- Investors – anticipate to get standardized advice through digital channels at any time of their choice, low cost, through self-service mode
- Advisers- consequently align the merchandises and rely extensively on analytics capabilities of the Robo Advisor to examine investor’s profile and inclination
- Dealer Groups & Product Makers- keep the standardized products off-the-shelf to satisfy investor’s demand, e.g., wraps
- Asset Managers, Banks & Insurers – Create and distribute products especially targeted at the investors who need low cost, standardized products, e.g., index funds
Articles related to fintech (financial technologies) and fintech software development.
Benefits of Robo Advice according to ESMA
Benefits to financial institutions
Benefits to consumers
Robo-advisers are systems that use algorithms to handle users’ investment platforms. And they may be threatening to upend the tremendous wealth management business that is international.
BI Intelligence predictions that robo-advisers will handle around 10% of overall worldwide assets under management (AUM) by 2020.
In a fresh report from BI Intelligence, we examine the marketplace for robo-advisory services, the motorists behind consumer adoption of robo- guiding the robo-adviser marketplace presents a chance to wealth management businesses that are conventional, and how startup robo-
As substantial legacy businesses start offering their own services counselors can triumph.
Big riches supervisors that are incumbent will not lose out to startups like Wealthfront and Betterment. Rather, they establishing their own products, which are scaling fast and are adopting the technology.
Consumers across all asset types are open to robo-advisers — such as the rich. 49% of the group would consider investing some of the assets using a robo advisor.
Many assets managed by robo advisers will come from those who have some investments.
On the first of July 2014 large polish economic magazine Puls Biznesu published an article “The age of robots comes to Warsaw Stock Exchange’. Article is quoting, among others, Empirica’s representatives speaking on the topic of the growth of algorithmic trading in Poland. Excerpts below.
‘Popularization of algorithmic trading on conferences like this one is step in good direction, says Michal Rozanski CEO of Empirica, a company which delivers Algorithmic Trading Platform. Expert says that computers will never replace a human in all the tasks. First and the foremost machines are taking over the processes that human traders had to perform manually. ‘I am sure that the development of algorithmic trading will not change the soul of the markets. It will not change to the race of engineers. It is and always has been the race on new, better ideas.’ says Michal Rozanski.
In his opinion both small and big investors will benefit. ‘Appliance of algorithmic trading tools increases liquidity and descreases bid/ask spreads which in turn decreases transaction cost born by all investors’ adds expert.
Michal Rozanski stresses that appliance of algorithmic trading does not limit to transactions with shortt time horizon, e.g. counted in miliseconds. Each trader can designs algorithms adjusted for it’s own requirements. ‘Let’s imagine an investor who would like to open a large position on KGHM shares or futures on WIG20. To make it happen it’s best to divde the order to tens or hundreds of smaller orders, which allows to hide her intentions from other market participants. Investor remains anonymous and minimizes market impact of her large order.’ explains Michal Rozanski.
‘I am convinced that development of algorithmic trading can be a breakthrough moment in the history of our market, as long as we will treat the matter seriously and deliberately. On Wall Street share of algorithms in total turnover is estimated at 50%, in Europe at 40%, and in Poland still at below 20%. ‘ says Adam Maciejewski, CEO of Warsaw Stock Exchange.
Link to article…
Algorithmic trading workshop took place on 27th of July 2013 as a part of the second conference held by economic magazine ‘Puls Biznesu’ and Warsaw Stock Exchange.
Michał Różański, representing Empirica, held workshop on the practical aspects of selecting tools for algorithmic trading by financial institutions. He stressed and covered in detail, especially one aspect of algorithmic trading which is from our practical experience constantly undervalued – namely proper testing of algorithms.
Very interesting was also a lecture of Emil Lewandowski who showed an algorithm which was able to detect a flash crash an hour before it actually happened. Algorithm was implemented, backtested, executed and presented to all the participants our Algorithmic Trading Platform. It was indeed very interesting example of application of algorithmic trading!
Among other guest were representatives from IBM, Sungard, List and M10.
Link to event:
FinTech : It is just starting
FinTech sector is producing businesses with scalable products and has seen rapid growth over the past few years. Senior executives at banks are responding to the challenge these companies have started by setting their own incubators up to capture this high-speed initiation.
Technology was once centralised, with companies being run on big databases and transaction engines. Nowadays, it is massively distributed. New businesses have sprung up to take advantage of the chances this shift brings, while leading banks still operate using the old technology. The term “peer to peer” captures some of the phenomenon, in that it is now potential for financial transactions to take place on a platform without needing a bank or indeed any entity as an intermediary.
