The WEALTHTECH Book E-Book

Susanne Chishti

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 683

Veröffentlichungsjahr: 2018

Beschreibung

Get a handle on disruption, innovation and opportunity in investment technology The digital evolution is enabling the creation of sophisticated software solutions that make money management more accessible, affordable and eponymous. Full automation is attractive to investors at an early stage of wealth accumulation, but hybrid models are of interest to investors who control larger amounts of wealth, particularly those who have enough wealth to be able to efficiently diversify their holdings. Investors can now outperform their benchmarks more easily using the latest tech tools. The WEALTHTECH Book is the only comprehensive guide of its kind to the disruption, innovation and opportunity in technology in the investment management sector. It is an invaluable source of information for entrepreneurs, innovators, investors, insurers, analysts and consultants working in or interested in investing in this space. * Explains how the wealth management sector is being affected by competition from low-cost robo-advisors * Explores technology and start-up company disruption and how to delight customers while managing their assets * Explains how to achieve better returns using the latest fintech innovation * Includes inspirational success stories and new business models * Details overall market dynamics The WealthTech Book is essential reading for investment and fund managers, asset allocators, family offices, hedge, venture capital and private equity funds and entrepreneurs and start-ups.

Leseprobe

“The WealthTech Book gives in depth and valuable insights about the transformation of the wealth management industry. By showcasing several examples of new digital solutions and technology driven changes the book and its renowned authors deep dive into the subject.”

Marc P. Bernegger, Fintech- and Crypto-Entrepreneur and Investor

“Like most other industries, the banking industry has had to deal with digitization, disruptive innovations and regulatory changes during the last years. New players entered the market, which facilitated the simplification of products and processes in this customer centric business field. In this constantly changing environment it’s easy to lose track of the current trends of state-of-the-art, cutting-edge technology.

Asset management has not been exempted from these disruptive ongoing trends. Robo-advisory even though still unclear in which ways it will add-value to customers will undoubtedly garner much attention. The WealthTech Book provides a great insight on the ongoing changes in the financial industry, especially on the topics of Wealth Management, Digital Platforms, Ecosystems, Blockchain and many more.”

Dr Peter Bosek, Chief Retail Officer, Erste Group AG

“FinTech has the potential to significantly alter the financial landscape, enabling financial inclusion and lifting wealth management to a new level. This book provides an in-depth overview of the multiple facets how FinTech will change wealth management – a valuable guide to professionals, regulators, and everyone interested in the future of finance.”

Prof. Dr Markus Brunnermeier, Director Bendheim Center for Finance, Princeton University

“The wealth management industry has reached a turning point fuelled by new technologies and greater access to information for both traditional and new investors. The industry is now challenged with searching far and wide for alpha in an increasingly regulated world – while also managing the complexities that come with better informed and empowered investors. This convergence has led to some of the most innovative investment solutions and services seen in decades. It has also set the stage for the next turning point: the gradual transference of wealth from baby boomers to digital-savvy millennials.”

David Craig, President, Financial and Risk, Thomson Reuters

“Everybody talks about Blockchain and Artificial Intelligence, but very few people know how to implement these solutions in financial services. The WealthTech Book is the ultimate toolkit showing you how the latest technologies can be applied to benefit investors, entrepreneurs, retail and institutional clients worldwide. The directory at the end is invaluable – a little ‘black book’ of the leading FinTech and WealthTech thought-leaders globally. Every investor should have it on his/her bedside table.”

John Davies, CEO, Just Loans Group PLC and Chairman, Kompli-Global Ltd

“Wealth management is at the dawn of a huge revolution: digitization is changing the customer journey value chain and business models of modern wealth management. The crowdsourced book tells you why and how the change will happen.”

Prof. Dr Oliver Gassmann, Director, Institute of Technology Management, University of St. Gallen

“This book is the first of its kind to give a comprehensive overview on the future developments in this evolving field. WealthTech is of highest relevance for SIX which combines expertise at the intersection of financial services and technology by providing securities trading, clearing and settlement, as well as financial information and payment transactions. Our owners which consist of financial institutions rely on us to provide them with innovative solutions in the field of WealthTech as well as FinTech and RegTech.”

Dr Romeo Lacher, Chairman of the Board of Directors, SIX Group

“Investing globally provides huge opportunities. The WealthTech Book shows investors how to use big data and AI to achieve alpha. It provides deep insights on how technology will impact the global asset management and private banking sector. I would like to thank Susanne Chishti for her insightful initiative. The post digital revolution world will be formed by decisions made today. As a robotics and blockchain friendly investor, I know that the first thing before investing is to have an extensive knowledge of the ecosystem. The WealthTech Book could be an invaluable guide to access these new and upcoming investment opportunities.”

Alice Lhabouz, President, Trecento Asset Management

“In the first book, the authors provided a broad view of FinTech to provide readers with an in-depth study of the interplay between finance and technology, as well as the trends across the FinTech spectrum. In this follow-up book, the authors have built on that firm foundation taken a deeper dive into the wealth sector of the FinTech spectrum. In doing so, the authors have once again provided new and returning readers a pragmatic and insightful look into how AI, Blockchain and other key technologies will lower the barrier of investment and make wealth generation much more accessible to a wider pool of consumers globally. Definitely a relevant read for both experienced and novice FinTech practitioners!”

Robin Loh, Chief Digital Officer, Allianz Asia Pacific

“Following vast disruption in the retail and ecommerce space, the wealth/asset management and private banking industry is facing its own ‘Uber moment’. Staying abreast of new trends and technologies – which span well beyond the use of artificial intelligence in ‘robo-advice’ – is going to be a challenge. The WealthTech Book, crowd-sourced from industry experts and thought leaders in digital disruption, is a valuable tool for industry players looking to stay relevant in this fast-changing environment.”

Joy Macknight, Deputy Editor, The Banker

“What if? The single, repetitive question every innovator, every entrepreneur, every policy maker asks themselves. What if there was another way, a better way, a new way? Well, what if this book not only opened your mind, but it also helped expanded and accelerated your potential? I believe it will. Whether you work in the sector, consume from it, supply to it, aspire to be part of it, I encourage you to invest in yourself, digest the book, and join the conversation. Make your mark. Ask yourself what if?”

