Bertrand has spent 20 years in the FinTech industry, mainly on the trading technology side. His roles have encompassed management, sales, marketing, and setting up operations for trading technology firms in London, Singapore, and Geneva.
Bertrand joined TradingScreen in 2015 and decided to launch an initiative to create a solution for the wealth management industry. The new solution is called QUO. It is a Web application that includes three distinct products that can be combined: FundQuo, WealthQUO, and TradeQuo. The solution is designed to be a portfolio-management system for fund and wealth managers coupled with a compliance engine and an Execution Management System.
During this interview, Bertrand shares his thoughts on how wealth management is being pushed towards digitization, compares the European and Asian financial markets, explains why performance cannot be the sole driver for the European segment of the industry, and illustrates how TradingScreen has been developing its wealth-management platform.
Pushing Wealth Management to Technology
Bertrand believes there has been a clear trend towards digitization. However, he emphasizes that the wealth-management industry is very conservative and unlikely to exploit new technologies if not pushed to do so. “Unless the benefits are highlighted, they will not embrace new technology just for the sake of it because it’s not in the wealth managers’ DNA. You need to find a driver.”
In Europe, regulators are mostly those drivers that push the industry. There is MiFID (the Markets in Financial Instruments Directive), which was applied in November 2007, and MiFID II, which is to be applied in January 2018. Bertrand explains, “That means more transparency, digitizing the process, using professional tools, as opposed to just relying on Excel, and it means connecting, as well, electronically to the brokers or custodians for the processing of their positions and transactions.”
Bertrand also mentions another trend—it’s not just younger generation of investor that prefers technology, but a younger generation of wealth managers as well. Younger wealth managers see technology as an opportunity to better engage with their clients. “The old generation is still battling with the new regulation; the regulators are forcing them to change and to adopt new technology, while the younger generation of wealth managers are actually keen to embrace these new technology trends to be more in tune with the younger high net worth individuals (HNWIs) that are also coming along.”
Bertrand divides wealth managers into two categories:
- traditional wealth managers that typically have a discretionary mandate,
- wealth managers who are providing advisory services to clients.
European investors tend to prefer the discretionary approach. “Europe is ‘old money;’ it is old families, and they’re used to outsourcing and delegating that investment process to traditional independent asset managers, private banks, and multi-family offices.” Nevertheless, the younger generation of investors has prompted a shift from the discretionary mandate towards providing more advisory services. This is where robo-advisory comes into play as the means to provide advisory services in a digital way.
Bertrand believes that Asia is more “new money;” their young generation of HNWIs is mostly successful first-generation entrepreneurs who are used to being in control of their money. Therefore, they prefer advisory services and robo-advisory which suits their outlook and lifestyle better.
The Luxury of Human Interaction vs. Performance
Despite all the advantages of automation, artificial intelligence, and digital advising, Bertrand doubts that robo-advisors will totally replace human financial advisors. “Robo-advisory will eventually become accessible to many, and not just in wealth management. I’m sure that eventually retail banks will be providing these types of services. More and more services will be automated and become digital. Robo-advisory will be relevant for a certain category of HNWIs. The very reason why they will talk to the wealth managers is that on top of these robo-advisory services, they will have that unique human interaction. They will have a tailor-made service. They will have something that a retail bank cannot provide.”
This is why, Bertrand believes, these two services will exist side by side. For retail banks, robo-advisory services are a great cost-saving exercise. As digitization and robo-advisory develop, human touch will remain the prerogative of the wealth-management industry.
In addition, providers of robo-advisory services will always try to enrich their algorithms to offer strategies that are more relevant. Big Data analytics may be of great use considering that performance has never been the driver of the wealth-management industry. Bertrand says, “At least in Europe, wealth preservation was the overriding concern. The very reason why families were putting money in Switzerland was primarily to preserve wealth.”
Although for the younger generation performance becomes more important because they are more empowered and clued in, Bertrand doesn’t agree that this parameter may have a significant impact on the industry.