The financial services marketplace is all about information exchange that is reliable, secure and efficient. In many cases the new alternatives can be cheaper and quicker than traditional models. A broad variety of potential models exist, which explains the increasing number of new fintech startups that have entered the market.
Needless to say, fintech is not new and technology has consistently brought gains to consumers. Back in the day, however, development costs were high, while the technologies of today are more broadly available, affordable and, most importantly, worldwide scalable.
The huge banks are setting up their own initiation arms to investigate opportunities presented not only mobile but also by by P2P and micro-payments cryptocurrencies like Bitcoin,, and distributed ledgers for example blockchain.
But as progressive as traditional financial institutions strive to be, they will remain hampered by their legacy systems and processes. I see the banking landscape continuing to change quickly as fintech businesses with talented management, viable products and clever advertising using new and traditional media take market share. Moving fast, nimbly and economically to capitalise on opportunities is the key.
Artificial intelligence in FinTech
Since its inception in the 1950s, artificial intelligence (AI) has found at least two major boom cycles and long winters of disillusionment. While artificial intelligence endured through the recent disullusionment cycle in the 1990s to today, its easing and corollary technologies have flourished, and we’re now entering into a fresh boom in applictions of the technology.
Financial services have been revolutioned by the computational arms race of the last twenty-plus years, as technologies like big data analytics, expert systems, neural networks, evolutionary algorithms, machine learning and more have enabled computers to crunch much more varied, diverse, and deep data sets than ever before.
While most of the businesses built around machines making decisions are’t true AI, they may be using data-intensive technologies that will help technologies and firms continue to get closer to executing AI in commercial applications.
Despite the hype of intelligent machines, the first uses of AI are’t replacing humans and human intelligence but augmenting them. Text-based conversational chat was adopted by many startups as a way to deliver a personal assistant-like expertise in many industries, and in fintech we’ve seen the case of businesses like Kasisto utilising AI to scale the impact of people using technology. Instead of being bounded in customer support uses by humans reacting to users through chat windows, AI and related technologies are being implemented to deliver a human-like chat encounter without the need for nearly as many human helpers.
By using smart agents that can examine and crunch data about individual behaviour and compare to broader datasets, small and big businesses could have the ability to deliver personalized financial services as a scope and scale never possible before. Consumer banking, advisory services, retail financial planning, investment advice and wealth management, all of these services can be delivered using a conversational user interface with artifical intelligence software behind. The combination of technologies can empower firms to supply services to customers where they were unable to supply human service profitably (i.e. lower net worth sections of personal financial, investment and retirement advisory), but can now function using codified knowledge and AI-powered software.
In addition to new segments, they are able to be more personal, supplying guidance at the transactional level (i.e. every individual transaction). This is the story behind smart wallets like Wallet.ai. Picture having an assistant with you to allow you to assess, price, and consider every single thing you spend money on, at a granular level that you could not be assisted by any human helper with. Is a roboadvisor that offers rule based advice using only a couple of predefined parameters AI? Likely not, but newer technologies as time goes by which are based around learning and viewing about your behaviors at the individual level, could give guidance and outcomes which might be personalized in a way never possible formerly.
AI can also power technologies that overlay humans to supply workers activities with an tracking and oversight mechanism, helping with compliance, security, and the observation of employee actions. Monitoring discrete, repetitive data entry tasks, computers could watch and learn as time passes to verify test and data entry for particular events, evaluate danger, and find fraud. Any segment of fintech that is regulated creates the chance for companies to install AI-powered employee and systems supervision.
AI technologies that allow computers to process information could augment underwriting and lending products and make decisions more easy and better than individuals alone. While it’s still to be determined how new data sets created by technologies like wearables and internet of things can be used for insurance and credit decisions, AI-based technologies make it more potential for businesses to use these new datasets in highly personal ways .
But AI is creating bigger opportunities to go beyond testing and fitting data to create trading systems and more “intelligent ” dealers, using robotraders to optimize and test predictions and trading rules. AI can help manage and augment rules and trading decisions, helping process the data and creating the algorithms managing trading rules.
Some investment firms have implemented trading algorithms based on sentiment and insights from social media and other public data sources for years, but technology companies like Dataminr are installing platforms for a larger set of businesses to use. Getting and utilizing large, heterogenous datasets is now potential for far more companies to use, so how will companies leverage and build on top of these datasets?
The future of AI in FinTech
While much of the investment in artificial intelligence has been into multi-purpose platforms which are figuring out their specific, high-value usecases, the chance in fintech is somewhat different. Fintech has a base of technological prowess in the technologies supporting AI and several immediate high value uses.