Simon Paris, Deputy CEO, FINASTRA

“You’ve done it again! On the heels of The FinTech Book, a global best seller across 107 countries, The WealthTech Book is another outstanding compilation of excellent and actionable content. It provides a very useful and detailed summary of important issues impacting the wealth management industry. Whether you are a start-up or an incumbent leveraging new technology to create new and/or better wealth management products, services and delivery, this book is a must read. I recommend it with alacrity.”

R. Todd Ruppert, retired CEO, T. Rowe Price Global Investment Services;venture partner, Greenspring Associates; senior advisor SenaHill Partnersand Motive Partners; serial FinTech investor and advisor

“Following the success of Susanne’s previous curated works in The FinTech Book comes The WealthTech Book. This is an important development as it demonstrates the granularity of how technology is attacking all of the structures of finance from retail banking and payments to commercial, investment and private banking to insurance and wealth management. The WealthTech Book is a timely arrival to show the specifics of how technology is changing the world of big money and high-net-worth people. About time, as the new generation of technology billionaires don’t really want some sharp-suited person calling them all the time. Leave it to the apps!”

Chris Skinner, CEO, The Finanser Ltd

“I am very impressed by the way Susanne Chishti again collects all stakeholders of the industry and motivates them to share their thoughts on the future development of the industry. I like the structure of the book – cover all relevant topics and each exactly to the point. For a traditional banker it offers a fast track to a new world.”

Dr Johann Strobl, CEO Raiffeisen Bank International

“The WealthTech Book is a must read as it provides an excellent overview of the trends, new technologies and reasons why the sector is transforming. Wealth Management will always fulfil a crucial role in consumers as it helps them give peace of mind on their financial future. Technology is creating a win–win for consumers and the sector allowing better net returns for investors and better RoE for those institutions timely adopting technology. Finding the balance between Tech and Human relationship and trust is what the next decade is about! Exciting times and an exciting read!”

Radboud Vlaar, Partner, Finch Capital (OGC)

The WealthTech Book

The FinTech Handbook for Investors, Entrepreneurs and Finance Visionaries

Edited by

Susanne ChishtiThomas Puschmann

This edition first published 2018© 2018 FINTECH Circle Ltd

Registered officeJohn Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom

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Library of Congress Cataloging-in-Publication Data

Names: Chishti, Susanne, editor. | Puschmann, Thomas, editor.Title: The wealthtech book : the fintech handbook for investors, entrepreneurs and finance visionaries / edited by Susanne Chishti, Thomas Puschmann.Description: Hoboken : Wiley, 2018. | Includes index. | Identifiers: LCCN 2017056769 (print) | LCCN 2018006547 (ebook) | ISBN 9781119362180 (pdf) | ISBN 9781119362227 (epub) | ISBN 9781119362159 (paperback)Subjects: LCSH: Investment analysis—Handbooks, manuals, etc. | BISAC: BUSINESS & ECONOMICS / Finance.Classification: LCC HG4529 (ebook) | LCC HG4529 .W427 2018 (print) | DDC 332.63/2042—dc23LC record available at https://lccn.loc.gov/2017056769

A catalogue record for this book is available from the British Library.

ISBN 978-1-119-36215-9 (paperback) ISBN 978-1-119-36218-0 (ePDF)

ISBN 978-1-119-36222-7 (ePub)   ISBN 978-1-119-44451-0 (Obook)

CONTENTS

Preface

About the Editors

Acknowledgements

1: Introduction

The Augmented Investment Management Industry

Clients are Changing

Connecting Market Data and Client Data

The Fourth Epoch – The Marketplace of Wealth Management

Notes

FinTech Disruption Across the Wealth Management Value Chain – Will FinTech Dominate the Wealth Management Model of the Future or is there Still a Place for Traditional Wealth Managers?

Definition of Wealth Management

Wealth Management Value Chain

What’s Driving Disruption in the Wealth Management Industry?

Changing Customer Profile

Where is the Current FinTech Development Focused Across the Wealth Management Value Chain?

Where Will Innovation Disrupt the Wealth Management Value Chain?

How Can Existing Wealth Managers Address the FinTech Challenge?

Wealth Managers Need to Consider Partnering with FinTechs to Keep Up With the Pace of Innovation

Disruption of the Wealth Management Value Chain Has Just Started

Notes

Embracing Emerging Technology

Notes

WealthTech – Business as Unusual

The Attraction for High-Net-Worth Individuals

Collaboration with the Wealth Management Industry

Looming Danger of Becoming Obsolete

Competing Against Mutual Funds

Test of Survival for FinTech Companies

RegTech Becoming Stricter

Conclusion

Notes

Welcoming an Artificial Intelligence Robot as a Colleague

Essential Digitization in Wealth Management

Becoming Millennial-Minded is Key for WealthTech

Embrace New Technology

Realize that you Can’t Rely on your Brand’s Laurels

Notes

“To Infinity and Beyond!” – Building WealthTech Applications has Never Been Easier

“LEGO” – Enabled Bricks for Applications

So How are the “Lego” Bricks Being Put Together?

Once the “Lego” Pieces are Found, and Relationships Linked… What are the Opportunities Moving Forward? Where Can WealthTech Go Next?

Notes

2: Digitizing Client Advisory and Robo-Advisors

Ten Reasons Why Digital Wealth Management Will Become a Worldwide Market Standard

Notes

What Do Wealthy Clients Think About Digital Wealth Management?

Today’s Client Preferences

Tomorrow’s Client Preferences

Technological Affinity

Projections

Conclusions

Notes

Challenges of Digitizing Wealth Management Advisory

The Hybrid Advice Model

The Future is Now for Digital Advice

No “One Size Fits All” – Personalized Client Service and Social Selling in Wealth Management

The Era of Wealth Management /Private Client Disconnect

Starting a New Approach

There is More to Be Done in a Slowly Changing Landscape

Notes

How to Give “Sleep-Tight” Robo-Advice

Notes

How Gamification Can Attract Consumers to Sign Up

Gamification and Financial Management

Conclusion

Notes

The Counter-intuitive Reality of Robo-Advice Demographics

Millennials as a Robo-Advice Target Client Segment

Early Adopters and Baby Boomers: Certainly Not Mutually Exclusive

Online Advice Has a Value Proposition Relevant for Older Generations

The Road Ahead Provides Services Across the Demographic Spectrum

How Emerging Technologies Will Change Emerging Markets – Welcome Robo-Advisor X.0!