“Robo-advisory will provide better performance, will become more attuned to the needs of the client, and will be able to come up with a variety of different strategies based on the client’s behavior. More importantly is whether the client is going to be sensitive to that. To what extent they will buy into these new strategies is the real question. I think that if the client is only interested in wealth preservation and you come up with a number of different strategies related to performance, they may not be willing to go down this route, either because of the risk perception that they may have of that new strategy, or simply because they’re not primarily interested in generating more performance, but their overriding concern is really to preserve wealth.”
In the US market, robo-advisors are mostly used to grow the investor’s wealth and provide retirement, estate, and tax planning, in contrast to preserving wealth. Most US-based solutions are focused on having more efficient asset allocation strategies that depend on the investor’s risk tolerance. Bertrand emphasizes that today, human interaction enables us to deal with more than just asset allocation and portfolio modeling. There’s a complete ecosystem, and people that provide technology solutions need to be able to address multifold requirements.
Financial World vs. Technology
As we touch on the topic of relationships between wealth managers and technology people, Bertrand expresses his vision that these two groups of experts live on radically different planets that are difficult to reconcile. He considers that technology people build certain algorithms that can be used to provide robo-advisory services and expect wealth managers to embrace this type of technology. “The problem is that the world of private banks and wealth managers is very different. They have operational constraints that need to be solved first, before even considering adding some services and some cool stuff. That’s one of the reasons why some of these technology firms that started up here in Switzerland have difficulties penetrating the wealth-management industry.”
Bertrand illustrates how TradingScreen developed its wealth-management platform. The company started by observing its existing clients to understand what their issues and problems were. Then, before creating any sophisticated functionality, the issues identified were addressed. Everything devised within the platform was validated by clients at various stages of development. TradingScreen had pilot sites wherein existing clients operating in the wealth-management industry could test the new system.
“Compliance is the number one priority, because they don’t have a choice; regulators are forcing wealth managers to adopt this new technology so that they can comply with regulations. If you don’t address that compliance issue, the portfolio-management issue, which is their core business, their core day-to-day activity, then you’re never going to get to the cool stuff and the advisory services,” Bertrand explains. That’s why TradingScreen created, step by step, a platform that could address compliance, portfolio management, and trading requirements. Only then did the company start to enrich it with robo-advisory services as part of the ecosystem.
Bertrand believes that technologists need to understand the financial markets, otherwise they will not be credible when they start promoting and marketing their services. From the other side, wealth managers also require education. “To remove that natural suspicion that they have towards technology, you need to educate them. If you want to educate them, you need to understand how they work, you need to be credible when you talk to them. To acquire that credibility, you need to understand how they work, how they do their work on a day-to-day basis, how they operate, how they deal with their clients. Once you put that in place, once they see that you know what you’re talking about, then they’re going to be naturally more receptive to discussing technology solutions and improvements.”
Expectations for the Future
Talking about his expectations regarding the future technology development of the wealth-management industry, Bertrand anticipates seeing a consolidation phrase with the following two major outcomes:
- Large banks will remain and will develop activities that blend asset management, brokerage, and wealth management. They will also develop online offerings similar to services some retail banks are starting to offer now, along with a more exclusive service dedicated to their HNWIs and ultra-HNWIs.
- Niche players will concentrate on one specific area of wealth management. “If you are an HNWI, you want to be treated differently than the man on the street. You want to be offered robo-advisory services like the man on the street, but you also want to have someone coming to your offices, talking to you, giving you specific advice, understanding where you come from, your family situation, and your specific needs and requirements.”
Bertrand also expects that financial institutions will invest in innovative technological products to enrich customer services. In this case, they may not be interested in robo-advisory services as such, but in very specific technology that will allow them to customize the delivery of some of these services. They will be relying more on niche technology and new platforms, as opposed to generic robo-advisory platforms or systems.
Bertrand believes that regulations will amplify and trigger a shift between large institutions and small boutique operators.
Interviewed by Vasyl Soloshchuk, CEO and co-owner at INSART, FinTech & Java engineering company. Vasyl is also the author of WealthTech Club, which conducts research into Fortune and Startup Robo-advisor and Wealth Management companies in terms of the technology ecosystem.