Tag Archives: fintech

The future is now: artificial intelligence and wealth management

Think about this situation. Imagine that you are client of any wealth manager and the staff sends you a report about the best chances for your investments, with recommendations and comments to obtain the best performance. Then, you talk to a friend, who is also client of the same wealth manager and you both comment about the report. You discover that both reports are personalised and are not the traditional recommendations’ standardised reports that these entities publish regularly. Each one have personalised information and you both discover that the entity has used your full data to design the best report to meet your needs. Then, you explain your friend several changes in your investments. Both have the same risk profile, but your portfolios (and the historic operations) have nothing to do to another.

The example could be larger, but it is enough to introduce the changes that we will live soon in the wealth management branch. The expression behind these changes is artificial intelligence. Shortened as AI, it is not a Steven Spielberg film. It is far from fiction, because it is reality. The learning capability of machines increased exponentially in the last years and the soar will keep on. There is a combination of big data analysis, natural language and machine learning. Big data analysis provides the capability of learning better not only about the customer, but also about any trend that goes around him. Natural language allows machines to interpret and generate spoken and written language. Machine learning uses algorithms that can learn and make predictions on data.

This will be the mix that we will see growing in the next years. The transformation will be deep in the whole financial sector. Currently, a 26% of assets and wealth manager firms already use AI to inform the next big decisions, according to PricewaterhouseCoopers. Money is flowing increasingly there, because all agree that this will be the next step for fintech business.

For instance, natural language processes will help comply better with regulations, as machines will learn immediately the changes and adaptations will be easier in platforms. This will also has a very relevant collateral effect managing risks more efficiently. The client will obtain a high-improved user experience with new interfaces. The advisor tasks will focus in asset gathering and portfolio monitoring. They will also become more responsive to client needs and increase the added value of their services.

Robo-advisor in the first deep step in this change. There will be further changes with a greater automation. Robo-advisors and human advisors will experience several transformations in their tasks and roles against clients. They, the clients, will be winners and the only losers will be entities (not only human, also fintech) that will not adapt to the new wave.

MiFID II and my roboadvisor

Next year in January, the European regulation MiFID II becomes effective. MiFID are the initials of Markets in Financial Instruments Directive. There was already a first version, but the evolution of the market and the interest of the European institutions to protect individual investors promoted this second chapter.

What does it mean? Actually, the regulation improves transparency in the markets and prices, promotes lower costs and strengthens investment protection. For instance, what investors’ protection refers, it makes heavy emphasis in communication, disclosure and transparency. The supervision is also reinforced and put the focus in management and governance in financial entities and markets.

MiFID has a high complexity, but we wonder: what will it happen if we invest through a roboadvisor? Will these platforms avoid the regulation? No, in any case. Automation does not mean at all that roboadvisors will protect less their customers. On the contrary, roboadvisor promote lower costs, standardization and transparency.

We have to consider that there are several kinds of these platforms: form full automatic services to others where there is a platform with human active management. This diversity is not linked with different levels of protection, because all of them must comply with the suitable tests to check the investment ability and knowledge of the customers and they have also forbidden retrocession if they are independent. What does it mean? In short, independent roboadvisors will not be able to sell financial products from other entities (for instance, mutual funds) to obtain a sales commission. Well, let’s explain this a bit more: if you sign up in the roboadvisor XYZ, which reports as independent, it is engaged to sell the best products depending the investors’ profile: the best from any entity. If the roboadvisor is not independent, it has to be very clear that it sells from specific entities and receive a retrocession for any sale.

Roboadvisor are platforms, but there are people behind that create portfolios. These people must have specific studies, following the rule. But the most important effect is the transparency in costs: roboadvisors (as human advisors) will have to report with details about any costs. These costs will have to be listed, not accumulated. In this part, roboadvisors are far away from human advisors. One of the first thing that you find in roboadvisors websites are the amount that you have to pay for the management, because they have very clear their advantages against traditional models.

As you see, MiFID will regulate much more to protect investors. It was developed with several learning from the crisis and from the recent fintech solutions. It tries to order these new systems and they have to accept regulations. If roboadvisors wouldn’t accept MiFID, what credibility would they keep when they say that they are transparent?

