Financial Expertise and Latest Technologies: How to Make The Most of The Two Worlds
Financial Expertise and Latest Technologies: How to Make the Most of the Two Worlds
Financial institutions have been investing heavily in technology for decades, but only recently a new breed of initiatives have started making a real impact on business models, shifting the emphasis from making processes more efficient to creating new markets and opportunities for customers. FinTech is more than “Finance + Technology”: it is a new paradigm that is significantly challenging the status quo in areas such as Wealth Management, Lending, Funding and Payments, among others. FinTech is not a fad and it is big, counting more than 750 companies worldwide and in excess of 26,5 billion of capital raised.
In FinTech, innovation is mostly promoted by a large number of ambitious start-ups, while incumbent financial companies are looking at this substantial wave of challenges with mixed feelings: some worry that their dominance may come to an abrupt end, while others feel ready to embrace the future and reinvent themselves partnering with the start-ups.
In general, start-ups have some obvious competitive advantages with respect to incumbents, such as leaner organisations, enthusiasm, flexibility and hunger for success. The latest technologies offer additional leverage: one example is cloud computing that dramatically lowers the barrier to entry to start-ups, as it converts the fixed costs of buying hardware into the variable costs of the payas- you-go pricing approach. Furthermore, the web provides a powerful alternative to traditional distribution channels, giving start-ups a level playing field compared to established players.
As always with new phenomena, it is not easy to fully appreciate their scope and implications for the future.
In FinTech, this is even more true as very few people have a sufficiently profound understanding of both finance and technology; in many cases, people simply don’t fully understand what it’s all about. For example, in Wealth Management a lot is being written and talked about “Robo-Advisors”, which are commonly described as “digital platforms that provide automated financial advice with no human intervention at very low costs”. For a start, there is a problem with the name itself: the largest and most successful Robo-Advisors are neither “Robos”, nor “Advisors”. Luckily, none of them are real robots buying and selling securities, rather they take full advantage of algorithms and some use methods from Artificial Intelligence, and ultimately there is always is someone in charge of deciding where to put clients’ money. Additionally, they don’t strictly give financial advice, but rather they manage money in a fully discretionary fashion.
Innovation in Wealth Management should be welcomed especially if – for once! – the general public is the final beneficiary through more transparency, lower costs and overall better service. Milan-based Euclidea is working hard in this direction. The company is a fully-fledged wealth manager and, taking full advantage of the latest technologies and leveraging the extensive experience of its founders, offers accessible and high-quality investment services with very low fees. The founders’ vision is to democratise the high-quality investment services currently offered to HNWI through Private Banking networks, consisting in customisable investment solutions and accurate, multi-channel customer service. The magic of technology here is twofold. On one side, it eliminates the need for bulky, costly, large “traditional” distribution channels; on the other side, it enables mass-customisation through automated customer profiling and the propagation of investment views to a potentially unlimited number of different portfolios.