Square`s growth strategy and the masses

The ten-year-old Fintech that listed on NYSE exactly 4 years ago – November 2015 with the ticker symbol SQ; continues to innovate. It is best known as a B2B Fintech in the payments space that had huge success with small merchants globally. It grew with POS terminals and smart credit card readers. As a publicly-traded […]

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What has triggered the explosion of payments for order flow? Not Fidelity

The Robinhood effect popped up again, as Schwab slashed its stock commissions to zero and forced TD America, E-trade, Interactive Brokers, Ally Invest, and Fidelity to follow suit over the next few days. Schwab called this the zero commission brokerage war, on CNN. This war is just the beginning of a broader trend that will […]

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Where are the missing Homo Economicus in investing?

Source All economic theories assume a Homo economicus; which in plain English means a totally rational investor. We forget this basic assumption which makes all models ill-fit to our emotional and unstable behavioral profiles. This point cannot be ignored anymore, as we seek to deploy technology to offer customized financial advice and goal-based services. Deep dive […]

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Robo-advisors have not reduced the Cash Pile

It was four years ago that Schwab and Vanguard stepped into the robo-advisory market and leapfrogged the standalone top US robo advisors, Betterment, Wealthfront, and Personal Capital. SigFig was also a big contender at the time but has pivoted since into a predominately B2B business.

Anyone interested in reviewing the baby steps in grabbing market share and luring those holding cash to invest, can review a series of past posts[1].  Fintech startups and incumbents with low-cost investment asset allocation services, great customer onboarding, and relatively simple investment choices; have been trying to serve Unadvised Assets.

Current market snapshot

The top five robo advisors by AUM are 3 Fintechs and two incumbents. They have accumulated over $187 billion in AUM.

robo-advisors-with-the-most-aum-2019-750x375

Source: Robo-advisors With the Most Assets Under Management -2019

The growth has been double-digit, the kind that VCs like. Despite the fact that robo-advisors have clearly not lowered the customer acquisition cost (CAC) and ironically, in most cases have been deploying the same old-fashioned channels to acquire customers[2]; VCs have been generous in funding them. Just for the top three Fintech robo-advisors, Betterment, Wealthfront, and Personal Capital VCs have invested ($275, $204, $265) nearly $745million.

The market share (as measured by AUM) amongst the top 5 US robos, is 20%-80% between Fintechs and incumbents.

One of the metrics that I had chosen to follow from the very beginning of the robo-advisory trend, was Unadvised Assets – cash in physical wallets and in checking & savings accounts. For me, Unadvised Assets are a measure of the market opportunity for robo businesses. Deloitte reported in 2014 that in the US there were close to 13 trillion of such, unadvised assets.

Looking at the Q3 2018 U.S. Federal Reserve report[3] and recent Money data, from grandmothers to hedge funds holding cash, in overnight money market funds, to checking accounts and currency; I realize that

Robo-advisors have had none or negligible impact on Unadvised assets.

In the US, Unadvised assets continue their solid growth. In 2016, I had reported $13.4trillion and now we are looking at $14.5trillion. An 8+% growth over the past 3yrs.

Unadvised assets in the Euro area, have grown from a total of 10.3 trillion EUR to 11.8 trillion EUR – a 14+% growth over the past 3yrs.

In the UK, from 1.56trillion GBP to 2.4 trillion GBP – a 5+% growth over the past 3yrs.

Cash continues to be up for grabs, for robo-advisors, for P2P lenders, for crowdfunding platforms, and tokenization platforms.

When will Unadvised Assets shrink? Will the digitization of capital markets (with the rich variety of technologies and business models) overtake the trends in fiat monetary policy, public markets, and human behavioral psychology?

[1]Nov. 2015 Salivating for Unadvised assets: a videographic

March 2016 Digital Wealth management: a videographic update

Nov. 2016 Oh, the things you could do with the enormous Cash pile!

[2] Advertising, mailing services, cheap initial offers….

[3]https://www.federalreserve.gov/releases/z1/20181206/z1.pdf

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

 I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

The `robos` in the front-office – takeaways from Swiss innovators


Watch the gap; between the Attention Economy and financial services.

