Transcription
Digital Wealth and AssetManagementEY Discussion DocumentMay 2017
Digital advice sizing and projections continue to riseFinTech “robo” startups are well funded and prolificin 2015/16 716mcombined VC funding for top6 robo firms in US leading to exponential growth, but incumbentfirms have grown faster than disruptors 10bSource: EY200 estimated number of globalguided/advice robo-firmsSource: EYcombined AUM for top two robos:Wealthfront and Betterment and increased growth predictions in five years(2020) 500b – 2.2tSource: SEC Form ADV 55b combined AUM for top twoincumbents in past year: Schwaband VanguardSource: SEC Form ADVestimated US robo market by 2020 5% of total AUM(out of 42.8tn)Source: Cerrulli and AT Kearney71%percentage of robo assets controlled byestablished/incumbent firms in 2020Source: MyprivatebankingMany incumbents are looking to partner with startups for a variety of reasons: speed to market, appetite for long-term digital investment,ability to attract engineering talent, and their core competency (investment acumen vs. consumer software).Page 2
Digital has already made a significant impact WEALTH MANAGEMENT Robo-adviser platform assets under managementglobally are forecast to grow from US 50 billioncurrently to more than US 300 billion by 2020. Financial advisory firms are using online and mobiletechnology to provide integrated portfolio, practicemanagement and reporting solutions to digitallyenable the adviser of the future. Data aggregation platforms combine data from avariety of different sources to provider a completefinancial picture of client holdings, behaviours andgoals.ASSET MANAGEMENTASSET SERVICING Digital utilities enable asset managers to provideinsurers with information on fund investments on alook-through basis down to holding level to meet theirSolvency II obligations. The first shares were traded on the blockchain in2015 and many global exchanges have eitherlaunched blockchain-based trading platforms, or arein the process of doing so. Exploratory front office analytics transcend day-today controls and standard compliance reporting byoffering a powerful but flexible framework for therapid assessment of compliance deviations, potentialinternal control weaknesses or unintentional errorsand inefficiencies. Instead of transactions going through a centralclearing house, then settling on both sides’ internalledgers several days later, blockchain allows deals tobe settled within minutes, with everyone in thenetwork seeing and checking the trade on a“distributed ledger”. Blockchain is also being used to streamline investorvoting.We have been in the midst of a digital revolution in wealth and asset management for the past ten years. And while we haven’t (yet) seen the emergence of a majordisruptor, that doesn’t mean that technology hasn’t changed the shape of our industry significantly.Page 3
Digitally enabled firms have greater capacity to focus on connecting with and providing expertise to ningrunningHNWclient journey Access marketing, research andeducational contentCollaborate with my InvestmentAdvisorSet-up my profile and high levelgoals Create a roadmap for my financialfutureAlign my investments with mygoalsReview my proposal Financial advisorview Receive welcome kitPopulate and sign forms /documentsOpen and fund my accountsUpload my statements from otherfirmsMonitor asset transfer e relationships(clients, COIs, prospects)Listen to andadvise clientsOnboard new clients and expandrelationshipsImplement clientinvestment strategies360o client/prospect viewSegmented client managementContact and activity managementMarketing and campaignmanagement Financial and riskprofile/questionnaireFinancial planning and goalsTarget asset allocationIPS generationClient collaboration toolsReport presentation capabilities Data collection and account openmonitoringProduct and service enrollmentAsset transfer initiation andmonitoringDocument and form management AcquisitiontoolsContentframeworkOmni channelservice design CRM Page 4Access my researchManage investment transactionsManage banking and lendingtransactionsEnroll in services (e.g., PAC)Perform researchPortfolio constructionModel managementAlerts managementPortfolio rebalancingOrder entryTrade complianceTrade commissionsPortfolio and risk monitoringDigital supporttechnologyReview my statements, taxreporting, performance reportsTrack my goalsView my portfolioCustomize my dashboardSelf-serve profile updates (e.g.,address change)OngoingservicingProvide contextualized information andservices Positions & balancesClient reportingData aggregationLife stage managementAd-hoc client requestsMoney movementsAccount and profile maintenanceDataanalytics