Robo-Advisor X.0 – Hugs and Kisses

Robo-Advisor X.0 – Mathematical Programming Problem and Optimal Solution

Robo-Advisor X.0 – Executive Officer

Summary

Notes

Presentation Technology – Enriching the Client Experience in a Physical and Virtual World

Facilitating Client Experience at Scale

Personalized Financial Content

Increasing Demand for Compliant Content

A Solution

The Future

Digital Super Powers – The Role of Artificial Intelligence in Wealth Management

Notes

Using Artificial Intelligence in Wealth Management

What is AI?

How Can AI Be Used in WM?

What About the Risks of Using AI?

Can AI Replace Human Intelligence?

Conclusion

Notes

Digital Asset Management in 2020 – Seven Theses

Robo-Advice Goes “Hybrid”

The Third Generation of Robo-Advice Gets Smarter

Robo-Advice Moves All-Finance

Specialized Robo-Advisors Will Rise

Financial Education is Increasing

Being Compliant Will Make or Break Robo-Advisor

Mass Retail Asset Management Strives for Zero Marginal Costs

Making Digital Advice Personal is as Important as Making Personal Advice Digital

Conclusion

Notes

3: Digitizing Wealth Management Operations

Digital Business Model for Wealth Management Operations as Matchmaker of Generations

Low Cost/High Value?

But What Does This Mean for Wealth Management Operations in General?

Omni-channel as the New Mantra

Beyond Systems and IT – The “Big Picture”!

Alignment of Business Perspectives

Balancing Complexity and Profitability

There is No One-Size-Fits-All Approach

Notes

How a Digital Architecture Can Lead to Tangible Business Results

Legacy Mindset Holding Us Back

And Digitization is Much More Than a Cool App

Achieving Quantifiable Business Results

Managing the Customer Life Cycle

Onboarding is Part of the Game

Digitization Benefits All Types of Customer

Ease for the Customer is Usually Easy for You

Client Service/Maintenance

Compliance and Regulators are Also Part of the Fan Base

IT as a Foundation

Identify the Utility Part of Your Business

“Backboning” Your Financial Proposition

The Personalization Pillar

The State of the Industry

The Four Pillars of Digitization

Harnessing Hyper-Personalization

Truly Personal Service

Notes

Digitizing Wealth Management

At the Blink of an Eye

Wealth Management is Already Digital

Financial Algorithms – Pillar One of Next-Level Digital Wealth Management

Automated Execution – Pillar Two of Next-Level Digital Wealth Management

Digitizing Wealth Management Progresses Rapidly

Notes

Survival of the Fittest – Cyber Resilience

Cyber Security as a Competitive Edge for Wealth Managers

Adopt a Strategy that Offers Cyber Resilience

Increase Customer Experience with Cyber Resilience

Target Your Cyber Security Investments

Put the Customer at the Centre of Your Cyber Resilience Strategy

Wealth Managers Should Learn from the Technology Firms

Notes

4: Digital Platforms, Products and Ecosystems

Wealth Management-as-a-Platform – The New Business Architecture with PSD2

Platforms are Taking Over the World

Why Banking as a Platform has Failed to Emerge

PSD2: Opening Pandora’s Box

Platform Roadmap

Conclusions

Wealth Management – Preparing for a Digital Revolution

Changing Client Behaviours

Emergence of New Technology

Emergence of Digital Platform Economy

How to Digitalize Wealth Management at Banks

Digital Financial Battlefield

Traditional Wealth Management Frameworks Under Attack

Digital Wealth Management Frameworks: New Powerful Strategic Tools

Survival in Wealth Management: Hybrid Transformation Options for Banks

Building Digital Wealth Management Frameworks: Dealing With the Complexity of Financial Markets

Three Steps to a Digital Wealth Management Framework

Keeping the “Time-to-Market” Short is Important

Key Success Factors in Gaining Market Share and Scale in Alternative Lending

Key Ingredients to Achieving Scale: TVFO

The Linking Pins and Enablers: PRVM

Interdependence Within the Ecosystem: Vulnerable to Contagion

Conclusion

Personal Financial Intelligence – AI and the Future of Money Management

Financial Forecasting and Portfolio Optimization in the 21st Century

A Very Brief History of Time and Technology

“Quant Funds”, Machine Learning and Other Trending Technologies

Supervised and Unsupervised Machine Learning

Unsupervised Machine Learning

Putting it All Together, Portfolio Sciences for the 21st Century

Notes

AI-Powered Wealth Management Products and Investment Vehicles

Complexity of the Financial Markets and Big Data

AI and Deep Learning: Adaptable and Self-Learning Capital Markets Modelling and Forecasting

Partially Versus Purely AI-Driven Investing

AI-Powered Investment Vehicles

“AI-Smart”-Beta ETFs

AI-Driven Sector (ETF) Rotation Strategies

Autonomous, Pure AI Hedge Funds and Reinforcement Learning

Plurality of Uncorrelated AI and Alternative Data-Driven Strategies

AI and the Future of Finance

Notes

Wealth Managers Can Deliver Effective Client Outcomes with a Data-Driven Investment Process

Systematization of Investment Decision-Making

Research and Data

Investment Technology and Communications

Risk Reduction

The Business Case for Gender Equality

The Case for Gender Equality

An Investment Imperative

Demand for ESG and Gender-Based Data

Methodology: Measuring the Gender Ecosystem

Setting New Standards for Gender Equality

Financial Performanceandthe Way Forward

Notes

Fiduciary Robo-Selection is Possible in a New Fund Order

Notes

5: Blockchain Applications in Asset and Wealth Management

Cryptocurrencies and Blockchain

What is “Cryptocurrency”?

What is an “Asset-Based Cryptocurrency”?

How is an Asset-Based Cryptocurrency Created?

Network Services

The Network Platform

The Wallet

The Block Explorer

Asset Supporters

Market Opportunities

Community Building

Regulatory Concerns

Token Exchange

Security Mention

Redemption Logistics

Reconciliation of Value

Conclusion

How Blockchain Drives Innovation in Asset Management

Challenges and Opportunities

New Business Model

Ecosystem of Blockchains

Adoption Stage

New Revenue Opportunities

Potential Disruptor

Exciting Times Ahead

Notes

Use Cases and Monetization Challenges of Blockchain Applications in Wealth Management

Digital Disruption in Finance via Blockchain Technology

Trust and Safety – A More Detailed Look at WM-Specific Use Cases

Challenges for Implementation and Monetization

Conclusion and Way Forward

Notes

Blockchain as a Backbone to Asset and Wealth Creation

Blockchain

Applications in Asset and Wealth Management

Blockchain as a Backbone

Blockchain Market Opportunities

Dreaming of a Ledger-Free, Globally Connected Wealth Management Industry

What is Roboblock?

