data integration, data cleansing, distribution and data discovery solutions. These award-winning solutions provide rigorous processes to secure high-quality data, easy integration into business user workflows and a trusted environment for advanced analytics. Delivered through managed services, cloud or on-premise deployment, our highly scalable products help the world’s most successful financial institutions meet their risk management, valuation, security master and operational needs with mission-critical reliability.”

Expert Opinion – Neil Thomas, Head of Sales and Asia for SIX: “When it comes to delivering analytics to drive decision making in Wealth Management banks should ensure high-quality data input which intern provides accurate outcomes.”

Expert Opinion - Stef Nielen, director of strategic business development at Asset Control: “The business focus regarding investment for data should be to centralise it. The wealth manager cannot afford to have inconsistent data flowing through the organisation. All disciplines including Research, Asset Allocation, Portfolio Construction, Trade Compliance, Operations, Risk, Performance Management and Reporting should base their decisions on the same data.”

Expert Opinion – Dominik Łyżwa, business consultant with Comarch: “Before considering AI/ML or any new technology, financial institutions should have their digitalised processes in order. Lack of smooth integrations in existing systems is still a productivity blocker in many wealth management firms.”

Fast-tracking innovation

An expert said that his firm’s mission was to help WM players accelerate their innovation, with the objective to provide a complete digital investment process, starting from onboarding all the way to execution. “To do so,” he reported, “we also utilise and leverage technology such as robo-digital advice, machine learning and AI to empower these products and business models.” He added that it requires providing better analytics, providing business intelligence, approving business processes, integration of legacy systems with the alternative FinTech models and accelerating the scalability of the solution.

He explained that simple approvals for either compliance or credit can take up to a few days in order to complete the cycle within a bank, but that his firm’s solutions can accelerate them to literally a few seconds, therefore dramatically improving that conversational engagement and customer experience, particularly for retail and mass affluent customers, while meeting the business objective of the bank. He added that for the retail and mass affluent segments, being so large and offering so much potential, the technology architecture should allow the provider to grow the business on an exponential basis and make the offering available to a larger customer segment in order to optimise these business and product models.

One guest highlighted how AI could achieve many goals, depending on the objectives. It can, for example, clean data, find patterns in data, track and discover investment behaviour and patterns amongst clients, identify risk factors, and find cleverer faster economic valuations in instruments. “This last approach could bring significant improvements to how we will perform risk calculations,” he said.

Expert Opinion – Dominik Łyżwa, business consultant with Comarch: “There are plenty of interesting FinTech companies out there, but a good algorithm is never enough for sound project delivery. Big institutions require a complex approach; therefore any cooperation with smaller companies may become challenging along the way.”

Expert Opinion – Neil Thomas, Head of Sales and Asia for SIX: “Change in the industry is constant - banks need to be willing to adapt to these changes. Working with FinTechs and ensuring their problem statements or strategic objectives are clearly understood will keep them competitive! Second to this is adopting a culture which promotes the interchange with the FinTech community.”

Expert Opinion - Stef Nielen, director of strategic business development at Asset Control: “Unclean data is used at your peril. Inconsistent data within the Wealth Manager could have dire consequences and bring reputational risk. It typically takes a lot of manpower to avoid ambiguous information leaking out or if required, correcting the situation. In addition to that, a lot of WMs typically pay too much for their data as every team in their organisation seem to request the same data separately , and after that, it still needs cleaning or reconciliation. That’s where Asset-Control can help”

Consolidating data and reporting

Data aggregating to help banks and other firms improve their clients’ approach to investing is another key area. “It is very hard,” he said, “to make progress around digitisation, around AI, around analytics, if you do not have a good data foundation.” And he explained that much more progress needs to be achieved in this regard, as so many banks are still even working with bank statements, even in this day and age. “Only when we solve these areas can you really start thinking about analytics and algorithms for recommendations.”

He added that given this situation, it has been a long journey, but that his firm has now assembled so many clients – several thousand he said – and covering some USD70 billion of assets, that the firm now has that foundation and is able to generate insights that are based on so much depth and quality of data that these insights are now truly becoming valuable. “We also see that the industry is at a tipping point where they are really becoming ready to provide this data on an ongoing basis,” he reported.

RMs must be smart, too

The next step, he elucidated, is then using that data effectively with the RMs. “You don’t just need an algorithm providing a recommendation,” he said, “you also need an RM who knows how to work with that, to then bring the recommendations to the client, because what we see is that our clients get overloaded with all kinds of information, all kinds of recommendations, news, their bank websites. And they need to make sense of it. And they normally rely on advisors.”

