disruption in the wealth management industry€¦ · growth of digital advice, a complement to...

ARCADIAN COURT JUNE 27, 2017

Disruption in the

Wealth Management Industry

Opening Remarks

David Reeve – CEO & Co-Founder,

InvestorCOM

3

Time to 50 Million Users:38 years

POKEMON GO

Hyperadoption: More people adopting more new product

experiences more rapidly than ever before

INVESTORS

13 years

4 years

3years

1 year

9 months 1 week

Demographics

> 1000

fintechs

Competitors

Regulation

Keynote Speech

Bruce Croxon - Founder, Round13

The Decentralized Future of a

Blockchain-enabled Wealth Management

Industry

Matthew Spoke - CEO, Nuco

The Decentralized Future of a

Blockchain-enabled Wealth Management

Industry

What is Blockchain?

https://www.youtube.com/watch?v=6WG7D47tGb0&t=9s

Blockchain Technology:A New Fabric for Industry,An Opportunity for Wealth Management

Blockchain networksconnect multipleentities in an industry

Smart contractsfacilitate automatedindustry processes

The infrastructureis built to scale andenable networkeffects

Enterprise Problems

Today

+ Reliance on intermediaries

+ Inefficient and high friction process

+ High cost

+ Isolated systems

/ P

RO

BLE

MS

TOD

AY

BlockchainCapabilities

+ Shift in trust

+ Shared infrastructure

+ Eliminate third party intermediaries

+ Crypto-Economics

/ B

LOC

KC

HA

INC

AP

AB

ILIT

Y

Enterprise

Potential of

Blockchain for

+ Automated and highly efficient

+ Tamper proof records and immutablebusiness logic

+ Interconnected ecosystems

+ New digital future/ B

LOC

KC

HA

INP

OTE

NTI

AL

Limitations for Mainstream Adoption Today:

+ Performance

+ Scalability

+ Security

+ Interoperability

/ B

LOC

KC

HA

INP

OTE

NTI

AL

Nuco’sTechnology

Proud BoardMembers

/ TH

ETE

CH

NO

LOG

Y

Becoming theStandard

ENTERPRISE BLOCKCHAIN

ENTERPRISE CLOUDENTERPRISE OPERATING SYSTEMENTERPRISE BIG DATA

“We Focus on the Blockchain so YouCan Focus on the App”

+ Network Access

+ Transaction Performance

“The Enterprise Data Hub” “Linux Integration and Support” “Web Infrastructure for Your App”+ Production Scalability

+ Privacy Control

+ Modular Architecture

+ Maintenance & Support

/ TH

ETE

CH

NO

LOG

Y

Products

& Tools

Nuco Kernel Dev Tools Admin Tools API

/ TH

ETE

CH

NO

LOG

Y

API SERVICES DEVELOPER TOOLS DEPLOYMENT

Web3/JS .Net JAVA C++ IDE App framework Profiler On-Prem Cloud

SoftwareArchitecture

SMART CONTRACT LANGUAGE THIRD PARTY INTEGRATION

Solidity Java SC Kotlin ERP Data Distribution PK Management

LOGIC IMPLEMENTATION SMART CONTRACT EXECUTION CONSENSUS ALGORITHM

On-Chain Off-Chain Gas Time Slicing Parallel PoW PoV PBFT RAFT

CRYPTO ENGINE VM ARCHITECTURE DATABASE

SHA2 BLAKE2b SHA3 EVM Multi-EVM JVM LevelDB RocksDB

NUCO KERNEL

/ TH

ETE

CH

NO

LOG

Y

The

Opportunity

Traction

/ TH

EO

PP

OR

TUN

ITY

USE CASES:

WealthManagement Real-time Settlement KYC & AML

Portfolio Management Crypto Space

/ TH

EO

PP

OR

TUN

ITY

+ Reduce redundancies in manualintensive processes

& labour-

+ Improve client relationships and experience

+ Reduce costs in client onboarding andsettlement

/ TH

EO

PP

OR

TUN

ITY

Is the Wealth Management Industry ready?

Blockchains will transform the internet, theeconomy and the world.

Coffee BreakThank You to our Sponsors!