Differentiating Roboblock From Other Distribution Models

Setting Up a Roboblock Network

Conclusion

Trust Arbitrage and the Future of the Wealth Manager – How Blockchain Innovations Can Crack the Code

Founding Fathers Ring the Death Knell for Autocracy with a Pen

The Story of the Firm, as Told by Economists

Blockchain Innovations Can Make the Firm Feel the Pain

Wealth Managers are Especially Vulnerable to – and Benefit from – Trust Arbitrage

Smaller Wealth Managers are Getting a Raw Deal

What If…

Predictions are Difficult, Especially About the Future

Notes

Investment and Issuance Distributed in Blockchain

Current State of Securities Practice with Pain Points

Future State of Securities Practice with Blockchain

Conclusion

6: Founders’ Success Stories

Launching MeDirect Bank as a Challenger Bank

A Good Product and Service at a Competitive Price

Partial (Re-)Bundling

Testing and Pivoting

Growth!

Client Centricity

Empowering Women Financially – The Why and the How

Why is it Important to Empower Women Financially?

Empowering Women Financially: How?

Notes

Why I Left Goldman Sachs for FinTech

Moneymeets.com – Germany’s Leading Personal Finance Management Portal

Digitization Redefines the Rules of the Game

How Two Bankers Became the Founders of a WealthTech

Wealth Management with Moneymeets

Working with Regulators

How to Scale a Successful Team

Finding “Good” Investors

WealthTech Market Germany – A Small Excursion

The 100 Trillion Dollar Market Failure

It’s Time for a Rating Platform

This Leads Us to the Question: What Do Investment Advisors and Fund Selectors Have in Common?

7: Enterprise Innovation

Just Do It! Using the Buzz Around Innovation to Empower Banks and Asset Managers

Always Strive to Generate Buzz When Promoting Your Idea Internally

Execution is the Real Game

Summary

Leveraging Corporate Innovation by Opening Banks to External Ecosystems

Definition of the Term WealthTech

Insight: The First Robo-Advisor by a Major German Bank

Corporate Innovation Accelerator as an Instrument to Enrich the Bank’s Innovation Potential

Paradigms for a Beneficial Cooperation within a Corporate Innovation Accelerator

The Need for Technical Interoperability within the Digital Banking Environment

Intrapreneurship as an Option for Accelerating Corporate Innovation Potential from Within

Conclusion

Wealth Management is Dead, Long Live Wealth Management

WealthTech Start-Up Collaboration Models

Blueprint for WealthTech Start-Up Collaboration

Future of Wealth Management in the Digital Age

Notes

8: Global Overview of WealthTech

Is the Future of WealthTech Already in China?

China, the Largest FinTech Market in the World

BAT Giant Tech Players Continue Growth by Moving to Other Markets Such as Banking

Tech Companies Also Emerge with Specific Value Propositions

Traditional Banks are Developing FinTech Solutions In-House or are Acquiring Them

The Future of Chinese FinTech

Notes

WealthTech in Latin America

What We Expect for the Evolution of FinTech and WealthTech in Latam

Why We Believe There is a Different Evolution of FinTech Activity in the Region

The Opportunity: To Grow Wealth We Need to Grow Financial Literacy First

Challenges in the Japanese Wealth Management Market – Digital Issuance and Distribution of Japanese Real-Estate Securitized Products

Japanese Financial and Real-Estate Securitization Markets

WealthTech Provides Solutions for Japan

Notes

How to Unlock WealthTech in Turkey

Notes

9: What is the Future of WealthTech?

The Networked Client

Notes

The Investment Managers of the Future are Going to be Millennials

Information Overload

Mobile and Mobility

User Experience and Digital Utility

Artificial Intelligence, Analytics and Big Data

Notes

Empowering Asset Owners and the Buy Side

The Sell Side’s Reaction to the New Era

Rest-of-Market Positioning in the New Era

Conclusion

Notes

An Industry Driven by Digital, Data and Artificial Intelligence

The Old Guard

Current Market and Innovation

The Future Will be an Industry That is Digital

The Coming Shifts

The 21st-Century Asset and Wealth Manager

New Opportunities and the Future

Notes

WealthTech – Taking Private Banking and Wealth Management Digital

The Analogue Castle of Wealth Management is Under Siege

Clients Request Tailored Solutions and “Bring Back the Fun”

Understanding the Relevant Technologies for WealthTech

Barbarians at the Gate? – The Forces of Disruption

Act Now: Strategic “Ways to Play” in WealthTech

How to Win in “High-Tech/ High-Touch”?

Final Remarks and Outlook

Notes

The Wealth Management Canvas – A Framework for Designing the WealthTech Firm of the Future

The Wealth Management Canvas

Avoiding Pitfalls Through Validation

Designing the Business Model of RoboRebalance

Concluding Remarks

Notes

The Ingredients of IKEA’s Approach for a Starry Wealth Management – Choose to Change the Competitive Arena in a Mature Sector

Stripping Out the Basic Elements

Do It Yourself and Education

Pricing

Quality, Sustainability and Risks

Credibility and Trust

Conclusions

FinTech and the Wealth Management Challenge

The Promise

Disintermediation – Always Unpredictable

Obstacles Facing WealthTech

Fintech and the Next Financial Crisis

Risk of Information Overload

When Tech Generations Collide

Cognitive Decision-Making with “Insights-as-a-Service”

How Could This Work in Practice?

Why Knowledge Digitization Will be a Norm in Investment Management

More Banking for Less Money

Back to the Future

ETFs Blaze the Trail

Pure Democratization

Undreamed-of Possibilities

How AI Will Cause Robo-Advice to Completely Outperform Human Advice

What AI Is and Why You Should Care

Real Advice – Combining Plans with Execution

New Powerful Tools in the Portfolio Manager’s Arsenal

Autonomous Execution

Explaining the Markets

Talking with Robots

Decreasing Customer Churn with Behavioural Analysis

Summary

Notes

Security in the Future of WealthTech

The General FinTech Challenge

The Technology Security Concern

The Human Capital Security Risk

The Regulation Security Risk

Conclusion

How China is Shaping WealthTech and the Future of Financial Services

The Wealth Management Opportunity in China: From HNWIs to the Mass Affluent

The Chinese Tech Dragons

Established Chinese FinTechs

Why So Successful?

