can roboadvisors change investment behavior to achieve financial goals?
TRANSCRIPT
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BrightTalk conference - June 23rd, 2016
Can Robo-Advisors change investment
behaviour to achieve your
financial goals?
April Rudin The Rudin Group
Paolo Sironi IBM
Greg B Davies, PhD Centapse
David P Wilson Capgemini
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2
Paolo SironiIBMThought LeaderWM FinTech Analyticsauthor “FinTech Innovation: from Robo Advisors to GBI and Gamification”
Greg B Davies, PhDCentapseFounder Specialist in behavioural finance and decision science
David P WilsonCapgeminiHead of Strategic Analysis Group at Capgemini Financial Services Founder of thewealthconsultant.com
April RudinThe Rudin GroupCEO Wealth marketing solutions
Welcome toour webinar
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Conversation withDavid P Wilson
(Capgemini)
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Automated Advisors BrightTalk Conference
June 24, 2016
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2 Copyright © Capgemini 2016. All Rights Reserved
20160623_BrightTalk Webinar_Automated Advisors_v1.0.pptx Follow discussion at #WWR2016 Download Full Report at www.WorldWealthReport.com
We celebrate the 20th anniversary of the WWR
Impact of New Market Realities on
HNWIs Changing HNWI
Behaviors
Mid-Tier Millionaire Challenge
Offshore vs. Onshore Capital
Flows
Globalization and Wealth
Transfer
Change and Innovation in
Private Banking
Needs- Based Client
Service Models
Ultra-HNWIs
Meeting Needs of Growth Markets
Institution- Like HNWI Behaviors
Specialized Products and
Strategies
Adapting to New Market
Realities
Europe vs. North America HNWIs
Change in Investor Psyche post Crisis
Leveraging Enterprise Value
Developing Scalable Business
Models
Regulatory Impacts on WM Firms
and their Clients
Addressing Evolving Role of Wealth
Manager
Digital: The New Wealth
Management Mandate WWR 2016 20th Year
Anniversary
Digital Maturity Remains an Elusive
Goal
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3 Copyright © Capgemini 2016. All Rights Reserved
20160623_BrightTalk Webinar_Automated Advisors_v1.0.pptx Follow discussion at #WWR2016 Download Full Report at www.WorldWealthReport.com
By 2025, HNWI wealth projected to be ~3x 2006 levels
3.5 8.4 17.4
42.1
4.4 11.2
16.6
25.7
5.0
10.1
13.6
19.9
2.2
5.1
7.4
11.7
1.1
1.4
2.3
4.4
0.4
0.9
1.4
2.3
0
20
40
60
80
100
120
1996 2006 2015 2025P
HN
WI F
inan
cial
Wea
lth
HNWI Wealth Growth 1996–2015 2006–2015 2015-2025P
Total 37.2
Total 58.7
Total 106.0 54.9%
106.4%
47.5%
34.3%
61.7% 44.3%
57.5%
Middle East Latin America
North America
Asia-Pacific
Europe
Africa
Global 65.5%
142.0%
54.4%
46.2%
92.0% 58.4%
80.7%
HNWI Wealth Projection, 2006, 2015, 2025P (by Region)
Source: Capgemini Financial Services Analysis, 2016
248.1%
397.0%
277.5%
171.8%
109.3% 235.4%
253.4%
Total 16.6
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4 Copyright © Capgemini 2016. All Rights Reserved
20160623_BrightTalk Webinar_Automated Advisors_v1.0.pptx Follow discussion at #WWR2016 Download Full Report at www.WorldWealthReport.com
Industry executives foresee significant disruption for the next 10 years
Source: Capgemini Financial Services Analysis, 2016; WWR Executive Interviews, 2016
Key Areas of Future Trends in Wealth Management
CLIENT
OPERATIONS
REGULATORY
DIGITAL
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5 Copyright © Capgemini 2016. All Rights Reserved
20160623_BrightTalk Webinar_Automated Advisors_v1.0.pptx Follow discussion at #WWR2016 Download Full Report at www.WorldWealthReport.com
Current wealth industry digital maturity will not be sufficient to tackle digital demand and disruption
Average Digital Maturity Score of Wealth Management Firms Across Enterprise, Advisory, and Client Parameters
Source: Capgemini Financial Services Analysis, 2016; Global HNWI Insights Survey 2016, Capgemini
3.6
3.4
3.2
3.1
3.0 2.9
3.0
2.9 3.5
2.5
2.0
3.5
3.3
2.8
3.0
2.0
Enterprise Culture
Enterprise Capability
Advisory Engagement
Advisory Productivity
Advisory Capability
Client Capability
Client Experience
Wealth Firm Score Third-Party Analyst Score
Enterprise Vision
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6 Copyright © Capgemini 2016. All Rights Reserved
20160623_BrightTalk Webinar_Automated Advisors_v1.0.pptx Follow discussion at #WWR2016 Download Full Report at www.WorldWealthReport.com
Digital maturity’s importance is going to increase as HNWIs increasingly embrace new FinTech offerings
49%
76% 70%
52% 48% 46%
33%
67%
80% 77%
64% 59% 61%
68%
0%
25%
50%
75%
100%
Global Asia-Pacific (excl.