 Market forces are fiercely at work to start closing this gap. I shared insights around this reality and ways that financial services players can participate successfully in this transformation, during my opening talk at the annual event by the Bank Innovation Competence Center[1], at Unil, HEC Lausanne. I also listened to different perspectives regarding `Les robots au front-office`.

Actual experiences and learnings from:

  • A Swiss private bank with a global outreach – Julius Bear
  • A Swiss online Bank with an in-house robo solution – Swissquote
  • A Swiss cantonal bank innovating through Fintech collaborations – BLKB/True Wealth B2B
  • A Swiss bank using chatbots – PostFinance/ELCA.

20190408_115830.jpg

Julius Baer, a 10yrold pure wealth manager[2], has already deployed a Digital Investment Advisory suite – called DIAS – in their Luxembourg operations and is in the process of adopting it in its home base. This is a technology stack deployed to empower the Relationships managers of JB so that they can focus on relationships, offer customized insights and reduce the burden of the ever-growing regulatory requirements.

Undoubtedly, the unbundling of financial services that have been instigated by standalone Fintechs, has essentially commoditized several aspects of financial services. Wrapping value-added advice around products and transactions is inevitable and that is what JB is aiming at. For now, and from JB`s experience, there has been no JB customer that has left from private banking to go to a standalone robo-advisor.

 Swissquote, the Swiss tech born online bank, has developed its own `robo` offering. Their heavily quantitative approach is well known from the suit of their financial products and services. An online automatic but discretionary approach to investing was a very natural extension of their successful e-trading business. One of their first learnings was that personalization is needed for the automation process. Through a close collaboration with Neuroprofiler, a Swiss-born behavioral finance risk profiler out of the Kickstart accelerator, they offer a dynamic automated risk profiling with gamification elements[3].

Swissquote`s robo is used by some of their end clients but also by asset managers and financial advisors that use the Swissquote technology. The two main learnings are that one of the main in-house uses of their robo capabilities, is from existing customers that leave cash in their accounts without doing anything. Think, for example, a customer using the Swissquote e-trading platform that has often cash that is not at work.

Evidence that robo-advisors can be of value-add to customers that leave cash sitting in their accounts due to inertia.

Swissquote is continuously improving their offering by experimenting with Big Data and AI that can enrich the interaction with customers beyond and in addition to their dynamic risk profiler. Think of an algorithm that sends an sms asking `Dear Efi, ahead of BREXIT, would you want to consider switching off the robo algorithm?`.

Digifolio, is the BLBK robo advisory offering powered by the B2B technology of True Wealth, a Swiss robo that also runs its own B2C offering. BLKB is the most innovative Swiss cantonal bank with an early online mortgage offering and a digital earthquake insurance offering. Digifolio was launched in the summer of 2017 (with a minimum requirement of 5k CHF). One of their main learnings up to now, is also that success can be clearly attributed to the effectiveness of Digifolio to move existing customers from cash in their account, into investing.

As early as 2015, I had introduced the concept of `Unadvised assets`[4] and since, have been looking at ways that Fintechs can `nudge` and grab the piles of cash.

3yrs ago, my 2min view

Digital Wealth management: a videographic update, March 2016

In addition to robos, Oh, the things you could do with the enormous Cash pile! November 2016, in which I looked at `competing` unbundled Fintech offerings.

Thanks to the market feedback shared at the BAICC event, I will be updating the `Unadvised Assets` perspective to check if there has been any noticeable impact on the cash pile possibly from rise automated investing offerings at the B2C and B2B2C level.

PostFinance, a Swiss financial service provider that has been investing in Fintechs for a while, has launched a text chatbot in collaboration with ELCA, a Swiss IT company. Postfinance is the first Swiss bank launching a customer-facing chatbot on its website. This is part of their business goal to offer 24/7 service with no queuing (as in the case of live online chatting with an `agent`) as one of the advantages of text chatbots is the simultaneous handling of requests.

The global chatbot market is expected to reach $1.23 billion by 2025according to a recent report by Grand View Research[5]. The challenges however to adopting chatbot technologies are not negligible. As ELCA explained, there needs to be a clearly defined business goal before designing a suitable chatbot, that of course, needs to be trained with the relevant content. Add to this, the complexity in the chatbot market because of the incompatible between text chatbot interfaces and voice user interfaces. In simple words, the language used and the content for training text chatbots is very different from that of voice chatbots. For example, in text chatbots often answers are provided in the form of links, which cannot work in voice chatbots.

