On 26th of October 2017, the “Trading CEE: Equities and Derivatives” conference took place in Warsaw. This is one of the most important financial industry related events in Central and Eastern Europe. The co-organizers of the event were the Warsaw Stock Exchange, the Global Investor Group and the National Depository for Securities. Michał Różański, CEO of Empirica took part in a panel devoted to the future of the fintech industry.
The Trading CEE was held in Warsaw’s Hilton hotel, where several hundred capital markets experts had the opportunity to talk about such important issues as the Mifid II regulation, or the scale of the fintech revolution in Poland and internationally.
They also discussed the decision made recently by FTSE Russell (the supplier of indices belonging to the London Stock Exchange group) to change the status of Poland from that of an Emerging Market into that of a Developed Market and considered the significance of this shift for the national economy.
Among many of the excellent speakers, we had the change to listen to Marek Dietl, President of the Warsaw Stock Exchange and Toby Webb, Head of EMEA Information Services FTSE Russell. The inaugural panel on the opportunities and threats facing investment markets in our region gathered such experts as Ales Ipavec, head of the stock exchange in Ljubljana, Richard Vegh from the Budapest Stock Exchange, Ivan Takev, head of the Bulgarian Stock Exchange and Head of International Sales of the Moscow Stock Exchange Tom O ‘ Brien.
Fintech Innovation Forum
The panel regarding the fintech industry was very popular among visitors, especially the topic of the development of tools based on artificial intelligence and their impact on investment markets in Poland. It was organized in such a way as to allow for 4 of the most promising Central & Eastern European companies in the modern financial technologies industry to present what they offer. One of the main participants of this part of the Trading CEE conference was Michał Różański, CEO and founder of Empirica, the fintech software house.
During his speech, he focused mainly on the presentation of innovations in the field of robo-advisors, which are already revolutionizing the global investment market.
– The robo-advisor platform is not only the future, but the present of wealth and asset management. Our Empirica Robo Advisor service stands out in the international market above all through its very high level of support for advisors in their work with the service’s users. All this is thanks to solutions in the field of AI analytics, which allows them to receive a full picture of the actions taken in the user profile and to quickly respond if these actions threaten the assets, which in the end also reduces the risk of losing the customer. Another important element of our consulting service is the fact that we have built it based on the strong foundations of our platform for Algo Trading. Thanks to it, our robo-solution has fully automated access to the data stream coming from the most important financial institutions at every stage of the Empirica Robo Advisor process. – explains Michał Różański.
New generation of users
Platforms from the robo-advisor category not only democratize investment opportunities, but also reduce the price of consultancy services. In an era of technological revolution, a millennial generation is slowly entering the capital market- people accustomed to continuous presence in the online world. Advisory platforms will enable it for them. Friendly user interfaces, notifications that they know from social media and an automated transaction system based on a personalized portfolio are already present in the fintech area. However, in order for these tools to function in such a complicated environment as the financial market, powerful computational engines based on artificial intelligence (AI) must be behind them. Empirica helps financial companies enter this world by providing an advisory platform that automates the asset management processes and is based on innovative solutions in the field of data processing. – adds the CEO of Empirica.
Empirica is a Wrocław-based company that offers services such as an Algorithmic Trade Platform implemented with successes on the Warsaw Stock Exchange, solutions from the category of fully automated advisors (robo-advisory platforms) and software built on the basis of blockchain technology.
The disruptive changes introduced by FinTech companies bring threats but also show where the opportunities can be found. With the advent of automated wealth management solutions, the traditional wealth management industry is facing perhaps its most disruptive threat since low-cost online stock trading in the mid 1990s.
Most wealth management companies now have a prime opportunity to apply robo-advisory technology to respond on time to the growing expectations of existing and future investors (the Millennials) and to stay more cost-efficient and profitable even in lower fees environment.
Main reasons to implement robo-advisory platform:
- To broaden the market for clients whose assets are below the minimum requirement now by traditional advising. Robo-advisors can offer the investors regular access to financial tools that have been reserved for high net worth investors. Automated advisory platforms allow the advisory firms to scale up operations and serve more clients of every size and type.
- To stay profitable in the lower fees environment. Automated advisory platforms allow advisory firms to remain profitable and be significantly more cost-efficient in their advice delivery and execution even if fees decline. Low fees are an undeniable advantage in the eye of the customer. Many investors are ready to opt out of human advisors in exchange for lower costs and access to advanced services offered only for wealthier customers so far.
- To work with Millennial Investors – a largely untapped source of assets. Digital advice attracts millennial generations of customers in a natural way. Millennials have two major characteristics: they are both accustomed to the online life, and usually do not have sufficient knowledge about investing. According to Accenture, almost 40% of Millennials are interested in robo-advice and their predisposition is to “do-it-yourself-through-an-app”.
- To address growing expectations on the level of the service. Providing the investors with real time information on their assets in an engaging way saves time and is more convenient to them.