Another guest highlighted his firm’s solutions to help fund managers and asset managers to easily switch from data sources and allow them to make data-driven decisions. “As a market leader in that space, we provide data integration, data quality, and data discovery. You can have all your AI working for you pretty well, but if the data doesn't serve you, then as another guest noted earlier, all these advanced analytics don't work so well either.”

Engaging with the clients

Another guest explained how his firm helps to deliver new technology to financial institutions designed to make advisors more productive and clients more engaged. “I see many cases each year as a consultant,” he reported, “and I see many cases where clients are interested in having very new technologies like AI, machine learning and so forth, but at the same time not having so well organised systems, meaning they are challenged with very simple tasks. So, for me, it is all about the right foundations, as technology alone is not the only answer.”

The topic shifted to a deeper focus on the customer experience. “The most regular inquiry we have,” an expert reported, “is can we deliver robo-advisory based on AI intelligence to the clients, to really make many things automated for the average customers out there. The deeper we go into the discussions with our clients, the more we discover that they are not really increasing advisors’ experience expertise, whereas they should be making sure the RMs’ journeys throughout each of their business days are better, should be making sure that they are addressing the more challenging tasks instead of the repetitive, very simple operations. So, in short, enhancing the RM’s expertise and capabilities is a central way to improve the customer experience as well.”

He elaborated on this view, adding that AI algorithms are now capable of taking up the challenges in the middle office and back office, and can help advisors match ideas and products from a broader universe to the right clients, helping the advisor also to make the final, relevant decisions, and thereby improving the customer experience and the WM firms’ business.

Expert Opinion – Michiel van Selm, Chief Operating Officer of Canopy: “They say health is the new wealth, WealthTech can learn from HealthTech as it addresses the same issues. Getting healthier is as difficult as getting wealthier, but health solutions do much better in engaging users with data, insights and social networking. We should look at apps like Strava and learn from this.”

Expert Opinion – Dominik Łyżwa, business consultant with Comarch: “There are plenty of ways for AI to make advisors’ work easier. Algorithms can reduce repetitive tasks and put advisors’ focus where it needs to be. Happier and more productive advisors mean happier and more engaged clients.”

Expert Opinion - Stef Nielen, director of strategic business development at Asset Control: “What needs to take place before asset managers or banks decide on their priorities? Three things are key. They need to be able to trust the data. They need to be able to make data-driven decisions. They need to be able to easily switch data vendors and data sources.”

Data – the new asset

Another panel member agreed, adding that data is the true asset, and the analytics is the commodity. “Robo advisory requires very clean data, first and foremost,” he stated.

A guest commented that the banks who embraced the digital transformation journey early on are reaping the rewards of this today, because they have a full RM ecosystem, they can digitally engage with their client, they can share data, they can chat, they have all of these capabilities.

Expert Opinion – Michiel van Selm, Chief Operating Officer of Canopy: “Data is the foundation, not more and not less. On this foundation, you build an organisation that works with data and delivers it to clients in a way that is both understandable and actionable. At Canopy, we built a very good foundation, but it requires the RMs and the rest of the bank to work with clients and generate valuable insights.”

Upsizing capabilities

“If you look at some of the global private banks,” he reported, “an average RM who was maybe managing USD200 million of client money just a few years ago are now managing USD400 million. And they can do that because processes have become more efficient, data becomes more readily available, but also, the analytics, the recommendations on top of the data become more useful and relevant. These banks have been able to easily transition through the pandemic, because they were already really ahead on all these matters.”

He added that with data aggregation, the accuracy of data and recommendations and curation of ideas and products gets even easier.

Another guest commented about how it was vital for organisations to create a culture to enable digital transformation. He wondered how these organisations could see beyond the buzzwords and actually focus on what they really need to achieve in order to achieve better outcomes in their selected areas. He explained they need the kind of understanding to get the best out of the critical part of the engagement from FinTechs into banks and infrastructure companies. “See clearly what the problems are, then see how to absorb and integrate the technology,” he advised.

Know what you are trying to achieve

To do so, he said the approach must be rooted in strategy, based on what the bank or other organisation wants to achieve over the next period, and then use technology to solve a problem. The critical work his company does around data analytics, for example with up to 30 years of corporate actions history that nobody has ever analysed before, can then be focused on the front end, the RM space, providing more useful data to produce better outcomes for the end clients.

He said this could then be further refined by working with incubators that can really refine this type of data, equivalent to taking a surgical scalpel and immense precision to extract the relevant data.

