We are all frightened by the uncertainty and global health and economic crisis. Fintech helps people to manage their finance during the crisis and avoid ruining decisions. That’s why financial advice and technology tools they use in their work are now raised in importance. It’s time to ask ourselves, in what the most impactful and non-obvious ways COVID-19 will change financial services?
In this selection, WealthTech and FinTech experts share their outlook and words of support with their business fellows, co-workers, and publicity. Find the motivation to keep trying hard and disrupt the world with wealth technology by reading them.
John Michel, CEO, CircleBlack:
The situation with the virus has put all innovations on hold. It will take us six weeks just to understand what’s going on, to get into the swing of things, and only then take action. Until that time, our main priority is communication with clients. We’re to retain our current clients by providing them with more value than we’ve ever provided, communicating with them in a way so that they feel the same as it was before isolation.
Steve Lewczyk, CRO, Harvest Savings & Wealth Technologies:
We enter the times when only communication can mitigate an unnecessary panic in the financial markets. Our mission today is to get out the message: the core business is still moving on, it’s still thriving. Some companies may put on hold new business projects but the core part is alive and continue to grow. So, there’s no reason to worry about that and we should ensure our clients are well aware about that. Let it be an overcommunication; they should hear the message either.
Aaron Schumm, CEO, Vestwell:
Fast-forward to 2020, we have all enjoyed a bull market exceeding a decade. A downturn was inevitable, but I don’t think anyone predicted the catalyst being a pandemic. The globe has and will continue to be impacted. Things will slow. Balance sheets will be strained, and unemployment will skyrocket in the industries most directly impacted, such as food & beverage, travel, etc.
On the positive side, this recession is not caused by a systemic financial flaw. In 2008, the financial industry was at fault. In 2020, the financial industry is being turned to as part of the solution. Fintech companies are at the forefront and best positioned to be bringing creative solutions to the world. With that, we’ll see immediate movement to a sustained cloud-based world, and focus on digital solutions. The companies that held back on moving to a modern era will now likely turn to those that have been at the forefront of change. This will apply to all businesses, including traditional financial services companies turning to fintech companies for solutions.
The impact of COVID-19 is a government mandated ‘pause’ on the economy. GDP will be hit. Industries will slow to a crawl. But as we work through this together and come out the other side, the move to a new state of normalcy will happen quickly. The hardest part is knowing when that will happen. In the meantime, we must plan for the worst, and hope for the best, erring on caution. We cannot control all aspects of this, but with thoughtful collective planning and approaches, we’ll all be better prepared in the future, just like the financial sector became stronger after 2008. Be safe. Manage family and health first. And the rest will follow.
Craig Pearson, CEO, Private Wealth Systems:
What an exciting week for our industry! One company was acquired at an incredible valuation, and another company raised an additional $40 million in capital. The barriers to sustainability for companies that aren’t focused on transaction processing and operating scale, a key part of our industry’s economic model, are very high.
The 2008 crisis was a boom for our industry. But with unforeseen operational burden, which came with growth, companies had to choose between increased efficiency by sacrificing data accuracy and comprehensiveness or maintain focus on the data but sacrifice scale, both of which drove the first wave of consolidation.
Our industry is at an inflection point similar to the steel industry when the Bessemer process had a seismic impact on the speed, quality, and cost of steel production which fueled the building of our cities or the introduction of the Model T that removed a point of friction to free commerce. The increasing trend of market volatility, the proliferation of financial complexity, and a heightened level of exacting sophistication among UHNWIs is absolutely the most exciting driver to our industry’s evolution, the impact of which won’t be known for years and decades to come.
Mike Ross Kane, Co-Founder of Hydrogen:
I see some interesting ideas for emergency savings and fast SMB credit/insurance that will pop up.
Anthony Termini, Fintech Alliances & Redistributors at Morningstar:
- Boom in touchless, contact-free payment adoption.
- Due to volatility, heightened interest in active portfolio management over passive.
- Reduction of brick and mortar financial services.
- Increased need for a digital experience that connects customers to a human.
- Acceleration of financial literacy and behavioral finance perspectives to mainstream social media (FB, Insta, TikTok).
Saurabh Mittal, PhonePe (ex-McKinsey, ex-PayPal):
While there will be a bunch of temporary changes, two, in particular, will likely stick:
- Evolution in policy – policymakers globally still stick to archaic practices for Know Your Customer etc. which require a physical touchpoint. They will be forced to create acceptable digital versions (e.g. live photo vs physical meeting, digitally signed Govt ID vs physical checking), which will then stick even beyond the virus.