Can the Same Happen in the West?

Is Data the Differentiator?

Conclusion

Notes

From the Technological to the Financial Singularity – A Journey Without Return to the Future of Finance

The Artificial Intelligence Super Explosion

When AIs Rule the Markets: The Financial Singularity

AI in Wealth Management

The Rise of the Financial Events Horizon

Notes

Welcoming the 2058 Class of the “Galactic Academy of Wealth Management”

Notes

List of Contributors

Index

EULA

Guide

Cover

Table of Contents

Preface

List of Tables

Preface

Table 1

Table 2

Table 3

Table 4

Chapter 10

Table 1

Chapter 31

Table 1

Chapter 42

Table 1

List of Illustrations

Chapter 2

Figure 1

Clients’ channel preferences in the next two years

Figure 2

Wealth management value chain

Chapter 10

Figure 1

Distribution of wealth management assets across client segment

Figure 2

Client readiness for disruptive behaviour

Figure 3

Distribution of wealth management assets across client segments

Chapter 11

Figure 1

A portfolio optimizer can propose a target portfolio that is closer to a benchmark portfolio

Chapter 12

Figure 1

The hybrid advice model

Figure 2

Optionality and flexibility of the hybrid model

Figure 3

The hybrid model allows advisors to service customers independent of their demographic and available assets

Chapter 13

Figure 1

Social selling

Chapter 22

Figure 1

The New Wealth Builders (2015)

Figure 2

US VC investment in FinTech

Figure 3

Professional advice received

Figure 4

Automated device limitations

Chapter 23

Figure 1

Business model framework

Chapter 30

Figure 1

Emerging best practice business model for wealth management at banks

Figure 2

Illustration of a digital wealth management framework

Chapter 31

Figure 1

Gaining market share in alternative lending

Figure 2

Interdependence in the ecosystem

Chapter 35

Figure 1

Projected long-term risk-adjusted returns

Figure 2

Emerging markets equity

Figure 3

Predictive signal screener

Chapter 36

Figure 1

Insights – how BFGEI members address gender equality around the globe

Chapter 38

Figure 1

Three pillars of digital money viability

Chapter 39

Figure 1

Blockchain fund subscription model Source: Dean Demellweek, Spring 2017

Chapter 41

Figure 1

Capital market and processes

Figure 2

Market challenges

Chapter 42

Figure 1

API data transfers in roboblock network

Figure 2

A roboblock setup sample 1

Figure 3

A roboblock setup sample 2

Figure 4

A roboblock setup sample 3

Chapter 44

Figure 1

The conventional issuing procedure

Figure 2

Sovereignty/jurisdiction separation

Chapter 54

Figure 1

Evolution of FinTech solutions in incumbents in the USA and Europe

Figure 2

Evolution of FinTech solutions in Mexico, Brazil, Chile and Latam

Chapter 61

Figure 1

Four strategic choices in WealthTech

Chapter 62

Figure 1

The Wealth Management Canvas

Chapter 67

Figure 1

Machine learning applied to customers’ churn reduction in a robo-advisory system

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Preface

With the development of digital wealth management (“WealthTech”), including robo-advisory platforms and virtual advice, the global investment management industry is facing huge disruption. In addition to successful digital wealth management solutions, customer preferences are changing and the millennial generation often prefers a “do it yourself” approach via apps instead of meeting a financial advisor in person. Considering that trillions of pounds will be inherited by this tech-inspired generation from their wealthy baby boomer parents, and the general trend that consumers are used to a great digital experience, most asset managers and private banks will need to closely review their product, distribution and marketing strategies over the next decade to stay in business.

In addition, the pressure to lower fees and achieve higher returns has allowed WealthTech solutions to shine, helping to generate higher alpha, reduce risk and significantly lower the costs of money management, financial planning and advice, while at the same time delighting their customers with a superior user experience.

Some emerging business models – such as robo-advisors – were initially focused on servicing customer segments which could not be serviced profitably by traditional players, before moving upstream and competing with incumbents. Other propositions are focused on empowering existing financial advisors and private bankers with the latest digital innovation and technologies, or supporting portfolio managers to fight information overload through solutions leveraging the latest artificial intelligence and big data analytics intelligence.

Overall, the WealthTech sector is booming globally, with FinTech entrepreneurs and investors across the world working on the most cutting-edge solutions. In order to share with our readers the best content globally, we have followed the same approach as with The FinTech Book – the first globally crowdsourced book on the financial technology revolution, which was published by Wiley in 2016 and has become a global bestseller.

The FinTech Book exceeded all our expectations: the book is available in five languages across 107 countries, as a paperback, e-book and audiobook. More than 160 authors from 27 countries submitted 189 abstracts to be part of the book. About 50% of all contributors were chosen to write for the final book. When we launched The FinTech Book across the world during 2016, our authors and readers had many opportunities to meet us in person, get their books signed at global book launch events and deepen their FinTech friendships worldwide.

In 2017 we decided to extend our FinTech book series by writing three new books on how new business models and technology innovation will change the global asset management and private banking sector (“WealthTech”), the insurance sector (“InsurTech”) and regulatory compliance (“RegTech”). We followed our approach of crowdsourcing the best experts, to give the most cutting-edge insight into the changes unfolding in our industry.

The WealthTech Book is the first global book on this subject – a book that provides food for thought to FinTech newbies, pioneers and well-seasoned experts alike. The reason that we decided to reach out to the global FinTech community in sourcing the book's contributors lies in the inherently fragmented nature of the field of financial technology applied to investment management, financial advisors and private banks globally. There was no single author, group of authors or indeed region in the world that could cover all the facets and nuances of WealthTech in an exhaustive manner. What is more, with a truly global contributor base, we not only stayed true to the spirit of FinTech and WealthTech, making use of technological channels of communication in reaching out to, selecting and reviewing our would-be contributors, but also made sure that every corner of the globe had the chance to have its say. Thus, we aimed to fulfil one of the most important purposes of The WealthTech Book, namely – to give a voice to those who would remain unheard, those who did not belong to a true FinTech community in their local areas, and spread that voice to an international audience. We have immensely enjoyed the journey of editing The WealthTech Book and sincerely hope that you will enjoy the journey of reading it at least as much.

