Nic Dreckmann is Julius Baer’s Chief Operating Officer and Head Intermediaries. He believes that personal and trusted relationships with clients are the fundamental success factor for wealth managers and intermediaries, but that technology has an increasing role to play as it augments individuals’ capabilities.
1 - In the spirit of open banking, expect more demand for data aggregation. Intermediaries today bank with several custodians and one of their biggest administrative burdens is the need to consolidate all the resulting client positions. “Open banking will make their lives a lot easier, as system providers will make it straightforward to aggregate and reconcile data” Dreckmann anticipates. “Some of the portfolio management systems already do this type of aggregation but they’re not yet at the stage where you can plug and play, especially when you have more complex client situations.”
2 - Portfolio management software companies will accelerate their ecosystem approach. Just as an iPhone gives access to apps, so portfolio management systems look set to step up their offerings of interfaces through APIs to fintechs’ products and solutions. “I expect tech companies, especially in the portfolio management space, to intensify their efforts to connect to fintech offerings via API interfaces,” he says. “In other words, they will have open architecture that incorporates other firms’ services and solutions.”
3 - Algorithms will have a bigger role in investment. As investment algorithms get more advanced they will be used more widely in portfolio management. “Not to use the over-hyped AI term, but advanced algorithms for investment strategies will gain strength. So the algo trading is something I believe will continue to increase in importance for intermediaries or wealth managers in general.”
4 - Tech will help to automate regulatory compliance. With MiFID II and FinIA/FinSA creating far more assessment, record-keeping and reporting requirements for intermediaries, fintech companies are likely to offer ways to automate compliance. “More tailored reg tech offerings for intermediaries should emerge to support them in the complex compliance procedures, for example in anti-money laundering,” he explains. “Also, outsourcing or buying in certain regulatory intelligence will probably gain in importance.”
5 - Expect digitization in new asset classes. While cryptocurrencies have dominated the field of digitization until now, a wide range of assets is likely to be digitized. “That’s going to be an interesting field not just for us at the bank but also for intermediaries,” says Dreckmann. “This applies to assets from real estate to art. But you can even apply it to normal shares with smart contracts on top of them. You can have derivatives or options which then settle at T plus zero, because these are all contractual digital assets.”
After initially seeking to compete with banks and other financial institutions, fintechs are now looking to collaborate with them, which is likely to allow intermediaries to offer better products and services more efficiently. What’s more, open banking presents the prospect for fintechs to present intermediaries with more revenue growth opportunities, according to Dreckmann. However, he cautions that fintech solutions will only work when all four parties to a transaction stand to gain – the intermediary, the client, the custodian bank and the fintech company.
While personal relationships with clients will always be the key to a successful intermediary business, he believes that fintech offerings will increasingly enhance human services.
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While deep human relationships are intermediaries’ key success factor, technology will increasingly play a supporting role. Fintech providers are stepping up their offerings, delivering opportunities to boost efficiency and revenues. Expect more fintech offerings across client portfolio data aggregation, investment algorithms and regulatory compliance.