Tech integration is always more complicated than it seems at the surface. Both because of legacy system integrations but also because experimentation maybe needed until the suitable product fit is determined in each use case. Pictet has been using chatbot technology internally, to modernize communication between the front office and compliance. This is a functionality that is also built behind the scenes of the JB DIAS system too.

[1] Agenda BAICC – EE – Seminar Robotics in FS – Agenda f (master). http://www.baicc.news/a-propos-baicc/

[2] JB separated in 2009 from its asset management business.

[3] Neurprofiler is a MiFIDII-compliant customer risk profiler for Financial Advisors.

[4] Salivating for Unadvised assets: a videographic, Nov. 2015

[5] https://www.techradar.com/news/support-agents-versus-conversational-chatbots

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Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

Unadvised Assets ’16

Robo-advisory: Women, Freemium, and Subscriptions

subscription

Spring has brought lots of action even in the commoditized robo-advisory segment.

Three picks capture the flavor of the day in US robo-advisory.

  • Ellevest, the B2C standalone robo focused on women, raised $33million from a select group of investors[1].
  • Betterment, the hybrid standalone robo, drops account minimum for customized portfolios for retail clients too.
  • Charles Schwab adds a subscription-based financial planning offering (Not one size fits all).

Ellevest is in its 4th year and remains focused on empowering women. The offering includes a significant educational and coaching service for business women. What became clear from this recent funding round, is that the only viable part of the business is actually the HNW part. Ellevest Private Wealth Management is the premium service targeting HNW females and most of the capital raised will go into growing this business. This makes me believe that Ellevest doesn’t actually belong to the robo-advisory category but to the `Financial Wellness for Women in Business` category.

Betterment, on the other hand, has gone hybrid in two ways. Both in terms of offering a 100% DIY asset allocation service and with an advisor lite possibility; and having a B2C business parallel to a B2B business for financial advisors and for corporates (e.g. Uber). Financial advisors using the Betterment platform didn’t have an account minimum anyway. Now Betterment drops the 100k account minimum for individuals that want a customized portfolio allocation through the Betterment Flexible Portfolios offering. Their Premium service for 40bps now has no minimum. Betterment`s move comes in response to demand from existing retail clients to be able to customize their exposure in certain asset classes. The business decision of offering this flexibility at no cost, confirms that Customer is King and will remain so forever and ever.

Charles Schwab subscription service rhymes with Apple`s news service. For $30 a month, Schwab offers a financial planning package. Schwab Intelligent Portfolios Premium (rebranded name) is offered at $30 a month after a one-time $300 fee with a $25k minimum. Asset allocation is from a universe of 50+ ETFs, including a financial plan with a customized roadmap and unlimited one-to-one guidance from a CFP professional. Regulated financial-investment advice at $630 for the 1st year and $360 annually thereafter.

Schwab Intelligent Advisory (the original robo name) was at 28bps per annum 0.28% of assets.

Think of the 300,000 Schwab Intelligent Advisory accounts ($37 billion). Some will remain in the free, no-advisory offering. But a significant part will switch over to Schwab Intelligent Portfolios Premium and get advice. Evidently, any account with enough assets ($125k seems to be the magic number) will switch over.

What will this move do to the rest of the large players? When will Vanguard follow suit?

This is another discount brokerage moment in the investment industry. This is the subscription financial advice retail moment. Michael Kitces, the cofounder of XY planning Network XYPN, has deployed a successful subscription-based business for financial advisors, thus proving that it works at the B2B level. Now Schwab is pushing for a B2C implementation.

[1] Rethink Impact, PSP Growth, the Melinda Gates’s investment fund Pivotal Ventures; PayPal; Wynn Resorts co-founder Elaine Wynn; former Google and Alphabet chairman Eric Schmidt; former top aide to President Obama, Valerie Jarrett; and Mastercard. Source.

Sources: Schwab on Bloomberg; Betterment on FP; Schwab on ThinkAdvisor.