Initially, AI was used more in backend technology settings to power large scale decisioning in financial analysis , trading and lending, but now it is becoming a technology that expands how everybody interacts with financial services companies. A number of problems consumers are facing when using financial services are around the problems in getting to quality, personal service. And possibly it’s an artificially intelligent agent that helps deliver cheaper, private services that are better and faster.
With the advent of Automated Digital Wealth Management options (aka robo advisers), the conventional wealth management industry is facing perhaps its most tumultuous threat since low-cost online stock trading emerged in the mid 1990’s
- The Millennial generation’s predisposition to “do-it-yourselfthrough-an-app”
- Availability of highly credible digital wealth management options
- Providing scalable advice
- Suffering in the comparative shift in appetite towards ETFs the mutual fund business, and other passive investment vehicles in particular seems farther threatened since most of the solution providers by digital wealth management solutions use ETFs as their underlying investment vehicles
- At the absolute minimum, all wealth supervisors should be highly focused on “digitizing” their businesses as consumers of all ages and demographics will expect an “Amazon and Uber – from all of their financial service providers like expertise that is ”
- Fintech disruption in all areas of finance and investments (online banking, big data, AI, sentiment analysis)
- New consumer brands are appearing in the digital wealth management sector (such as Betterment, Wealthfront and Personal Capital) while conventional companies are striking back by either offering their own in house options (including Charles Schwab and Vanguard) or partnering or getting to speed time to market
As a wealth advisory service, robo-advisors have already been growing in popularity for recent years. Low minimums, low fees and the guarantee of sound yields, attract new investors, particularly millennials.
Now while this kind of service created considerable asset increase at first, that increase has leveled off. Although the usage of robo-advisors continues, a tendency that is more comprehensive is replacing the service, with financial advisors using computer programs to help them in managing customer accounts and offering investment advice.
There stays a comparatively small section of investors for whom robo-advice and most of the demands can match with.
The truth is, the popularity of robo-advisers, and the lessons learned from their execution, point to online brokerages, a fresh manner advisors and other financial institutions can do business. These investment and advice suppliers obtain or can construct a platform offering much more than just advice that is digital. It can rather power an environment where a personalized investment software is successfully provided through call center, advisors and digital stations, determined by the route that is best, together with client setting.
Call it an automated advice platform—a package of applications that can direct investment choices and more, from tax-loss harvesting and rebalancing to predictive analytics and data mining, helping the adviser and business socialize with the customer through the route that is most suitable. This type of system drives cost savings and efficiencies, together with an increased customer experience.
You’ll find choices and many variables that businesses should consider when planning and installing these systems.
THE DAWN OF AUTOMATED advice
The financial advisory business was limited and included much more manual task by now’s standards, in and to whom.
advice delivery was ineffective and slow, along with exclusive (largely limited to rich or well-off investors). Eventually, it was not difficult for fiscal preparation to become disconnected from your real execution of the investment advice.
When technology increased rate and consumers needed immediate info delivered at their convenience and increased transparency these shortcomings became clear. Many financial advisors, working with insufficient and ageing applications, cannot fulfill with those requirements.
Robo- prejudices that are behavioral could be eliminated by advisors and manage regular account maintenance while conserving prices—so the pitch went.
Some of the early robo-advisors came like Betterment and Wealthfront from pure play robo companies. Well-recognized product producers like Vanguard, BlackRock and Schwab got into the space, also. Conventional advisory companies, also as independent broker dealers and custodians, embraced automated investment technologies, looking to attract younger customers (nearly 40% of millennials are thinking about robo-advice) and smaller accounts, together with maintain their peers. Still nowadays, we see niche-oriented robo-companies like WorthFM coming to market, as businesses that are other add artificial intelligence with their platforms.
By investing in a automated platform that is advisory, companies can construct and power an omni-station surroundings—one where advice that is customized is delivered through digital versions, call center and adviser.
Growth rates have dropped, and average earnings per robo-advisors customer is decreasing, which doesn’t bode well for his or her long term prognosis.
If the portfolio is simply an apportionment of various ETFs that are passive, then it’s not more expensive to buy through a self directed account.
The robo-adviser also leaves no selection —once the asset allocation is discovered, it’s impossible to change investments. Other criticisms of pure robo-advisors are that they’ve yet to work during a long bear market or downturn (remaining invested is essential to the investing theory), and it’s not clear how they’ll manage occasions like post-retirement drawdowns. And, while many younger investors are wonderful with fiscal advice that is only digital, many others aren’t. Additionally, many facets of the fiscal advice relationship continue to demand human intervention, like tax strategies and estate planning.
