22 October 2016
Fintech, which includes robo-advisers, bots and blockchain technology, can be applied to portfolio and asset management solutions. Photo: Internet
Fintech, which includes robo-advisers, bots and blockchain technology, can be applied to portfolio and asset management solutions. Photo: Internet

How fintech is shaking up private banking

Financial technology, which aims to make financial services more efficient, can be applied to four main areas in the private banking industry, helping bankers and clients save time.

These are advice and distribution, account administration, asset management and asset servicing.

Jeroen Buwalda, Asia Pacific wealth and asset management leader at Ernest & Young, said fintech allows financial professionals such as relationship managers, portfolio managers and investment directors to focus on valued-added services.

Advice and distribution

In recent years, some fintech companies have used robo-adviser software to automate portfolio management according to their clients’ risk profiles.

At the moment, most robo-advisers are limited to portfolio management and are not used in retirement planning or cash-flow management.

For example, FutureAdvisor, a San Francisco-based digital investment manager founded in 2010 by two former Microsoft engineers, helps clients achieve a balanced portfolio.

The company was acquired by BlackRock in August last year.

“Robo-advisory is dominant in the US. Assets managed by this technology tripled to US$60 billionin last year,” Buwalda said.

He said traditional financial advisers will not be replaced by robo-advisers but the former will play a different role in future.

“People still appreciate human interaction. The more digital the market, the more human interaction it needs. We believe there will be a bigger role for humans.

“Teachers don’t really teach any more. They guide students to learn online. They are changing their role to help people search for information, rather than knowing all the information. It’s a very different role,” he said.

Account administration

According to research group McKinsey, as much as 45 percent of the work of individuals can be automated by adopting different technologies.

The trend toward automation will affect not only low-skill, low-wage workers but also the highest-paid players such as financial managers.

Buwalda said robotics is a new trend in account administration.

“The upside is that it works 24/7. Robots don’t ask for a salary increase and they hardly make mistakes,” he said.

Private banks typically cut administration expenses by 9 percent for onshore accounts and up to 30 percent for offshore accounts by using automated solutions, he said.

Asset management

Bots, usually powered by artificial intelligence, are widely applied in asset management. 

In the past, asset managers relied on news, interviews, product launch information and site visits to study the market and guide their investment decisions.

Now they apply data analysis, artificial intelligence and bots to filter useful information.

In the US, an app can find out which company is getting a lot of positive mentions on social media such as Twitter, Facebook and LinkedIn.

The information can be an important investment insight for asset managers, Buwalda said.

Large fintech players with access to a lot of transaction information will have superior insight to most fund managers, he said.

With bots, asset managers can have time to focus on the things that are less common such as alternative investments, he said.

Asset servicing

Blockchain, a technology well known for underpinning digital currency bitcoin, can provide investors with faster transactions at lower costs.

Last year, 22 global financial institutions announced a plan to jointly develop blockchain technology.

NASDAQ’s blockchain platform has been handling share transfers since December.

“This is not mainstream but it can be piloted in a small production environment,” Buwalda said.

“This won’t start a revolution but an evolution.”

He said it takes three days to complete a trade across five to seven layers between buyers and sellers.

Blockchain technology removes much of this intermediation and shortens trading time.

[Chinese version中文版]

Private banking sector set to evolve with fintech (May 18, 2016)

– Contact us at [email protected]


Chief reporter at EJ Insight

EJI Weekly Newsletter