The Regulatory Landscape Affecting the

Wealth Management Industry

John Mountain – Director of Investment

Funds & Structured Products,

OSC

The Regulatory Landscape

What is happening today in the marketplace from a regulatory standpoint?


In the field of managed assets, is regulation creating more or less competition?


On a related note, how is regulation affecting traditional wealth management

companies’ business models?


What Canadian proposals are in the hopper that may impact wealth management

companies in the future?


What comes next in terms of Point of Sale and CRM3 regulations?


• What is the OSC doing about Fintech?

• It looks to some who read about OSC LaunchPad that the OSC is making it

easier for new entrants to carry on business vs. existing companies. Is there

any reason why the OSC would advantage new entrants?


The Statement of Priorities talks about reducing the regulatory burden for

investment funds. Can you please expand on the OSC’s vision to:

• Remove redundant and ineffective disclosure and reporting requirements for

investment funds (some examples?)

• Eliminate overlap in regulatory requirements, and

• Identify ways to enhance electronic delivery of documents


There has been a management re-org within your Branch at the OSC. Please

describe it for us, and what you hope to achieve with this re-org.


What global regulatory themes should wealth management teams be investigating

as they plan their Canadian operations?

LunchThank You to our Sponsors!

Client PanelJoe Canavan – CEO, LOGiQ Asset Management

Barry Gordon – Founder, First Asset Investment Management

Ashim Khemani – CEO, Stem Capital

Katie Peperkorn – Director, Wealth Management Solutions, ATB Financial

Sue Britton (moderator) - CEO, Fin+Tech Growth Syndicate

Client Panel: “How to Thrive in these Times of Disruption”

What do you consider to be the most disruptive forces in Wealth Management

today and what are the most effective strategies to counter those forces?


Transforming and re-imagining the way established companies respond internally

to disruption is key to enabling innovation. How are your companies tackling

learning and embracing some of these new technologies and ways of working?


Have there been any cases where you have been able to drive learnings from

failure, and can you share some insights with us?


Who do you consider to be the biggest innovators in Wealth Management and

why?


There has been a lot of talk about the role advisors will play in the future and the

human vs robo relationship – what is your view of how this will play out over the

next few years?


If we were sitting together in 10 years and looking at the biggest winners in WM,

who do you think they will be, and what would they have done to create a

leadership position?

Sink or Swim: Why Wealth Management

Can’t Afford to Miss the Digital Wave

Yair Weisblum - Partner, Financial Services

Consulting Strategy & Digital, PwC

Sink or Swim: Why Wealth Management

Can’t Afford to Miss the Digital Wave

Ben - Upping the Ante

https://www.youtube.com/watch?v=AiYcoaHW9gY

Global Financial Services

Sink or swim: Why wealth management can’t afford to miss the digital wave

Key wealth management trends

1. Anticipating problems, finding solutions Global Annual Review, PwC, 2014

2. Asset Management 2020 - A Brave New World, PwC, 2010

How will this affect the wealthmanagement industry?The wealth management industry is at an inflection

point: changing demographics, shifting customer behaviours, changing regulatory environment and new technologies are changing how people manage theirmoney

Regulations (CRM 2.0) have been enforcing fee transparency, enabling investors to see how much their investments truly cost them. Proposals to remove embedded commissions will further erode advice pricing and margins

Due to fee reforms and other factors, there has been an everincreasingshift from active to passiveinvestments.

Shift from technology-enabled human relationships to digital

experiences with humansupport will change the way

services are delivered tocustomers

Automated advisory services delivered online and through

mobile apps will better serve the needs of millennial investors,

who will control over 50% of all investable assets by 2020

Proliferation of automated advisory services and a

continued shift towards passive investment products will put

pressure on traditional revenuemodels

Self-guided and direct-to-customer products will create

new business models and channels and helpturn

unprofitable customer segments into profitableones

Client expectations are now shifting towards a platform that demands accessibility (anywhere, anytime), customized on-demand services and better customerrelationships

The simplicity of new technologies have enabled investors to self- direct even more investment products, reducing the number of interactions and sales opportunities for financial advisors in traditional wealthinstitutions

As Boomers retire, the next three decades will lead tounprecedentedwealth transfer($59T).