Many of the notions that drove the adoption of robo-advisers in the first place stay sound, and advisers and companies have a prime chance to employ robo-advisory technology more generally across practices and their company. Really, robo- alternatives that are advisory will continue to develop to address these shortcomings, placing pressure that is on-going on advisory businesses that are conventional. By investing within an platform that is advisory that is automated, companies can construct and power an omni-station surroundings—one where advice that is customized is delivered through call center, advisors and digital versions.
By investing in a platform that is advisory that is automated, companies can assemble and power an omni-station surroundings—one where advice that is customized is delivered through digital versions, call center and adviser.
In this hyper-linked information age, a large proportion of investors, no matter account size want professional advice. The fiscal advisory businesses that can best provide this advice—in a sense which is still rewarding to the business, and in the quantity, frequency and format the customer needs —will function as ones that prosper and live. There are lots of newer “tumultuous” suppliers which are using innovative methods to deliver this advice that is professional, such as call centre and the only on-line -based advisory business Personal Capital. This places those conventional advisory companies that manage to completely comprehend their present and prospective customers at a clear edge and to develop their abilities. Companies must have the capacity to serve customers in just how they need. Technology is critical to provide the customer experience that is appropriate, fulfilling the customer’s needs consistently and economically. But, the real innovators are the ones that will push on their technology -advisory. With the proper preparation, they are able to set up an all-inclusive advice platform that is automated.
Advantages of an automated platform that is advisory
Companies which make an investment in applications and the hardware that enable an automated platform to run with omni-station advice stand to reap tremendous gains. Possibly the most noticeable is client satisfaction; customers who are receiving advice through their favorite channel and at their favorite frequency are substantially more likely to be met with the service they’re receiving and, therefore, are more likely to remain with advisors and the company. An automated advisory platform’s first job will be to identify customer needs and vector those customers into the advice delivery channel that is proper. But, that can not go considerably deeper than the platform. advisors can also use data mining to help them comprehend a customer’s obligations and total assets, much more precisely than before. The sophisticated platforms with artificial intelligence can examine behavioral profile is ’sed by a customer and call possible attrition and life events, then propose methods for the advisors to manage such occasions. The platform may have the capacity to identify possible areas for new product development centered on tasks and customer needs. The real innovators are the ones that will push on their technology -advisory. With the proper preparation, they are able to set up an all-inclusive advice platform that is automated.
Raising price efficiencies
Advisory platforms that are automated enable advisers and companies to be cost efficient in performance and their advice delivery, helping keep gains if fee income declines.
There are, needless to say, upfront prices to add applications and hardware, but automated platforms that are advisory enable advisers and companies to be more cost efficient in performance and their advice delivery, helping keep gains if fee income declines. These platforms also enable adviser and the company serve more customers of every size and kind and to scale up operations.
Past robo-advisory, technology may be a tremendous support in regards to routine account tasks, many of which are never seen by customers.
Likewise, regular coverage—quarterly, annual or as frequently as the customer needs—can be readily automated too.
Eventually, aside from the station, each interaction will be recorded by the finest automated platforms, together with any customer comments, both for to improve future interactions and regulatory functions.
Best interests: The Department of Labor’s fiduciary rule Regulations that are new are about to get stricter, especially in regards to advice on other retirement accounts and IRAs. Additionally, it sets strict rules on advisers becoming paid through commission.
With present adviser practices, the new rule WOn’t probably allow it to be rewarding for advisers to service accounts that are smaller. Nevertheless, technology— especially applications leveraging robo-adviser strategies—can empower companies to service these accounts that are smaller while still fulfilling with the fiduciary rule’s no- best-interest and commission mandates.
The fiduciary rule is more extensive than that, nevertheless, and technology will be critical to fulfilling with all its precepts. Any advice that’s given to some retirement customer must take the customer’s best interest, irrespective of how little or large the customer and no matter what station that advice is delivered through.
The appropriate technology can ensure that occurs, ensuring an adviser or an algorithm doesn’t advocate the investment merchandise that is incorrect, for instance, and making certain the advice is consistent across all stations. Technology also will keep an eye on what advice is given it is simple to demonstrate to regulators that the performance of that advice and the advice were in the customer’s best interest.
Advisory platforms that are automated enable advisers and companies to be cost efficient in performance and their advice delivery, helping keep gains if fee income declines.
CHOOSING AND APPLYING AN AUTOMATED ADVISORY PLATFORM
The best automated advisory platform will do much more than simply offer investment merchandise suggestions and rebalancing and tax- lost harvest
While the notion of a robo-adviser is not useless, the current use of the technology does not go far enough. This creates an opportunity for forward-thinking financial institutions and advisers reap benefits and to expand the notion significantly, including cementing long-lasting and rewarding client relationships.