More than 240 authors from 25 countries submitted 236 abstracts to be part of the book. We asked our global FinTech community for their views regarding which abstracts they would like to have fully expanded. Out of all the contributions, we selected the best and asked our selected authors to write the 71 chapters in this book. We conducted a questionnaire among all our selected authors to further understand their background and expertise. 80% of our authors have postgraduate university degrees and strong domain expertise across many fields; 74% of our final authors had had their articles published before. See Tables 1 and 2.

Table 1: What is the highest educational qualification of our authors?

Table 2: List of all areas our authors have domain expertise in (multiple choices possible)

Tables 3 and 4 show that more than 35% of our authors are entrepreneurs working for FinTech start-ups (many of them part of the founding team), 40% come from established financial and technology companies and another quarter from service providers such as consulting firms or law firms servicing the FinTech sector.

Table 3: The types of company our authors are working in

Table 4: The size of companies our authors work for

More than 25% of our authors work for start-ups with up to 5 people and another 28% for start-ups/SMEs (small and medium-sized enterprises) with up to 50 people. More than a quarter of our authors are employed by a large organization, with more than 1000 employees.

In summary, we are very proud of our highly qualified authors, their strong expertise and passion for FinTech, either being entrepreneurs or often “intrapreneurs” in large established organizations committed to playing a significant role in the global FinTech and WealthTech revolution. These remarkable people are willing to share their insights with all of us over the following pages.

This project would not have been possible without the dedication and efforts of all contributors to The WealthTech Book (both those who submitted their initial abstracts for consideration by the global FinTech community, and the final authors whose insights you will be reading shortly). In addition, we would like to thank our editors at Wiley, whose guidance and help made sure that what started off as an idea, became the book you are now holding in your hands.

Finally, I would like to thank my fantastic co-editor Thomas Puschmann, Head of the Swiss FinTech Innovation Lab. Editing a crowdsourced book naturally takes several months, and Thomas was always a pleasure to work with, given his strong domain expertise and vision for the future of WealthTech!

Susanne ChishtiCo-Founder, The FINTECH Book Series

CEO & Founder FINTECH Circle & the FINTECH Circle Institutewww.FINTECHCircle.com

About the Editors

Susanne Chishti

(Twitter: www.twitter.com/SusanneChishti)

Susanne Chishti is the CEO of FINTECH Circle, Europe’s first Angel Network focused on FinTech opportunities and the founder of the FINTECH Circle Institute, the first global peer-to-peer FinTech learning platform to acquire FinTech and digital skills. She is co-editor of the bestselling title The FinTech Book, which has been translated into five languages and is sold across 107 countries. Susanne is recognized in the European Digital Financial Services “Power 50” 2015, an independent ranking of the most influential people in digital financial services in Europe. She has been selected as top 15 FINTECH UK Twitter influencer and as the UK’s “City Innovator – Inspirational Woman” 2016. Susanne is a FinTech TV commentator on CNBC and a guest lecturer on financial technology at the University of Cambridge.

After completing her MBA, she started her career working for a FinTech company (before the term “FinTech” was invented) in Silicon Valley, 20 years ago. She then worked for more than 15 years across Deutsche Bank, Lloyds Banking Group, Morgan Stanley and Accenture in London and Hong Kong. Susanne is an award-winning entrepreneur and investor, with strong FinTech expertise. She is a mentor, judge and coach at FinTech events and competitions such as SWIFT Innotribe and FinTech & InsurTech Startup Bootcamp. She is also a conference speaker at leading FinTech events globally.

FINTECH Circle is a global community of more than 100,000 FinTech entrepreneurs, investors and financial services professionals globally. FINTECH Circle’s advisory practice services clients including leading financial institutions such as BNP Paribas and the UK’s innovation agency NESTA, which appointed FINTECH Circle as partner for the £5 million Challenge Prize to work on Open Banking initiatives for SME banking in 2017.

Susanne is also a non-executive director of the Just Loans Group plc, Kompli-Global and Lenderwize Ltd.

About FINTECH Circle

FINTECH Circle (www.FINTECHCircle.com) is a global community of 100,000 FinTech entrepreneurs, angel and VC investors, financial services professionals and FinTech thought leaders, focusing on FinTech seed investing, education and enterprise innovation. FINTECH Circle’s CEO, Susanne Chishti, co-edited The FinTech Book published by Wiley, which became the first globally crowdsourced book on financial technology and a global bestseller across 107 countries in five languages.

Twitter: @FINTECHCircle

Instagram: @FINTECHCircle

About the FINTECH Circle Institute

The FINTECH Circle Institute (www.FINTECHCircleInstitute.com) is a peer-to-peer online learning platform, designed to empower finance professionals with the necessary digital skills to adapt to the rapidly changing industry. With board members ranging from traditional banks and FinTech experts through to academics from leading universities, the platform offers practical bitesize courses on topics including WealthTech/robo-banking, InsurTech, RegTech, blockchain, artificial intelligence, enterprise innovation and start-ups. Every quarter, new bitesize classes are released online to ensure that members have access to the latest FinTech insights and industry experts working on the most cutting-edge FinTech innovations globally.

Twitter: @FTC_Institute

Join our LinkedIn Group to share your FinTech knowledge and learn from others:

www.linkedin.com/groups/8184397

Thomas Puschmann

(Twitter: www.twitter.com/PuschmannThomas)

Thomas Puschmann has spent more than a decade at the nexus of technology and business. Currently, he is founder and director of the Swiss FinTech Innovation Lab at the University of Zurich and a member of the Swiss Innovation Council Innosuisse. In addition, Thomas is a senior advisor for many public and professional initiatives and projects. He is a founder of Swiss FinTech Innovations, an independent association of major Swiss financial institutions, a founder of the consulting firm FinTech Innovations and an advisory board member of the Center on Global Internet Finance. Lastly, he is a judge and mentor for several start-up competitions in Europe and Asia and a conference speaker.