PwC

Wealth Management is one of the least digital lines of

businesses

PwC

High Net Worth Clients are adopting and/or interested in technology driven solutions

PwC

Weak affiliation to traditional wealth managers is creating a sector vulnerable to FinTech incomers.

PwC

38% of FIs believe their customers are already interacting with

Wealth Management Fintech Companies….

What financial activities do you believe your customers already

conduct with FinTech companies?

Source: PwC Global FinTech Survey 2017

PwC

… and feel that User Experience, Cost, and accessibility are

key toretaining those customers…

What do you think are the most important

areas to address customer retention in the

context of new FinTech competition?


PwC

Current and expected partnerships per country

8


PwC

45%

are currently engaging in partnerships with FinTech companies

(compared to 32% in 2016)

82%

expect to increase FinTech partnerships in the

next three to five years

Financial Institutions are learning to partner…

And integrate

When working with Financial Institutions (or

FinTech companies),

what challenges do you face?

“Traditional Financial Institutions are too slow in implementing things. For a startup it takes no timeto adapt to new circumstances and make changes accordingly. Incumbents take forever.Integrating with them is a nightmare because they lack the culture, know-how, and they lack the incentive.”

CEO of a LatinAmerican FinTechcompany


PwC

Pw

C

Investment in enabling technologies will help narrow the gap

What are the most relevant technologies for your

business that you plan to invest in

within the next 12 months?

Percentage of large companies that identified these

emerging technologies as the most relevant to invest

in within the next 12 months


According to PwC’s DeNovo, recent advancements in AI have pushed the technology to the top of the list for financial services. Startups that apply AI to Financial Services have been funded more extensively, with an average funding of US$1 bn over the last two years.

Innovation trends under an industry spotlight

Trends in Financial Services ranked by importance and

likelihood to respond

Source: PwC Global FinTech Survey 2017 & DeNovo

PwC

While 60% of AWMs see future activities at risk, only 30% are

currently engaging in partnerships

83

%

84

% 67

%

89

%

54

%

PwC

45

%

42

%

30

%

Asset and WealthManagement

Percentage of respondents currently engaged in partnerships withFinTech companies

Percentage of respondents expecting to increase partnerships over the nextthree to fiveyears

Banking Insurance Payments

• Most bankers see personal loans (64%) and personal finance (50%) most at risk of moving to a FinTech company.

• Bankers are increasingly turning to FinTech companies to engage in partnerships (54% vs. 42% last year), and to buy the services of FinTech companies (40% vs 25% last year).

• Insurance companies have been accelerating efforts to keep pace with the trends reshaping the market and closing the gap with other financial sectors.

• They are increasingly coming together as 45% engage with FinTech companies, compared to 28% last year.

• 60% of Asset & Wealth Managers (AWMs) see wealth management activities at risk of moving to a FinTechcompany.

• FinTechs and AWMs are just beginning to come together, with only 30% engaging in partnerships.

• Overall, payment companies are confident in their ability to innovate.

• Innovators are being seen as an opportunity for payments companies, especially as 27% are offering their services to FinTech companies (vs. 17% of respondents across all sectors) and as they are increasingly partnering with them (42% compared to 35% last year).

Wealth management industry is poised togrow at a CAGR of 6% with emerging markets

witnessing the maximum growth rate

PwC

Growth of digital advice, a complement to traditional wealth

models

Globally, there are 200+ Digital Advisory firms. Long term, we believe only a handful will

survive, with the survivors becoming platform providers for the

established wealth managementplayers.

Traditional wealth models will still dominate the global asset

management market.

Incumbents will need to maintaintheir market share in the traditional

wealth space and should complement it with digital advisory

services to take advantage of the growth opportunity.