- To attract investors by providing user portfolios aligned with their life goals instead of products of the advisor. Robo-advisory platforms give the visualization of balance projection and show the investor dependencies between the answers from the on-boarding questionnaire, risk profile, proposed investment strategy and long term financial goals.
- To benefit as a manager from behavioural analysis of customer activities in the system to help them get a better deal with emotional aspects of investing.
- To aim for transparency, especially when presenting the robo-advisor’s pricing, product and process information.
See our Robo Advisor Software:
Robo-Advice is not about tomorrow anymore. It’s about today.
A robo-advisor is an online wealth management service that provides automated, algorithm-based portfolio management advice without the use of human financial planners. Robo-advisors are typically low-cost, have low account minimums, and attract younger investors who are more comfortable doing things online. The idea made sense to many, and robo-advisors quickly gained market traction. Full-service, high-value-added, person-to-person activity isn’t for everybody. There are generations of tomorrow’s investors coming through today, who are more attracted to something less person-to-person and more technologically enabled.
The rapid rise of Robo-Advisors
Robo-Advice is changing the landscape of global wealth management. Historically, investment management was the purview of the wealthy. With robo-advisors flooding the investment markets, offering low-fee, diversified professional management, the investing landscape is evolving.
The number of robo-advisors is growing rapidly. New consumer brands are emerging in the digital wealth management industry such as Betterment, Wealthfront and Personal Capital.
In its report, BI Intelligence forecasts that robo-advisors will manage around $8 trillion of total global assets under management (AUM) by 2020.
TOP trends and challenges in wealth management for the next years
- Robo-advisors disrupt the wealth management industry. In the near future, advisors that will wait for the transition to robo-advisor will lose out. Investors will migrate towards those lower-fee providers with technology platforms.
- We observe the strong influence of technology within the entire investing environment. Many investors trust technology and expect 24/7 access and reporting.
- The competition increases rapidly. New consumer brands of pure robo-advisors appear in the digital wealth management industry, while traditional financial advisors ‘go robo’ as well.
- New regulations are directly impacting the financial advisory industry and driving companies to offer robo services as a way to meet the requirements.
- Investors increase pressure to lower fees. Robo-Advisors serve a wider range of customers and allow to stay profitable in lower fees environment.
- Artificial Intelligence enters the robo-advisory industry and could be the strongest competitive advantage. Robo-Advisors soon will offer more diversified investment products.
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As the robo-advice industry grows it is attracting the attention of traditional asset management firms. These companies want to offer what their clients need — easy money management — while at the exact same time attract more funds to manage. Today they may be losing assets to the startup robo-advisor firms. Last year, Fidelity Investments, Charles Schwab Corp. and The Vanguard Group have either created their own digital services unit or partnered with an existing robo business. We are sure the other large firms will join the trend.
After the great success of robo advisors launched by Ameritrade, Vanguard or Charles Schwab the main question for traditional financial advisors is not ‘if to invest’ in new robo-technology but ‘how to bridge the gap’.
Traditional financial advisors decide on a hybrid model
Following in the footsteps of the stand-alone digital robo-advisor is a hybrid model, combining both automated and traditional human services. The model offers a live company-employed financial advisor in combination with online automated services in areas such as asset allocation and rebalancing.
Hybrid Robos = Combining Human and Automated Wealth Advice
The report by My Private Banking Research projects a robust future for the hybrid model of the robo-advisor. The research implies that the hybrid models will grow to $3.7 trillion assets world-wide by 2020 and $16.3 trillion by 2025, 10% of all investable worldwide assets.
The main expectation for robo-advisors is to utilize more human-like interfaces and features, and for human advisors to adopt more robo-advisor-like features.
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Future growth in assets under management (AUM) seems to be closely linked to digital strategy, as new generations of investors adopt different ways of investing. This calls for a rethink of which strategies can best capture the next generation of customers and compete against players who offer new investment platforms based on advanced robo-technology. Digital distribution is therefore expected to disrupt the traditional distribution landscape.
What does it mean for advisors today?
The next few years will be challenging for CEOs of wealth management companies. The top challenges include starting the digital transformation journey, which has an influence on:
- The Grow of AUM
- Cost Management
- Regulatory Changes Navigating
- Adapting to disruptive innovations in the business environment
- Enhancement of customer satisfaction and engagement
Automated advisory platform allows firms and advisors to be significantly more cost-efficient in their advice delivery and execution, helping maintain profits even if the fee income declines. These platforms also allow to scale up operations and serve more clients of every size and type.
Technology aids transparency and trust. When all operations are running through the automated advisory platform, it is easy to report to the client exactly what is happening, and why. Similarly, periodic reporting—quarterly, yearly or as often as the client wants—can be easily automated as well. The best automated platforms will record each interaction, as well as any client feedback, both for regulatory purposes and to enhance future interactions.
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