Japan)
Latin America
Japan Middle East and
Africa
Europe North America
2015 2016
(%)
Source: Capgemini Financial Services Analysis, 2016; Global HNWI Insights Survey 2016, Capgemini; Capgemini and RBC Wealth Management Global HNW Insights Survey 2015; Capgemini Wealth Manager Survey, 2016
47.5% 48.4% 59.1%
34.8% 46.4%
69.1%
39.3%
13.3% 11.4%
11.9%
17.4%
13.0%
11.3%
18.1%
12.3% 11.0%
12.9%
15.8% 11.2%
8.5%
15.9%
12.4% 8.9%
9.5%
20.1% 13.3%
6.4%
17.0%
14.5% 20.2% 6.7% 12.0% 16.1%
4.7% 9.8%
0%
25%
50%
75%
100%
Global North America
Asia-Pacific (excl.
Japan)
Japan Europe Latin America
Middle East
& Africa
Never
Once or Twice an Year
Quarterly
Monthly
At Least Weekly
HNWI Propensity to Use Automated Advisory Services
HNWI Current Frequency of Usage of Peer-to-Peer Advice Forums
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7 Copyright © Capgemini 2016. All Rights Reserved
20160623_BrightTalk Webinar_Automated Advisors_v1.0.pptx Follow discussion at #WWR2016 Download Full Report at www.WorldWealthReport.com
Wealth manager engagement and FinTech collaboration can enable digital transformation
High-Level Digital Prioritization Roadmap in Wealth Management
Core/Strategic Focus Transformation Focus
Shift the business mindset Develop ROI model/ cross-enterprise support
Make build vs. buy decisions
Implement quick wins to build momentum
Develop big data opportunities
Partner/ collaborate with FinTechs
Engage wealth managers to test, improve, and launch programs
Additional Recommendation for 2016 Strategic Recommendation from WWR 2014 Transformation Recommendation from WWR 2014
Note: Steps do not necessarily need to be taken sequentially Source: Capgemini Financial Services Analysis, 2016; WWR Executive Interviews, 2016
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2016 www.worldwealthreport.com
WORLD WEALTH REPORT
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12
Conversation withPaolo Sironi
(IBM)
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Long term equation: “FinTech Innovation”
Robo-Advisors ( TECH innovation ) + Goal Based Investing ( FIN innovation ) + Gamification ( behavioural change ) ———————————————— = personalisation of personal finance
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Robo-Advisors
Automated investment solutions which:- engage individuals with digital tools- featuring advanced customer experience- to guide them through a self-assessment
process- and shape their investment behaviour- towards rudimentary goals- and provide automated rebalancing- using trading algorithms based on passive
investments- and portfolio diversification.
nor Advisors
neither Robo
good example to explain how to digitalise Retail and Private Banking
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It is not gold all that glitters
Something BAD
1. Over-simplified on-boarding
2. Not enough risk & goal based
3. Not holistic approach
Something GOOD
1 . investing for the long term
2. portfolios not just products
3. lower costs
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Progressive industry shift towards 2020
to channel of
portfoliosadvice driven
from channel of
productssales driven
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GBI is a gravitational system: space (risk/return), goal (time)
fee
return
risk
fee
return
risk
Digital WMTraditional WM
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What changes for advisors and investors
WHAT DOES IT MEAN FOR ADVISORS?
from PEOPLE’S GOALS
to PORTFOLIOS
to PRODUCTS
WHAT DOES IT MEAN FOR INDIVIDUALS?
MAKE YOUR AMBITIONS RIGHT
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Learning trough experiences
What is a good ambition?
Why should I stay the course while markets drop?
How can my investment actions affect long-term portfolio returns?
Market crash
negative rates
high inflation
booms and busts
job loss
health concerns
Cognitive Gamification
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20
Investors’ bias
Conversation withGreg P Davies, PhD
(Centapse)
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1
@GregBDavies [email protected]
Dr Greg B Davies Founder, Centapse
Centaur Advice Man plus machine for better decisions
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Fluid Intelligence
Less wealthy half Wealthier half
Expense Substantial
Small
Your car is having some trouble and requires £X to be fixed You can pay in full, take a loan, or take a chance and forego the service at the moment...”
Chart adopted from Anandi Mani, Sendhil Mullainathan, Eldar Shafir, Jiaying Zhao (2013). Poverty Impedes Cognitive Function. Science. Vol(341): 976-980.
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Human Capital (future income)
Goals (Future
Liabilities)
Asset Debt Funding
Financial Debt Funding
Ne
t V
alu
e
Crystallised Goals
Savings & Investments
Future Wealth Current Wealth
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4
Investment
Savings
Insurance
Spending
Planning
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Total Investment Portfolio Multiple Investment Pots
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Knowledge Engagement Comfort Examples
Disclosure Little, or none None None
Caveat emptor
Disclaimers
Traditional Education
Little, or none Little, or none Little, or none Seminars
Classes
Nudges None, or negative
None, or negative Some
Auto-enrolment
Defaults
Engaged Choice
Yes Yes Yes
Just in time education
Gamification
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Behavioural Design
Digital Technology
Data Analytics
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Thank you
Can Robo-Advisors change investment behaviour to achieve your financial goals?
April Rudin The Rudin Group
Paolo Sironi IBM
Greg B. Davis Centapse
David Wilson Capgemini
THANKS