Growth of Global DigitalAdvice Projected Assets Market (AuM)

Industry estimates suggest that the total assets under management by Digital Advisors could grow to

almost half a trillion dollars over thenext 4 years (approximately ~0.5% of the

global wealth management AuM)

Growth of Global Wealth Management Industry(AuM)

$102T

$86.5T$73T

+6%

2014

2015

2020E

$489B

$23.4B$14B

2014

2015

2020E

+81%

Despite strong growth in the Digital Advisory space, it accounts for only 0.5% of the global asset management market due to steady growth of the wealth management industry as a whole

PwC

Artificial Intelligence (AI) is a branch of computer science

dealing

Topic Areas within Artificial Intelligence (non-exhaustive)

Robotics

Knowledge Representation

Deep Causal Reasoning

Machine Learning

Natural Language Processing

Deep Learning

Deep Q&A systems (or Cognitive Computing)

Natural Language

Generation

Virtual Personal

Assistants

Social Network Analysis

Graph Analysis

Recommen der Systems

Sensors / Internet of

Things

Visualization

Simulation Modelling

Audio/Spee ch Analytics

Machine Translation

Image Analytics

with the simulation of intelligent behavior in computers

changed over the last decade? (Data in$B)

PwC

Number of companies : ~1700

$1.3

$0.8

$0.4$0.5$0.3

$0.2$0.2$0.1$0.1

2006 2007 2008 2009 2010 2011 2012 2013 2014 20152016

$2.5

$1.9

$3.5

$0.3

$1.1 $1.0$0.9

$0.7 $0.6 $0.5 $0.5 $0.5

Which category of AI has attracted the most amount of venture investment globally? (Data in $Bfor2005-16)

Number of companies :~1561

$7.4B 44.27%Total Global Investment Global Investment

CAGR (2011-2016) (2011-2016)

·Investment trends indicate increasing interest in adoption of AI for business process efficiencies and for better insight-generation techniques

·Machine/deep learning solution providers have raised the highest amount of funding. This is consistent with the trend that the companies are striving to solve complex problems using pattern recognition enabled by machine learning on top of big data analytics solutions.

AI has drawn significant attention from investors, with machine

learning solution providers raising the highest fundingHow has global investment in AI

Bank of America, Wells Fargo, SEB in Switzerland, DBS in Singapore, RBS and

Natwestin UK, and a number of other banks worldwide are introducing chatbots part of their customer service and digital offerings

Meet Eria, Bank of America’s New Voice AI Banking system

PwC

Hedge funds, private equity, institutional funds, and retail advisors are all using

AI at different stages and different types of investing, trading, and advice

Numerai – crowdsourcing 7500 data scientists to build a hedge fund brain

PwC

What does this mean for you?

Target Customers

&

Segmentation

• Must be prepared to service

‘new- age’ clients who are tech

savvy, and are DIY investors

with lower assetbase• Should also consider advisor

assisted models to not lose sight

of higher asset advisors

Deliver

y

Model

• Must determine the appropriate

delivery models for its target

markets and consider how to

align with existing channels• Determine if the model should

be white label offerings vs.

homegrown offerings

• Determine if their digital

offering will be self-directed or

used as an onboarding tool for

advisors

Products

and

Features

• Must determine the

appropriate products to be

offered via. digitaladvisors• Consider if solution should

focus primarily on ETFs, or

include individual

securities, mutual funds

and alternatives

Pricin

g

Model

• Pricing should be organized

based on products and services,

while also correlated with

account minimums• The shift to lower-cost channel

and investment solutions will

put pressure on pricing and

margins• Consider the financial impact of

drawing customers away from

traditional channels and

products

Applicatio

n of

Data

• Digital channels provide an

opportunity to capture client

behavior, should look to use the

data generated from digital

advisory to gain insights on its

clients

• Client data should be managed

as a currency to drive internal

business decisions on products

and services

When defining the strategy and the model for digital advisory, incumbents must be sure to address five critical focus areas: target customers, delivery model, products, pricing and data

Critical focus areas that you should consider:

PwC

What does this mean for you?

PwC

BuildBuild in-house capabilities

Customized SaaSDevelop customized solution by

partnering with an existing wealth SaaS platform

White LabelPartner with existing Robo-

advisor as a white label product

Pr

os

Co

ns

• Digital offering can be customized according to the requirements of advisors

• Higher level of trust among traditional investors

• Can be easily bundled along with existing services

• Unique advisor option and customer experience

• Defend existing product franchise

• Complete control and fully able to define customer experience based on platform

• Faster-to-market

• Benefit from years of external investment, innovation and research & development

• Freedom of choosing an appropriate target to fill a key capabilitygap

• High level of investments required in technical manpower, systems and skills

• Delay in entering a highly competitive market

• Partner may put limitations on bundling and preferential pricing of offerings

• Software agreements might not be exclusive

• No direct access to digital partner’s clients / AUM

• High acquisition and integration costs

• Apprehensions among traditional investors

• Limited customization

Building, Partnering, White Labeling are three execution strategies worthconsideing

Thank YouYair WeisblumPartner, Financial Services Consulting [email protected]: 647-404- 7552

mailto:[email protected]

Coffee BreakThank You to our Sponsors!