Hybrid advisor: the future mix of humans and technology in finances

Hybrid advisors, the mix between technology and humans

Do you remember Robocop? Yes, that kind of police half machine half human. Paul Verhoeven’s film was very successful at the end of the 80’s last century. That proposal (the fusion between humans and machines) is a possible development in finances, but please do not expect a cyborg in a bank or managing fund office.

The adviser and blogger Michael Kitces proposed the approach to the “cyborg” advisor already last year and repeated it somehow some days ago. Robo-advisors have changed deeply the financial landscape. Algorithms, low fees and thin structure are the main characteristics, but humans still play a role in some robo-advisor models. Let’s look, for instance, Personal Capital or Vanguard Personal Advisor Services, where there is a combination of technology and human advice.

A recent report from My Private Banking points out that this mixed advisor model will grow by 2020 up to 3,700 billion dollars and represent the 10% of the total investable wealth in 2025. On the contrary, pure automated robo-advisors will keep only a 1.6% of the market share. It already mentioned a relevant trend: the white label robo-advisors by technological providers for financial entities.

The robo-advisor phenomenon have shown a more complex evolution than it was expected. At the very beginning, it sounded that machines will substitute everyone in the wealth management branch. However, we are evolving to a mixed landscape where pure automatic robo-advisors (Betterment, Wealthfront) and automated platforms for self-directed investors (as T-Advisor) live together in the markets with entities that have developed their own platforms (as Vanguard did) or bought existing companies (as BlackRock did with Future Advisor) and with cyborg wealth managers.

The market has place enough for several models, but it is true that the changes are focusing in providing a “human touch” to algorithmic solutions. Kitces, as we already mentioned, titled his recent post as: “The B2C Robo-Advisor Movement Is Dying, But Its #FinTech Legacy Will Live On!”. The text explained the difficulties of the pure tech model, but accept the revolution in the sector made by technology. In fact, he underlines that technology isn’t replacing advisors, but increasing the number of them. Wealth managers accepted technology and they are learning how to use it and improve their results. My Private Banking proposes also different approaches and strategies to robo solutions depending on the customer segments.

In conclusion, the financial sector is already aware that robo-advisors are not anymore fashion: they are a stabilised solution in the market and they are real competitors to the classical individual human-to-human relationship in advising. But the sector finally learned. They have forgot the negative opinions and adopted a different view. Technology is an ally and human advisors have to play the battle in this field if they want to survive. The hybrid advisor model is a kind of solution that will complete progressively the wealth-managing sector with the traditional and the pure tech model. Let’s see the trend in the next years and the market share that they will take up.

Roboadvisors: the word that is changing finances

Roboadvisors : T-Advisor mobile app picture

Roboadvisors or roboadvisers, with an O or with an E: the name began as derogatory, but it has been finally adopted by the different providers that operate in this field. This is the trendy word in financial technologies (or fintech, as it is also known).

The concept is simple: with the technological evolution, algorithms have been developed to create portfolios and manage them automatically or with a very low human intervention. Traditionally, a financial adviser has met the customer, listened their needs and creates a personal portfolio linked to a financial plan. In the case of roboadvisors, the customer register, fill in a investment risk profile questionnaire and the system proposes a model portfolio. This portfolio changes (what is known as rebalances), through algorithms, in order to improve the results when markets are negative. Easy: you invest and the machine works.

The immediate and clearer effect is about the price: fees are very low. Technology has opened a wide door for low-cost services with a very high quality and finances are not absent of this trend. Roboadvisors are the solution for little investors that have not enough funds to be worthwhile for advisers but look for better returns that traditional banking products, as deposits. In addition, investors feel the control of their investments, as they have a 24/7 platform with attractive web interfaces or mobile apps. The have also more advantages, as we have already explained.

Why are the fees so cheap?

  • The staff is very short.
  • The portfolios are composed by ETF, which are a kind of funds simple, transparent and with low fees.
  • The products are massive portfolios. There is no personal portfolio, as traditional advisers make, but one for different risk profiles.

