Elyxir: on the implementation of client facing robo-advisors
Early reaction to a new customer savings advisory service developed by Societe Generale over the past two years or so has been promising. The technology that underpins it is now live and commercialisation is beginning.
The bank is currently in detailed discussions with two prospective institutional users of the white label service, which was conceived and developed and is now in the first stages of implementation by Elyxir (a demonstration can be viewed at elyxir.coach).
Elyxir is an internal start-up. It operates within Societe Generale but outside traditional governance parameters and procedures. It comprises an experienced team of financial advisers and technology engineers, who have a certain freedom in a lighter touch environment.
“We can take a little more risk in the way that we take risks,” says Hadrien Devichi, Paris-based co-founder of Elyxir along with Vianney Chevalier, leading a team of eight engineers-cum-bankers.
“We can innovate”. The internal start-up structure enables the adoption of a bottom-up approach to innovation that the standard top-down strategic approach to organisational management would otherwise prevent.
“We founded Elyxir around two years ago” says Hadrien Devichi. “Why did we do it? We saw an opportunity to combine our banking and engineering knowledge and skills to build digital channels that would meet the needs of clients who could not afford personal advisers to help with their short-, medium- and long-term financial planning requirements.
Personal advisers are expensive and clients not eligible for full private banking status will simply not meet one very often-if ever. Expressed in simple terms, our goal is to help banks build better client relationships and, in doing so, to enhance client service and improve the management of savings. There has long been a gap between the banking industry and its clients, he acknowledges, noting that this is where the opportunity lies. The development of technology has highlighted a number of shortcomings on the part of the industry. The suppliers of financial services have often struggled to meet the increased expectations of clients, who have become accustomed to having their needs met more or less instantly, around the clock.
Digital is crucial but so is human
With Elyxir you can talk to clients more often, identify their specific needs and send personalised messages with bespoke advice, says Hadrien Devichi. We want to do as much as possible online, but we also want to encourage more clients to visit their banks. Digital technology is an entrenched fact of modern life and work, of course, but bricks and mortar branches still have an important role to play. A key part of the attraction of tackling the underlying client savings issues in this manner has been the removal of the kind of ingrained short-term thinking than can prevent innovation in a long-established institution.
Our service will become accepted over the next five years rather than the next five months, adds Devichi. Many people in the industry agree with our long-term vision but struggle with the short-term practicalities and the need to change. This will not alter overnight.
But in the course of time, our work will deliver a concrete example of the Group’s determination to derive the maximum benefit from the fusion of the best of technology and the best of people.
The laws of “financial robotics”
Robo-advice has a clear part to play in the financial services industry, but the human touch will remain essential. The greatest challenge, he says, is not the technology, but the difficulty involved in persuading a range of stakeholders of the value of implementing change within the industry. The underlying aim of the Elyxir project is to improve the quality of financial advice being delivered to customers, says Hadrien Devichi. By way of an illustration, he points to the recognised need of some customers to boost their retirement savings if they are to enjoy the same standard of living in their later years as at the peak of their earning power. Elyxir can also help in a range of other areas that feature prominently in everyday life, from acquiring real estate to the funding of education, from the earning of income to its eventual transmission to the next generation via inheritance. It enables financial advisers to draw on multiple sources of data relating to individual customers in order to deliver customised planning advice to savers.
“As we will be delivering neutral advice, and not selling investment products, we will sit neatly and comfortably within existing and planned regulatory requirements rather than be constrained by them” says Hadrien Devichi. The regulatory constraints lie further downstream, when the advice is implemented.
Looking beyond the immediate implications for the Societe Generale group and other financial institutions, are there any lessons that have been learnt that might be shared within the Group and more widely?
The short answer is simple: yes. A fuller answer is more nuanced.
“It might seem strange at first, but I would advise others who find themselves in a similar position not to focus too much on the technology at first”, says Hadrien Devichi.
Slow and steady wins the race
Don’t try to do everything at once. Focus on the good idea at the heart of the project. The technology is a means to an end, not an end in itself. And don’t start building the technology without extensive feedback from clients. It is a pitfall to start full-scale development too early. It will be costly in financial terms and involve a lot of wasted effort.
As an internal start-up with relatively few resources we operated on a small scale. Don’t be afraid to test a prototype. You don’t need years of development to get customer feedback.
Is there anything we could have done better? We started implementing early, within six months or so. We should have waited a few more months for feedback. We should have focussed more on going to see customers to find out just what they needed. One of the key lessons we learnt is that what customers need, what customers want and what customers say they need and want can all be different.
A core part of our job is to cut through the interference to establish exactly what they need. When you do start building, I would recommend adopting a test-and-learn philosophy. I would say test, change, test, change, develop and implement.
Hadrien has more than 16 years of experience in the consulting and banking industry. He joined Societe Generale group in 2007, where he contributed to set up the credit risk monitoring systems for structured finance, before taking responsibility for the information system of the Equity Finance business line. In 2016, he founded Elyxir within Lyxor Asset Management, one of Societe Generale’s first startup, to develop a new way to deliver financial advice. Hadrien graduated from Polytechnique.