Be Bold, Be Brave, Be Experimental

Shawn Kanungo - Sr. Manager, Strategy, Deloitte

BE BOLD

@ S H A W N K A N U N G O

BE BRAVEBE EXPERIMENTAL

DISRUPTION

INNOVATION

DISRUPTION

INNOVATION

DISRUPTION

INNOVATION

DISRUPTION

INNOVATION

DISRUPTION

WHY?

WHY BE BOLD &

BRAVE?

HOW?

HOW DO WE

MAKE SMARTER

EXPERIMENTS?

WHAT?

WHAT DO WE NEED

TO BUILD A

CULTURE OF

EXPERIMENTATION?


DOCTORENGINEER

ACCOUNTANTLAWYER

*MARRY A DOCTOR@ S H A W N K A N U N G O

PIANO

PHONOGRAPH

THE MARKET

DOESN’T

CARE ABOUT US


PIANO

PHONOGRAPH

LOSTWENT

HOME@ S H A W N K A N U N G O

WENT

HOME@ S H A W N K A N U N G O

GO HOME


“PEOPLE THAT DO NOT

SPEND 5-10 HOURS/WEEK IN

ONLINE LEARNING WILL

OBSOLETE THEMSELVES WITH

THE TECHNOLOGY”

- RANDALL STEPHENSON,

CEO AT&T

GOING

HOME?@ S H A W N K A N U N G O

NEWWORLDORDER


DISRUPTOR

DISRUPTED

OR


89% O F T H E F O R T U N E 5 0 0

CO M PA N I E S F R O M 1 9 5 5 A R E

N OT O N T H E L I S T I N 2 0 1 4

T H E AV E R AG E L I F E S PA N O F A N

S & P 5 0 0 CO M PA N Y H A S

D E C R E A S E D F R O M : 67 YEARS

( 1 9 2 0 ’ S ) TO 15 YEARS ( TO DAY

I N T H E N E X T 1 0 Y E A R S 40%O F A L L S & P 5 0 0 CO M PA N I E S

W I L L D I S A P P E A R F R O M T H I S

L I S T ”

WE CAN’T GO BACK

WHY?

WHY BE BOLD?

HOW?

HOW DO WE

MAKE SMARTER

EXPERIMENTS?

WHAT?

WHAT DO WE NEED

TO BUILD A

CULTURE OF

EXPERIMENTATION?


UberEATSUberCARGOUberRUSH

UberESSENTIALS

UberSANSHUMAN@ S H A W N K A N U N G O

IF YOU DOUBLE

THE NUMBER OF

EXPERIMENTS

YOU DO PER YEAR,

YOU’RE GOING TO

DOUBLE YOUR

INVENTIVENESS– J EFF BEZOS , AMAZON


CONTROLLED EXPERIMENTS

ARE THE FUNDAMENTAL BUILD

BLOCK OF DECIS ION-MAKING

AT AIRBNB

100 EXPERIMENTS3300 METRICS

60% TEAM

P E R W E E K

T R A C K E D

E X P E R I M E N T


CEO KICKED OUT THE DVD

EXECUTIVES OUT OF THE MAIN

MANAGEMENT MEETING

THE DVD TEAM WAS

RESPONSIBLE FOR ALL THE

REVENUE AND PROFIT OF

THE COMPANY


$100 IN 2010

$75,000,000 IN 2017

BITCOIN

5% TO 20% TIME

GMAIL

ADSENSE

GOOGLE MAPS


BUILD EXPERIMENTS

FOR HUMANS.

WITH FACEBOOK’S AUTOPLAY

FEATURE, BUZZFEED DISCOVERED

THAT 40 SECONDS WAS THE

MAGICAL ENGAGEMENT NUMBER.