Book one hour with Efi – Ask me anything (AMA) for 0.10BTC – Efi@dailyfintech.com

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

 I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

Subscribe by email to join the 25,000 other Fintech leaders who read our research daily to stay ahead of the curve. Check out our advisory services (how we pay for this free original research).

Digitizing employee benefits towards Goal-based investing: the case of Moola.(JLT)

Gemma

Call it a hidden bias, or coincidence, the fact is that I have mentioned Moo.la the UK `robo` in three posts over the past 3 years. Gemma Godfrey, CEO and founder, is an ex-Goldman Sachs personality who was in the City A.M.’s Power 100 list the 2017  and was also chosen to join Arnold Schwarzenegger advisory on The Celebrity Apprentice (alongside Jessica Alba, Warren Buffett and YouTube celebrity Justine “iJustine” Ezarik).

In early 2016 as I was searching for robo-advisor actual performance, I spotted Moo.la as one of the promising female-led robo advisors along with  Sallie Krawcheck`s Ellevest. Call this another bias? Maybe, since Sallie and Gemma are both ex-Wall Street female leaders with significant investment experience. See here.

In late 2016. Moo.la was already included in the Top50 European Fintechs.

 In Feb 2018, I included Gemma in my monthly `Women and Fintech – The Feb. playlist of 10` for a very explicit reason.  Gemma’s venture was addressing the savings crisis problem in the UK. Her message was loud and clear and based on her belief that the domination of men in finance is a problem that can only be solved by us women becoming raw models for others.

In Spring 2018, Moo.la came across my path again as I met Paul McNamara, the CEO of Evalue, the sophisticated UK financial planning and advice software company. I could not resist sharing on DailyFintech Paul`s excitement on the launch of their API platform and their participation in the 2nd cohort of the FCA with a focus on regulated advice.

Moo.la was one of the Fintech partnership examples with Evalue that I reported. While Moo.la is a savings platform and one that caters to all those that are intimidated from the investment lingo and the confusing product choices; they wanted to offer their clients realistic, visual scenarios for the inexperienced to become comfortable with their investment choices. Evalue offered a piece of mind to Moo.la that behind the scenes, the scenario analysis was as sophisticated as it can get.

On the other hand, Gemma had made a business choice to offer a limited menu of investment choices. Three kinds of investment plans and one additional pure ethical portfolio. There is no `luxury` of customization and the focus is on offering comfort for the pre-designed investment choices. The philosophy behind this, is to focus on the customer experience which is mostly driven by emotional comfort or discomfort (leading to panic when least needed).

Four investment options that are well understood will work wonders for customers versus 44 investment options that are not well understood.

As Moo.la is not an investment advisor, Evalue`s software also makes sure that all is fully compliant. The limited menu also allows Moo.la to keep costs low. Savor Moo.la`s knowledge center with insights and education for all levels in a language that is natural.

Last summer, Moo.la was acquired by JLT Employee Benefits (JLT), one of the UK’s leading employee benefits providers. This acquisition should not be seen as a just another Fintech M&A transaction. It is actually a purposeful strategic ecosystem move, whose success should be measured beyond the dry numbers. First and foremost, Moo.la becomes part of a business (and running also standalone) that is in complete alignment with their philosophy. JLT’s strategy is focused on helping UK businesses deliver better performance through the improved financial, emotional and physical wellness of its people.

This acquisition is at the service of Goal-based investing.

Moo.la will also be integrated in JLT`s Benpal platform. Fintech from an angle of employee benefits in all industries is a great example of sustainable innovation. Robo services that are not just about the low cost but predominately about retentions, engagement and well being of the employees. BENPAL is an evolving next generation rewards and benefits platform that JLT offers its corporate clients. It is designed to help attract, retain, engage and reward the workforce. It allows employers to manage employee reward and benefit program in a digitalized era.

Last week Moo.la won the City of London’s ‘Best Goal-Based Investing Service’. We are already designing the world we have been dreaming of; slowly and steadily. An investment world that is not only about the monthly reports of our investments but also about our progress towards our goals

In this spirit:

Efi-Book-Review paolo1

Book one hour with Efi – Ask me anything (AMA) for 0.10BTC – Efi@dailyfintech.com

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

 I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

High-quality Low-cost, Active Index investing

`Jack` Bogle passed away this past January. No matter what investment camp you belong to, he has undoubtedly impacted investment thinking, products, and services.