The greatest automated advisory platform will do much more than just offer rebalancing and investment merchandise ideas and tax-loss harvesting. The platform also must be incorporated with client relationship management (CRM) programs, so that the adviser can get up to the minute info on an account, regardless of that customer’s main advice delivery channel.
Many of these items can be handled digitally. Others will need call center advice as well as face-to-face meetings between customer and the advisor. Pivoting between channels completely understands each client’s settings and WOn’t be an issue for the company or advisors that has put in place the technology that is correct.
The finest automated advisory platform will do far more than just offer investment product suggestions and rebalancing and tax-lost harvest.
Six steps for delivering automated advisory To construct and produce this vision of a robust, technologyenabled platform, it’s essential the platform be thought out before any changes are made. We have identified six important steps that any automated advisory platform must support while particular functions will differ depending on a firm’s own settings, capabilities, client roster and plans for growth.
Step one – Client vectoring: This critical first step involves getting to know new clients, their assets and their investment aims, and then slotting them into the proper investment and servicing software. Clients can be sifted into groups for example mass market, mass affluent and high net worth, and the platform can devise investment plans for each class (e.g., UMAs for the rich and wrapping accounts for mass market investors) and based on how each client will probably prefer to be served. This assessment must be nimble enough to account for personal tastes.
Measure two – Preparation and product selection: This is the phase that perhaps most resembles now’s robo-adviser. Using information collected through questionnaires and other customer interactions, the algorithm advocates underlying securities which might be suitable to each customer and an asset allocation. The difference is the platform can also help train the client on these options—via online or call center, for example—and may also make adjustments to the recommendations based on how complicated each client’s portfolio and individual financial situation is.
Step three – Implementation: The application or the financial advisor subsequently clarifies the rationale behind the proposed investment program and makes any corrections predicated on client interaction.
Step four – Monitoring: After the automated advisory platform makes an investment, the algorithms continuously track how that investment is performing. The action could be as easy as monitoring rebalancing and drift as needed. The activity also could be more sophisticated, for example tax-loss harvesting, transaction cost optimization, or flagging an issue for additional actions by adviser or the call center.
Step five – Performance and servicing: Here we see the complete advantages of the omni-channel servicing version that an automated platform that is advisory supports. How account statements, investment reports, funding requests and other regular customer messages are best delivered depends on customer setting and adviser commitments, also as on the content of the communications themselves.
Measure six – Event-driven reinvention: Client scenarios continuously change (e.g., new job, inheritance, health complications, retirement). These life events may necessitate significant changes. Many will demand the intervention of a human adviser, although a few of these changes can be managed automatically by the platform. The platform and advisors, working in tandem, can come up with the best solution, such as a brand new investment product, changing to a new service station, or going into an UMA or UMH.
Concerns when choosing provider and a platform
Transforming a current IT system can be expensive, complex and uncertain, but this is offset by the many clear advantages of transitioning to an automated advisory strategy. Questions to consider when looking to purchase and deploy an automated advice platform comprise the following:
• What attributes does the platform The platform also needs to work within a business’s present IT infrastructure, or the business will have to upgrade its systems. Likewise, can the new platform integrate readily with a firm’s present software and with the workflow that’s already in place among its advisers, call center representatives and other professionals?
Scalable have to be addressed? Are there gaps in a firm’s existing data collection systems? Is the company’s online security robust and up up to now? The type of upgrades or changes will be needed to advisers ’ backgrounds and dashboards? What about the call center?
• What are the integration challenges? offer? As we’ve seen, there is certainly a broad range of attributes that are possible a platform will offer. Companies will want to decide how complicated and thorough they desire their first platform to be. In addition they will want to make certain it can be expanded to feature new products and services without an excessive amount of trouble as the business’s needs change.
• What other challenges is the platform? As the company’s novel of business grows firms must ensure the platform can grow with regards to the variety of advisors and clients it can support.
It must not be a question of “if” but instead “when” a company will set up an automated advisory platform. The future of the financial advisory industry will tend heavily on technology, and those companies that lag behind are bound to miss out on the advantages to advisors, customers and the firm overall.
Top companies will put in place platforms that consider the needs of advisors and clients, ensuring that advisers develop a strong instrument that helps them serve their clients more economically and effectively. The robo-adviser tendencies in recent years gave rise to fears that technology would casts aside advisors. But, it is now clear that advisers are as important as ever. An automated advisory platform can augment advisers’ expertise, ensuring that customers receive the best advice—no matter what channel they prefer.
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