Thomas holds a PhD in business administration with a specific focus on information systems from the University of St. Gallen and a master in management and information sciences. Before his current position he was heading a large international financial services research project from the Universities of St. Gallen and Leipzig where he was working on his postdoctoral lecture qualification. In addition, Thomas was a visiting scholar at the MIT Sloan School of Management and a member of the board at ESPRiT Consulting and The Information Management Group where he was responsible for business technology.

About the Swiss FinTech Innovation Lab

The Swiss FinTech Innovation Lab is a cross-disciplinary platform for education, research and entrepreneurship that involves researchers and practitioners from banking and finance, business informatics, innovation management, social sciences, economics, law and many other disciplines. The lab researches and teaches on the topic of the digitization in the financial services industry together with participants from the whole value chain, including banks, insurers, start-ups, service providers, regulators, and various other organizations and associations from the financial services ecosystem. It aims to create knowledge in this emerging field to improve and foster intra- and entrepreneurship. Hosted at the University of Zurich, the Swiss FinTech Innovation Lab cooperates with a broad international network of researchers and universities.

Web: www.swissfintechinnovationlab.ch

Twitter: www.twitter.com/PuschmannThomas

LinkedIn: www.linkedin.com/in/thomaspuschmann

Acknowledgements

After the global launch of The FinTech Book in 2016, we met thousands of FinTech entrepreneurs, investors and financial services professionals who all loved the book and wanted to learn more about how financial technology will change the global investment/wealth management sector and private banking.

We came up with the idea for The WealthTech Book, spoke to our FinTech friends globally and everybody supported the idea. FinTech entrepreneurs across all continents were eager to share their powerful insights. They wanted to explain the new business models and technologies they were working on to change the world of finance. FinTech investors, “intrapreneurs”, innovation leaders at leading financial institutions and thought leaders were keen to describe their embrace of the FinTech revolution across investment management and private banking. Finally, our WealthTech visionaries wanted to share their vision for the future.

The global effort of crowdsourcing such insights was born with The FinTech Book, which became a global bestseller across 107 countries in five languages. We built on this success with The WealthTech Book. We are aware that this would not have been possible without the FINTECH Circle global community, the Swiss FinTech Innovation Lab community and our own personal networks. We are very grateful to the almost 100,000 members of FINTECH Circle for joining us daily across our websites (www.FINTECHCircle.com, www.swissfintechinnovationlab.ch), our Twitter accounts and our LinkedIn groups. Without public support and the engagement of our global FinTech community, this book would not have been possible.

The authors you will read about have been chosen by our global FinTech community purely on merit – no matter how big or small their organization, no matter which country they work in, no matter if they are well known or still undiscovered, everybody had the same chance to apply and be part of The WealthTech Book. We are proud of that, as we believe that FinTech and WealthTech will fundamentally change the world of finance and asset management. The global FinTech and WealthTech community is made up of the smartest, most innovative and nicest people we know. Thank you for being part of our journey. It is difficult to name you all here, but you are all listed in the directory at the end of this book.

Our publisher, Wiley, has been a great partner for The FinTech Book and we are delighted that Wiley will again publish The WealthTech Book in paperback and e-book formats globally. Special thanks go to our fantastic editor, Gemma Valler. Thank you to you and your team – we could not have done it without your amazing support!

We look forward to hearing from you. Please visit our website www.WealthTECHBook.com for additional bonus content from our global WealthTech community! Please send us your comments on The WealthTech Book and let us know how you wish to be engaged by dropping us a line at [email protected] or [email protected].

Susanne Chishti Thomas Puschmann

Twitter: @SusanneChishtiTwitter: @PuschmannThomas

1Introduction

Executive Summary

WealthTech can be narrowly defined as the technology/software used to help investors make better decisions when it comes to where they should put their money. In this book we define WealthTech much more widely as the impact that technology has on the global investment and wealth management industry, including private banking and asset management. WealthTech includes known business-to-consumer (B2C) models such as crowd-funding, alternative lending and robo-advisory.1 However, it also includes business-to-business (B2B) enterprise innovation and technologies in the areas of blockchain, artificial intelligence and big data analytics, which empower asset managers to achieve better returns at lower costs for the benefit of their customers. This part will provide you with an introduction into the future of this sector, which controls global assets of more than US$70 trillion.2

As much of the financial industry from the retail sector has started to transform, the asset management sector is now experiencing the changing tides of technology too. But this type of disruption is different from what we have seen in the past, as it is now more about FinTech partnerships and how to counter threats from new business models and tech giants. Alibaba’s four-year-old Yu’e Bao, for example, now has more than US$200 billion of assets under management and thus is the world’s biggest money market fund, overtaking JPMorgan’s U.S. government money market fund, which has US$150 billion of assets under management. Another example is WeChat, which already offers wealth management services to its clients over its platform.

WealthTech is not just for millennials, even the older generations of high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) are taking a keen interest in it. Too often, wealth management firms try to appeal to millennials using the same marketing strategies that worked on baby boomers, by relying on their brand name and email communication. This “one-size-fits-all” approach does not work. Otherwise, firms risk losing the US$30 trillion in generational wealth transfer set to occur over the next several decades. Profitability is a major concern, and 2017 has tested FinTech companies – especially in the robo-advisory space – that are relying solely on lower costs to compete. Robo-advisors will challenge existing financial advisors and private banks long-term, but to be effective, the robos have to offer both “digital services” and strong credibility. However, WealthTech does not just include robo-advisors. To help you visualize the future, this part also includes a fictional email from a CEO to his company employees highlighting how artificial intelligence (AI) will be integrated into the company. The CEO’s message reflects new organizational priorities in the company around AI, technological choices and job creation.

Summarized, in this part you will get an introduction to WealthTech, both why consumers are driving digitization in wealth management and how established businesses can respond to it with innovative solutions. Following this introduction, the second chapter focuses on digitizing client advisory and robo-advisors, the third chapter on digitizing wealth management operations, the fourth chapter on digital platforms, products and ecosystems, and the fifth chapter on blockchain applications in asset and wealth management. While these four chapters each have a focus on digitizing specific areas of wealth management, the sixth to ninth chapters refer to more general areas like founders’ success stories, enterprise innovation, global WealthTech markets and the future of WealthTech.

Notes

1

Source: Puschmann, T. (2017). “Fintech”,

Business & Information Systems Engineering

, 59(1), 69–76.

2

Source: BCG, “Global Asset Management 2017”,

http://www.agefi.fr/sites/agefi.fr/files/fichiers/2016/07/bcg-doubling-down-on-data-july-2016_tcm80-2113701.pdf.