THEY CREATED A TEAM - FB40 -

TO SCALE THEIR VIDEO

EXPERIMENTS. @ S H A W N K A N U N G O

FOLLOW HUMANSIN THE WILD


MEET BARRY


EXPERIMENTAT THE

EDGES@ S H A W N K A N U N G O

IDEATIONNEW IDEAS

INNOVATIONCREATING VALUE IN NEW WAYS


Ten Types of InnovationA framework that helps us both assess innovation

strategies and create new ones. It represents the ten

key areas in which companies can innovate.

Profit Model

Network Structure Process Product Performance

Product System

Service Channel Brand Customer Engagement

CONFIGURATION OFFERING EXPERIENCE


54D E L O I T T E C O N F I D E N T I A L | 2 0 1 4

Successful innovators innovate across

multiple types of innovation

Once you know this, it’s much easier to conceive

breakthrough innovations.


Configuration

Profit Model Network Structure Process

How you

make money

How you connect with

others to create value

How you align

your talent and assets

How you use signature or

superior methods to do

your work


Offering

Product Performance Product System

How you create

complementary products

and services

How you you employ

distinguishing features and

functionality


Service Channel Brand Customer Engagement

Experience

How you support and

enhance the value of

your offerings

How you deliver your

offerings to customers

and users

How you represent your

offerings and business

How you foster

distinctive interactions


The average innovator tends to pursue singular, product-

based innovation which integrates few other types

175

0

140

105

70

35

0 Types 1-2 Types 3-4 Types 5+ Types

12% 72% 15% 1%

16%

3–10 Innovation Types

84%0–2 Innovation Types

THERE IS A

DIRTY SECRET

TO EXPLOSIVE

INNOVATION @ S H A W N K A N U N G O

ART IF IC IAL INTELL IGENCE

AUGMENTED REAL IT Y

INTERNET OF TH INGS

BLOCKCHAIN

CROWDSOURCING

ARTIFICIAL

INTELLIGENCE


96.7 MILLIONFEDERAL GOVERNMENT WORKING

HOURS ANNUALLY

$3.3 BILLONSAVED

LOW END


1.2 MILLIONFEDERAL GOVERNMENT WORKING

HOURS ANNUALLY

$41.1 BILLONSAVED

HIGH END


500 BILLION DEVICES

CONNECTED BY 2025

CROWDSOURCING

WHY?

WHY DO WE

EXPERIMENT?

HOW?

HOW DO WE

MAKE SMARTER

EXPERIMENTS?

WHAT?

WHAT DO WE NEED

TO BUILD A

CULTURE OF

EXPERIMENTATION?


“ IN ITALY FOR 30 YEARS UNDER THE

BORGIAS, THEY HAD WARFARE, TERROR,

MURDER AND BLOODSHED, BUT THEY

PRODUCED MICHELANGELO ,

LEONARDO DA VINCI AND THE

RENAISSANCE . IN

SWITZERLAND THEY HAD BROTHERLY LOVE

- THEY HAD 500 YEARS OF DEMOCRACY

AND PEACE, AND WHAT DID THAT

PRODUCE? ….@ S H A W N K A N U N G O

THE CUCKOO

CLOCK


VIENNA OF 1900

THE RENAISSANCE

ANCIENT ATHENS

SONG DYNASTY

HANGZHOU

SIL ICON VALLEY

TRUMP ERA@ S H A W N K A N U N G O

DISCIPLINED

SMARTER

CHAOS

EXPERIMENTATION@ S H A W N K A N U N G O

SNL


ORGANIZAT IONS ARE

DESIGNED

TO OPERATE WELL

ORGANIZAT IONS ARE

NOT DESIGNED

TO EVOLVE


DIGITAL STRATEGY

BUSINESS STRATEGY IN A

DISRUPTIVE ERA

BE BOLD


BE BRAVEBE EXPERIMENTAL

Closing Remarks

Anthony Boright – President & Co-Founder,

InvestorCOM

Cocktail ReceptionThank You to our Sponsors!

disruption in the wealth management industry€¦ · growth of digital advice, a complement to...

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