- Customer service and back operations will get automated and digitized. Chatbots will become more intelligent and more prevalent.
Alex Loukissas, CTO, Agentrisk:
[What do you think are the most interesting ways COVID-19 will change financial services?] Income protections for gig workers.
Adam Antoniades, CEO, Cetera Financial Group:
Wall Street has become a political battleground, the true best interests of small investors are often forgotten.
Mike McDerment, CEO, FreshBooks:
Now let me say, supporting local businesses in your community right now is imperative. Small businesses are the engine of economic growth. Growth fuels prosperity for all. We all want and deserve prosperity. Due to COVID-19, businesses will shut down. Some are adapting, others will be less impacted. With this backdrop, and in the face of this adversity, each of us has the power to act, but sometimes we just don’t know what to do. So here is a proposal. It is not a cure-all. Some may laugh at how insignificant the proposal may seem on the surface. Or be annoyed that it’s “just an idea”. I would contend, at least it is taking action, however small. And that small acts can make a big impact. My proposal is this: Pre-purchase from your local businesses. Buy gift cards if available. Or, if you are a local business under duress, reach out to your clients and make it easy for them to purchase in advance from you today.
Matthew Clay, Director of Investment Management, Jackson/Roskelley Wealth Advisors, Inc.:
Traditional statistical methodologies around normally distributed data (i.e. 95% confidence intervals and tail risk) and standard distributions are helpful context but cannot account for anomalous data. It would be confusing to clients to speak about but one might argue that asset returns often simulate more of a modified Weibull distribution. So, the easier commentary is that historical return data basically suggests that over time asset returns are asymmetrically positive. Depending on what historical time period one is looking at, stock returns are positive 75-79% of historical calendar year periods and is interesting is the intra-year movement of lows/highs. The Risk Number is a great reminder of where the client portfolio is at for most “normal” circumstances relative to risk mitigating or risk-seeking assets (normal bond or stock market risk). The distribution of return outcomes is an excellent conversation piece to remind clients that “most of the time” a portfolio is expected to achieve a certain outcome given the parameters.
Aaron Klein, CEO, Riskalyze:
Now is not the time to recalibrate or discover risk tolerance for the first time. The worst investing decisions are made out of fear.
The recent market volatility has thrown a curveball to many investors and highlights the importance of financial advisors’ work — especially during times of turbulence.
We are incredibly grateful for the heroic role that advisors continue to play in helping push back against the fear every investor is feeling, and allow logic, reason, and data to drive decision making. The work of a financial advisor has never been more valuable.
Randy Bullard, Global Head of Wealth at Charles River:
Part of the catch in risk assessment is the human nature element of it. At the end of a decade-long bull market, my assessment is that a lot of people have expressed a higher risk tolerance than they actually have, and that they’re now re-discovering their real risk tolerance at the absolutely worst time – in the midst of a raging bear market.
I don’t believe investors should be emotional and start acting tactfully out of fear, but if someone was taking on too much risk going into this market and this is unfortunately how they figured that out… that’s a reason to revisit what their asset mix should really be in light of this new state of risk awareness.
Matt Reiner, CEO, Wela:
This is a time when businesses are forced to change. And what will be realized is that some of the changes are beneficial and will positively impact the way they do business going forward. For instance, all these Zoom meetings may lead to a lower travel budget or increased desire for Zoom meetings with clients. Adoption of new innovations in technology will continue to build as firms will look to create scalability to ensure they can grow their business, potentially with less people. The big takeaway for me is that the best thing about humans is our ability to adapt. And we will get through this and we will adapt to the changes that present themselves.
Mitch Reiner, Managing Partner and Senior Investment Advisor at Capital Investment Advisors:
Economic shutdown is crushing businesses. Unfortunately, too many businesses haven’t been financially responsible keeping enough cash around for challenging moments.
John Mazur, CEO, Homesnap:
Maybe $10 trillion is going too far, but $1-$2 trillion does NOT get this done. Based on the various proposals/ranges I have read today $3-4 trillion appears to be the number to keep American economy sound and the American people sustained while we fight this virus. The largest economy in the world collapsing would be incomprehensible. Fighting the health pandemic with a stable economy surely gives this country exponentially better odds. Let’s fight for Washington to get this done NOW!!! Stay safe, stay positive and focus on the WE vs. ME. If we take care of each other and force our government to do what is required we WILL succeed – not even a question!