The list of players is long and the assets under management (AuM) are growing quickly: an AT Kearney report mentioned that AuM managed by roboadvisors would reach $2.2 trillion in 2020. Currently, the largest roboadvisors manage $3 billion. That´s why the biggest players in the financial branch, that initially rejected them, are developing or event buying roboadvisors: Schwab and Vanguard have developed its own solutions, BlackRock and Invesco bought roboadvisor companies.

In the case of T-Advisor, there is a mixture of self-directed tools for investors that prefer to manage their full investments on their own and a model portfolio module as the existing portfolios in the roboadvisors. And all for free.

The map is changing: investors look for more technological, autonomous and cheaper solutions for them. Roboadvisors were criticised, because customer wouldn´t have anybody on the other side of the phone in the case of a crisis. We are living currently hard times in the markets. Let’s see what the financial landscape brings just at the end of the year: more or less roboadvisors? More or less AuM managed by them? Positive or negative returns for the customers?

The Olympics in Fintech: T-Advisor 3.0. medals

Some gamification features in T-Advisor

T-Advisor has recently launched its 3.0 version for its users. It was a milestone in the development of our tools, as the new version includes gamification features. We believe that some ideas for games are very useful to learn, motivate and evolve in finances. That is why we adopted them in T-Advisor. Every user has access to several medals depending on the goals that the person complies.

There are 8 global achievements:

  • I use the T-Advisor features
  • I take part in the T-Advisor community
  • I am an active T-Advisor community user
  • I have basic financial knowledge
  • I learn to invest
  • I diversify my investments by myself
  • I manage my investments properly
  • I am an expert manager of my investments

Each achievement has some tasks to fulfil. Some of them depend of users’ interactions with the system, as uploading a profile image, create portfolios, write a comment in your wall, follow another user or invest a part of your portfolio in our weekly-recommended investment opportunities.

Some tasks to fulfil an achievement in T-Advisor

Other tasks depend on what the system detects in your actions and profile, for instance, if someone clicks “like” in a comment made by you in the wall, if your portfolio has a bullish trend or has achieved different temporary performances (1 month, year-to-date, 1 year) or if the volatility is within your risk profile limits.

You get points and medals. The more you get, the higher position you obtain in the ranking. You can compete with other T-Advisor users and compare you position in the ranking by points, followers and scored portfolios.

You can discover all these features in “My profile” page in the T-Advisor platform. You can follow what medals you obtained, how much points you have, what features you have to fulfil to complete an achievement and your global position in the ranking.

Ranking by points in T-Advisor

This is our particular Olympics in Fintech. T-Advisor promotes the financial training for everybody through its platform, because we really believe that investments should not be only for very rich people, but for everyone who has interest in getting a better return for the savings.

TechRules introduces T-Advisor, the first roboadvisor in Spain

T-Advisor homepage

TechRules, the leading company for advanced wealth management solutions, introduces T-Advisor, the first roboadvisor in Spain. T-Advisor is a suite of tools to manage and monitor portfolios. It offers a new commercial channel to gain new customers amongst financial advisers, wealth managers and financial entities.

Roboadvisors have deeply changed financial advisory landscape in US. There are already several solutions that have created a new business model where technology and human capital join to add value to financial companies and entities.

T-Advisor has been launched for a year and a half and it has already more than 1.000 users that manage their portfolios. The suite is based on data accuracy, a list of more than 6.000 assets and dozens of world reference markets to look up, an easy-to-use toolkit with many hints and the technological support by a leading fintech company as TechRules.

Tomorrow, TechRules will officialy introduce T-Advisor to professionals from the finance branch in Spain. In the presentation, TechRules general managers will give many details about its main features that get close finances to everyone.

“This concept didn’t exist in Spain. TechRules detected that the roboadvisor model is a future business line. Solutions as T-Advisor let financial companies have available tools for their customers, so that they feel the control of their investments. At the same time, these companies benefit from an easy-to-manage platform that opens a new communication channel with individual investors. This technology provides a higher adaptability, as it opens our business to a greater number of people and reduces substantially the costs. In exchange,you obtain a collection of tools with excellent and professional features”, explains Jaime Bolívar, TechRules general manager.

T-Advisor is a suite of professional tools with an easy and usable design to approach finances to everyone. With these tools, individual investors can organise, monitor and modify their investments to get the best results. In our blog, we have written posts full of details about all features.