but significant opportunity remains For all the advances we’ve seen in technology and data, our clients continue to face a number of significant issues that inhibit the clientor adviser experience, the development of new products and services, or financial performance.On-boarding is time- consumingand a barrier to winning newbusinessClients do not have timelyaccess to the accurateinformation they needA. Clientengagementand experienceData is scattered and limits ourability to understand our clients’needsPage 5Provision of financial advice istime consuming andinconsistentB. Productand servicepropositionDifficult to engage clients in ameaningful, goals-baseddiscussionDisconnect between clientobjectives, investment strategyand performanceOngoing portfolio managementis not scalable and deliverssuboptimal strategyAsset management systems arenot integrated and prone tocostly errorC. Fulfilmentand operationalsupportBack office processes are notscalable and result in increasingcostsExisting project resources donot have required digitalcapabilitiesD. Enterpriserisk and financialperformanceDifficult to maintain compliancewith global regulatory reportingobligationsBusiness strategy does not haveeffective response to threat ofdisruption
.keeping up with the pace of innovation has been challenging as leading FIs struggle to prioritize new technologies (build,buy, and partner)1Micro investing and PFM6Investments with purpose andthemes2Chat bot / conversationalinterfaces7Artificial Intelligence / MachineLearning3Digitally Enabled FAs8Multi product solutions:protection and lending4Digital Defined ContributionPlans9Open APIs and third partydeveloper portals5Digital Acquisition andAutomated Marketing10Digital for HNW individuals /Private BanksConvergence of new technology, continued demographic shifts, and user preferences are creating unique opportunities for established and new digitaladvice firms.Page 6
Competitive landscape – US implementation of digital advice trategyBuildLaunchLaunched July 2016Launched 2016AcquisitionLaunchImplementationLaunched 2015Page entationStrategyStrategyLaunchPilotLaunched 2009 / Acquired 2015Launched 2010 / Acquired 2015Launched 2014 / Acquired 2016
.And the list of Online Advice Firms continues to expand AcornsAdvisor SoftwareAsset BuilderBetterment HoldingsBlackrock – FutureAdvisorBOM Financial Group (Harris MY CFO)Brinker Capital (Retirement Advice Business)Circle Black (ex- Bloomberg)Edelman Financial Services (Hybrid model)EllevestEnvestnet (Upside)Financial EnginesFidelity GoGuided Investing by Merrill EdgeGoldman Sachs – Honest DollarHedgeableInteractive Brokers Group – CovestorJempstepPage 8 Market RidersMarstone (B2B)Morgan Stanley – Launch in SummerMorningstar – Retirement AdvisorNextCapitalNorthwestern Mutual Life – LearnvestPersonal Capital Corp.Rebalance IRARiskalyzeSigfigTD Bank Financial (Amerivest)The Bank of New York Mellon Corp (Pershing Robo)The Charles Schwab Corp (Intelligent Portfolios, Institutionalintelligent, Hybrid RIA)The Vangaurd GroupTrizicWealthfrontWiseBanyan
However, not all software is created equal. The next battleground is focused on 1) data to define what customers want and 2)machine learning to scale that italProductrecommendations(e.g., mortgage) Digital InteractionsDemographicClient / ProspectNet lData Collection(static and real-time)Next Best ActionDecisionengine(Rank,Score, etc.)(web, mobile,social)ContactCenter(e.g. Call Client)Data andanalyticsChatbotContent marketing(e.g., web usage anddemographics)Text / EmailFraud Ops(e.g., False Positive,EDD, CIP failures)BIResourcesLearn and adjust predictive modelsPage 9SupportDeliver targetmarketing actions toclients and thehome-office.
Open APIs will impact banks’ role in the financial services ecosystem and will drive continued unbundling of FIsThe unbundling of WM ecosystem–––––APIs that can be white labeled in any market.Simple revenue share structure.Modules (widgets) can be offered on top of the core APIs for a fee.Integration with your own website / with only a few lines of code.New use cases from non traditional providers (insurance, P2P, etc.)CORE WM API FEATURES Account Info Custodian Integration KYC Account Funding Bank links Support Ticketing Live Chat & Text Message Emails Secure Documents Financial PlanningPage 10 Two-Factor Authentication Promotions Rewards Analytics & Benchmarking Alerts Partner Tools Account Aggregation Goals Tax Management Portfolios & AllocationsADD ON MODULES UI/UXOperations as a Service (OaaS)AI – Artificial IntelligenceInvesting (CIO as service)Banking (via Partner)Self Directed Trading (via Partner)Insurance
The winners will have an open architecture strategy but understand how to re-bundle and package up a core set of services towork together in managing a holistic client relationsihpPage 11Source: CB Insights
Thank youMarco Ribas, Director – São Paulomarco.ribas@br.ey.comMarcelo Fava, Partner – USmarcelo.fava@ey.comPage 12
500b - 2.2t percentage of robo assets controlled by established/incumbent firms in 2020 Source: Myprivatebanking 71% combined AUM for top two robos: Wealthfront and Betterment Source: SEC Form ADV 10b combined AUM for top two incumbents in past year: Schwab and Vanguard Source: SEC Form ADV 55b estimated number of global