The Augmented Investment Management Industry

By Patrick Donaldson

Head of Market Development, Wealth Management Asia, Thomson Reuters

Since we are currently experiencing the fourth industrial revolution, we should not be surprised that wealth management is entering a fourth epoch as well. What is particularly exciting about this era is that it offers an opportunity to fundamentally rethink the business of wealth management, rather than simply providing a more efficient replication of what went before.

A brief reminder – the World Economic Forum has defined the four industrial revolutions as: the rise of mechanical power; the advent of electricity and communications; the digital age and the development of modern computing; and finally a new era that builds and extends the impact of digitization in new and unanticipated ways.

The four stages of wealth management are slightly out of step with these. Technological advances have been a constant in the financial services industry, as investors have sought to find the most efficient and effective means of putting capital to work, but we can also discern significant step-changes in the way wealth management was conducted.

The first three epochs of wealth management were, broadly speaking: the hand delivery of documentation; the mechanization of those hand-to-hand processes; and the development of computing solutions.

That first involved the old coffee-house method of investment, where company documents were handwritten and exchanged among patrons. This developed into the old stock exchange trading floor, complete with jobbers and runners to distribute the news. Paul Julius Reuter opened his first office just behind the Royal Exchange in London (it still stands today). The boys he employed to carry news back and forth between the trading floor and his offices were perhaps the first low-latency trading solution.

The second stage was the laying of telegraphic cables across the world, and the use of ticker-tape machines to send information across huge distances. Again, pioneers such as Reuter effectively shrunk the world, providing a new richness and depth of information for investors.

The third era came in the 1960s, when computer networks began replacing the ticker-tape machines and systems such as ILX and Quottron were developed, providing processing power at speed and gathering information from price sources around the world. In the 1990s the internet and the rise of the home computer was followed by the development of online retail brokerage systems, but perhaps more significantly democratized access to data about companies and other investment opportunities. A lot of the information previously prized by wealth managers as sources of insight was now available to the investing public at the click of a mouse.

As wealth management progressed through its various eras, the value proposition also changed. At first, just having a stock price or news was valuable in and of itself. Then, the value came from having information faster. Once data (such as stock prices) became more of a commodity, value was created by analysing the data or combining it with other information such as news or earnings, quickly acting on the analysis.

We are now entering a new era, a fourth epoch, driven by technological advances such as cognitive computing. Whereas the previous eras developed efficiencies in an established process, the technologies available or in development today enable us fundamentally to rethink the process. Rather than simply replicating the established methods of managing wealth, they offer an opportunity to augment these in new ways.

We are at a point where advances in computing power and lower computing costs enable us to apply artificial intelligence, machine learning, natural language processing, neural networks and a host of other tools to everyday tasks. The opportunities for wealth management are genuinely epoch-making.

Clients are Changing

The practice of wealth management basically involves finding ways to protect and build wealth in order to pass it down the generations. As this wealth grows, and as clients’ family trees grow new branches, the number of clients expands exponentially.

The average US investor is in his/her early 60s and that is likely to rise to over 70 within the next few years. More than half of assets managed (53%) are already held by clients who are over the age of 65, “leaving us poised on the precipice of the greatest wealth transfer in history”, as The Fountain of Growth puts it.1

Meanwhile, the average advisor is in his or her early 50s, with a quarter of advisors already at the typical retirement age. These advisors control 25% of assets. This is therefore a second aspect to generational wealth transfer. Both represent risks to wealth management firms.

First, assets will flow from parents to their children. In this case, wealth management firms need to position themselves to keep these assets in-house. The challenge is in addressing the “my father’s advisor” syndrome, in which a son or daughter feels that their parents’ advisor is out of touch with their views on investing, risk tolerance, how they choose to invest and how they prefer to communicate.

Second, for advisors the risk is that, without proper succession planning, customers may switch wealth management firms – or wealth models altogether – when their advisor retires.

Unless there is a material market correction, the US wealth market will continue to grow across numerous metrics (assets, accounts and investors) through 2020 and beyond.2,3 At the same time, there is evidence that the number of advisors will decrease.4 Hence the need for wealth management firms to leverage technology to achieve the necessary scale.

The good news is that the expectations of the coming generations are very different. Younger clients are not looking for as much one-on-one attention. According to one study, millennials and generation-Xers (gen-Xers) are less likely to want to discuss investing strategies with a professional (49% and 48%, respectively) compared with baby boomers and mature clients (61% and 67%, respectively).5

To focus on that millennial opportunity for a moment, we can predict with some confidence that their personal wealth will grow. By 2020 the net worth of global millennials is predicted to more than double compared with 2015, with estimates ranging from $19 trillion to $24 trillion. The same study (by Deloitte) noted that millennials (those currently aged between 18 and 34) are about to enter their prime earning years.

It may also be worth noting that the majority (54%) of this generation in developed countries are self-employed or are planning to start their own business. This means that the option of employer-assisted wealth-building strategies will not be open to them. When it comes to planning their financial futures, they are on their own (less than 30% of millennials’ wealth is invested in stocks).

Younger clients’ expectations tend to be very different: they are neither looking for nor expecting as much one-on-one attention and they view technology as an important aspect in wealth management. Some 57% would change their bank relationship for a better technology platform solution, for instance. That is not surprising, given that in 2015 more than 80% of millennials owned a smartphone, and of those 89% would check their mobile devices within the first 15 minutes of waking.6

The expectation is therefore that millennials will prefer to be self-directed investors, who can call on expert advice if needed. They will be significantly more comfortable with robo-trading than older generations. Millennials and gen-Xers are more likely to prefer a computer algorithm over a financial advisor (40% in each case) than baby boomers and mature clients (30% and 24%, respectively).7

Part of this may be driven by the fact that 44% of millennials and 47% of gen-Xers would rather not pay for personal services, while mature clients and baby boomers are still content to do so (56% and 55%, respectively).8

There is one constant among the generations, however: as life becomes more complex, all investors, millennials and gen-Xers included, become more interested in speaking with an advisor. This applies most around tax questions and estate planning (71%), followed by the approach of retirement age (64%), life events such as births, deaths and marriages (60%) and when a person has new money to invest (58%).9

Connecting Market Data and Client Data

The amount of information, data and news that is generated and delivered daily is massive – and increasing.