A culture of welcoming change

Another guest agreed that the right culture must be adopted at the heart of each organisation. “We see that the most effective scope of working is that the requirement is delivered by a culture, that there’s a culture that is built that is targeted through digital innovations and digital transformation culture, and that is mandated by the top-level management within an organisation. They are setting very analytical goals in terms of the value of the investment, the value chain that they're looking to disrupt, and what exactly their targets are. We can deliver to that value chain within the mandate of exactly where the financial institution is looking to proceed and what they want to achieve.” He explained that his firm then encompasses this into a relevant B2B offering and solution, whether working with buy-side investment banks, or with wealth managers and RMs.

Scalability

“We see how we are able to provide the complete value chain at the most effective rate and how are we able to scale the solutions, not only to their existing customer base but their potential portfolio of customers in the near future,” he explained.

Another guest commented that convenience and simplicity are crucial to optimised digital solutions. “Convenience is the new loyalty, and simplicity should be the digital advisors’ new first name,” he said, “and transparency is the key to trust. The big success so far of the challengers in the wealthtech industry was to make simple services available in a simple way. And they need to provide complex services made simple.”

He also highlighted how data security is essential as data and data analytics proliferate. “Whom do you trust with your data?” he pondered. “Well, it is very important to have this clarity, transparency, the understanding, and if you have the right technology platform, you can really deliver this. You don’t need to spend vast sums of money either. You can spend a fraction of these large sums to get there because you have these new technologies, for example, SaaS, and the cloud.”

Remaining relevant

Any player must go digital to remain successful, a guest concluded, they have to integrate, they have to orchestrate and especially they have to be open, which is not something they have been in the past. “This is the game-changer for the future,” he said, “and they have to do a lot of homework and preparation work, they must start with exploration.”

“Don’t be afraid of introducing new technology,” said another guest. “You can introduce these innovations without harming trust with your clients because they already have so many of these solutions in their daily lives with consumer technology and apps and so forth. Adopt new solutions today.”

Another expert said the adaptability of digital technologies is essential, and adopting the right solutions to move with or ahead of the competition. “The pace of change is much quicker than it was ten years ago,” he observed, “and it's only going to accelerate, but I think it's about staying up to speed. And as they say, adapting to change is the best way to survive. That’s critical.”

Hubbis Post-Event Survey

Immediately after the virtual event, we asked delegates for some brief views on their digitisations plans and the progress so far. We have distilled some of their views below.

Hubbis: What are the digitisation priorities of your bank or your wealth management firm, and why?

• Client account information integration and analysis are currently most needed. As the number of clients within our wealth management platform grows, it is almost impossible to manage client records without automation, and digitisation can also assist client managers to analyse clients’ investment portfolios and provide better investment ideas.
• The website and our app.
• Priorities include streamlining data and analytics.
• Our priority is on the fund trading platform.
• We are focusing on communication processes, as access to systems, analysts and even clients is reduced. Digitisation fosters new modes of communication and help us provide financial advisory at this time. AI and Robo advisory have a long way to go for us.
• The Customer Information System - consolidation of clients’ various bank accounts into a single view, with full compliance and regulatory rectitude.
• The back-office and front-end related matters are top priority for the reasons of cost savings and efficiencies and productivity.
• We primarily rely on custodial platforms to provide the digital systems. Consolidation of custodial platform data would be the main focus.
• We are very active in looking for opportunities for remittances using ripple or other blockchain type software. This will eventually replace the financial plumbing that banks currently own.
• We are interested in digitising the client interface, but we are really too small to make that a reality.
• CRM as this is crucial for effective client management.
• Setting model portfolios which can deliver value to clients, and that is where we see most demand.
• Onboarding and KYC.
• Client management systems, which are essential for daily operations.
• Account consolidation.
• Digital account opening and online trading platform for funds
• Improving interactions with clients to keep them up to date of their AUM and apprised of investment opportunities.

Hubbis: How much positive impact is this digitisation having on your wealth management capabilities?

