Will asset managers spend less time speaking with their customers in future and more time on the markets?
Torsten Reischmann: In our view, personal contact will continue to be important in future for wealthy private clients. But at the same time, there are a large number of private investors today who, because of the low volume of their wealth, are unattractive to asset managers given the amount of manual input currently required. More time for the markets is also important because that, after all, is the management performance for which asset managers are ultimately paid. We are convinced that many processes that today take up expensive and therefore scarce time resources can be increasingly supported, and to some extent also handled completely, by the appropriate software. Our solutions relieve people of humdrum chores and free them up to focus on core competencies and on entering new markets.
So what jobs will machines be doing in future?
TR: Pre- and post-trade checks, whether set by individual customers or required by regulation, such as loss threshold monitoring, are already being performed automatically at many asset management businesses with the aid of our solutions. On implementation of MiFID II, suitability tests will also play a much more important role in this area. And monitoring is only the first step. The aim is increasingly to find direct, fast software-aided solutions, and we are further optimising our systems to this end.
What processes between asset manager and client can be handled in future by machine?
TR: Client onboarding, for example. That is a multi-tiered process that involves the collection and review of a large volume of data. Today, various systems and a great deal of paper are still in use, requiring a high level of personnel intensity but with no added value for the end-customer. Production of the customer reports is also automated in many cases today. But review and dispatch are still done by hand. In future, reports can be sent via online postbox and new evaluations made available on a portal where, for example, WpHG reporting forms could also be updated online.
So does that mean that the entire advising process will then be done by machine?
TR: It should be clear that many clients want and need personal advice, and this will also frequently continue to be the case in future. But the customer advisor needs time for that, which today often has to be spent on ensuring conformity with compliance rules and regulatory requirements. The customer advisor can generate genuine added value, for example through the explanations in connection with profiling or a keener financial planning view of all relevant cash flows. Software solutions can also help in those cases with workflow support and analytics. They also enable substantial time savings in connection with administrative tasks. But also and above all, they open up new business opportunities.
In what way?
TR: Think of the robo advisors, for example. Why shouldn’t something like that also be used by clients who are already more or less self-deciders today, either because they don’t want to delegate or because they have too little in the way of wealth and assets to be attractive to asset managers and banks? That would address a new, very large group of clients who have hitherto been ignored.
We previously thought robo advisors were primarily intended for people without a lot of money?
TR: This is the place where most start-ups are currently to be found. Another reason as we see it is that solutions for this are relatively easy to develop, both from the software point of view and in terms of investment. Things become significantly more complex and costly when the product being offered becomes more complex. We and our customers know that from our years of experience. But if you develop a complex investment strategy for your portfolio and analyse a larger product spectrum with the aim of concrete implementation, this is of interest to far more clients, including those who have hitherto developed and pursued their own strategies. For those with less in the way of assets, a standardised online asset management facility can be easily provided. And self-deciders can benefit from the expertise and the innovatively managed processes. That opens up completely new growth opportunities for asset managers.
What does that mean for minimum investment amounts in future?
TR: They will continue to fall further. Through the digitalisation of internal processes, in particular rebalancing and order management, we have already helped clients to lower the entry barrier to genuine multi-asset class wealth management to as little as €100,000. We also have customers who serve many thousands of clients with funds and ETF asset management for sums starting from €5,000. These are amounts that fintech start-ups also address. What many of our traditional customers are short of to enable the lower end-client segment to be developed on a broad scale is a digital communication channel to the end-customers for onboarding, profiling and account viewing.
Many customers are worried by the fact that their customer data will in future be stored in a cloud, i.e. not in a concrete place. Is there no way of avoiding increased use of cloud technology?
TR: Anyone who wants to can still continue to work with fax and Excel in future- and will consider them to be perfectly adequate. We believe, however, that customer data will in some cases be more secure in a cloud than on a poorly protected computer. And in order for people to be able to work as asset managers from wherever they happen to be, or as the end-customer to be able to view evaluations and reports or modify investment profiles, there will for many people be no getting past cloud technology solutions, at least to some extent and in the medium term, for cost and security reasons.
Given the fact that it is hardly possible to open accounts or place asset management orders online today, that most portfolio management systems do not have any integrated email traffic facility and that interfaces are far from functioning in as error-free a manner as they should, isn’t that a distant utopia?
TR: Start-ups have developed initial rudimentary solutions for standardised products in the affluent segment. And a few international major banks are already demonstrating today what is possible with gigantically huge budgets. We, as service providers, will support the whole of the market in the digitalisation of asset management with highly customisable and affordable integrated solutions, in the same way as we have already done so in response to challenges in the past through our tried-and-tested vwd portfolio manager and wvd advisory solution products. To this end we are contributing various core competencies and our pan-European market experience and observation with the aim of being able to identify regulatory and regional trends and develop innovative product solutions for those trends at a very early stage.
What will be there first, the new technology or the new asset managers who understand how to use it all and are willing to use it?
TR: We already offer very far-reaching solutions for internal process digitalisation today, and these are already being used by some, though by no means all, of our customers. We have created the basic platform for the end-customer digital channel, and already offer our B2B customers an initial Robo Advice software system for the end-customer target group of hybrid self-deciders. Solutions for digital asset management and comprehensive digital private banking are currently undergoing development and will be launched in 2017. The advantage of our modular standard solutions is that no one is forced to use everything; instead, they can choose the elements that match their current operating model. If this changes, there is no need to replace the entire software solution, but merely to adapt it. As a result, we are able to support the process of transformation towards digital asset management in the best possible way.