• We do save time and resource.
• We are improving the customer experience and enhancing distribution and sales.
• Clients feel convenient in trading and avoiding complicated and inefficient procedures.
• WFH is now a real possibility, with the flexibility from which to improve the work/life balance. The ease of communication means more time for wealth advisory. Having robo-advisory may help further.
• We can facilitate client advisory from an overall perspective.
• We are reducing compliance costs, and we can improve efficiency in the fulfilment of regulatory compliance requirements.
• I would say it is an expectation of clients that they can do virtually anything online these days and similarly, they assume that to be case for everything that takes place in our company. I was shocked the other day when told by a (Singapore) private bank that I had to phone up to place buy orders, as there was not yet any online interface.
• The ability to focus on what is important and indeed essential to the needs of clients.
• Big banks have been extremely slow to drive this process believing their history and scale will help see them through this without any need to change. A few cracks are not starting to appear. The big banks all need to get more efficient - and client servicing is costly unless you can develop a way to deliver a lower cost of servicing.
• Very helpful with regard to interacting with clients.
• We can deliver real comparisons for clients regarding their portfolios and relationship to model portfolios.
• We are cutting operational costs.
• Having been an RM both in the UK and Singapore, digitisation has a significant impact on our ability to properly service the client. Spending less time on admin and much more on ensuring proper, complete and accurate advice is of great value.

Do you think in general that the collaboration of banks or wealth management firms with FinTechs is working as efficiently and effectively as it should?

• Not currently, as most of the FinTech firms are new and do not have mature products, but the collaboration will be more and more efficient going forward as the FinTech products become more powerful, and banks and wealth management firms are more used to use them and to work with the FinTechs.
• Not yet. It's somewhat a case of chickens clucking to ducks. Finance and IT still have some way before they get blissfully married.
• Yes, especially in the process of filtering investment products in order to pick the best products for clients to achieve their investment goals.
• Probably not. There was a question yesterday about why should somebody use private banking or wealth management services, particularly in the context of AI and robo-advisory systems and the answer came back ‘because of trust’. I think this overlooked the fundamental issue at this stage, which is that the jury is still out on whether these platforms actually deliver or not, many are not purely algorithm driven. Also, although there are huge amounts of data and information available online, this invariably serves to further confuse as so much of it is conflicting, so people still need a professional who can advise and steer them through the maze. That is the stage when you need to trust the person who is advising you. FinTechs, AI and the like might help the investment manager, I think it might be more applicable to sourcing potential customers.
• Banks are still stalling their investments in this regard. They do watch this situation very carefully, but they are not so committed to going down this road.
• Not sufficiently as so far. However, it is moving in the right direction.
• Not as effectively or fully utilised as it should be, there is still room for improvement.

ESG to shine more light

“The main question you should be asking yourself today,” said one panel member, “is what kind of data is most valuable to wealth managers and asset managers now. The third dimension is ESG, alongside performance and risk. What I mean by that is that ESG is essentially looking for potential market externalities that have not been found in the normal investments yet, where an externality is like a consequence of industrial or commercial activity that affect others but without being reflected in the transaction price.”

A simple example, he added, is that the pandemic has made everybody jump on to bullion gold, but you could also think about mining, the mining companies that might be profiting from a very high gold price. “But with the ESG perspective,” he advised, “we can actually see implications – for example when Rio Tinto earlier this year blasted some rock shelters in the Pilbara region of Western Australia that dated back to aboriginal times 46,000 years ago, and the company suffered a major hit to its valuation. The bigger wealth managers are really focusing on this, and that's where we can bring capabilities to bring in ESG data and combine it with other market data so you can look for those externalities in the third dimension.”

Another expert commented that there are two main streams of developments happening that are shaping the industry, namely robo investing and ETF/Index investing, and on the latter element, he observed that not all ETFs are created equal. “Anyone who is not jumping on these bandwagons will miss out terribly in the next three to four years,” he cautioned.

Expert Opinion - Stef Nielen, director of strategic business development at Asset Control: “The main idea behind gathering ESG data is to analyse and discover whether there are any potential market externalities to be found behind all the investments – where an externality is deemed to be a consequence of an industrial or commercial activity which affects other parties without this being reflected in market prices. “

Holistic perspectives

A panellist said that wealth managers should be open to digitalisation, open to integration with other data partners, allowing them to give their clients a more holistic view of their investments and their assets at any given time. “And my final takeaway is that I would definitely encourage wealth managers to look into investing into technology as an asset and not as a liability.”

“I personally like the comparison between health/sports and wealth,” said another guest. “You follow the same journey; you start as a retail investor (the recreational athlete), and then you potentially move to higher levels. Like recreational athletes only use apps, retail investors only use online solutions. If you move to the top level, you get a full team supporting you, including all the data and analytics that goes with it. Both in sports and in investments, you see that it is an interplay between technology advancement and a professional support team if you want to play at the highest level.”

The final word went to an expert who reiterated that trust is definitely the starting point. “Without trust, you will not be able to win your clients’ money, but you also have to innovate, to add value to your clients, and you do that by understanding the clients, understanding all the data by providing innovative services and making sense for them, and advise them what to do, give them real advice.”