Last summer, Victor Hagahni and James White – Victor is the Founder and CIO of Elm Partners, and James is Elm’s CEO – wrote an article Is Vanguard More Rolls Royce, or Hyundai? that highlights an investment world particularity:

With most products and services – cars, doctors, food etc – better quality normally goes hand-in-hand with a higher price. Not so with investing.

They even quoted Bill McNabb, former CEO of the Vanguard Group saying:

`The whole cost argument from an investment perspective is counter-intuitive.` 

Listening to Bill McNabb`s short interview[1] at the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs, he makes a very important point that is not well understood.

Over the past ten years, we have transformed the investment management space into

A low-cost product space

It is NOT a transformation into

A passive beats active space

The growth of robo-advisory (apologies for the umbrella term) is Not about passive over active. Robo-advisory is about the widespread use of low-cost products. We live in a world that it is becoming more difficult to imagine high-cost investment products.

One of the best examples of low cost, active and passive management, is Elm Partners. 12bps, tax harvesting, portfolio construction based on economic fundamentals and other liquid risk premia in addition to equity market Beta.

Listen to Victor Hagahni and James White discuss with me their approach which is for accredited investors only. Their offering includes less than half a dozen investment programs and the possibility of SMAs. Elm Partners does not aim to do everything for everybody. Low cost and transparency, are paramount for their business.



You can also follow their quarterly reporting on Seeking Alpha, here. You can follow their thoughtful research here. You can savor Victor`s TEDx Talk Where are all the Billionaires? & Why should We Care?: where he uses the puzzle of the missing billionaires to help us understand why most investors fail to capture the returns offered by the market. This actually leads into the main reasoning for Elm Partners investment strategy, the so-called “Active Index Investing.”

[1] Former Chairman and CEO of Vanguard, Bill McNabb Discusses the Future of the Investment Industry from the 2019 Academic and Practitioner Symposium on Mutual Funds and ETFs. Presented by UVA Darden and the Investment Company Institute. https://www.youtube.com/watch?v=Z8UQvkKbFZo

Book one hour with Efi – Ask me anything (AMA) for 0.10BTC – Efi@dailyfintech.com

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email

Food and Finance blurring through technology

As technology blurs business lines and `forces` incumbents to get rid of silos, Wealth Management & Capital Markets become broader.

Wealth Management & Capital Markets are being re-imagined as we speak.

Stay with me in this transformation.

My vision of Wealth Management is a holistic service that surely includes the future of Food and how we eat.  We didn`t touch on this topic with Paolo Sironi, when we discussed the principles of the Theory of Financial Market Transparency (FMT) in `Sustainable Banking Innovation`. Limited (and irreversible) time constraints were the reason that I didn`t raise the issue, which otherwise would be a very suitable topic to discuss with the Italian thought leader @thespironi.

My belief is that Food, Finance, and Fun are essential domains to our health and wealth. So, we will soon add to budgeting, borrowing, insurance, investing, trading, all sorts of others non-conventional `assets` and services.

Vivek Gopalakrishnan, head of brand & communications Wealth Mgt at BNP Paribas in South East Asia,  shared a Reimagine food infographic about What and How we will be eating.

reimagine food

Source: DECODING THE FUTURE OF FOOD

The way I see the broadening of wealth management with Food is through AI algorithms that we will eventually trust, as we become convinced that they know us better than we know ourselves. Once this cultural shift happens, then food AI advisory will become ubiquitous. We will entrust the mathematics, the algorithms to advise us on Diversification, risk management, and investing around food.

All this will be 100% linked to our customized insurance policies naturally. It will also affect our risk appetite in financial investing as science will put us in more control of our life expectancy and Immortality will become in. Audrey de Grey, the renowned biomedical gerontologist, wants to increase human longevity to the point that death could become a thing of the past. Medical technology could soon be able to prevent us from falling sick. Yuval Noah Harari, also talks about the `Last Days of Death` in Homo Deus.

Even if this doesn’t happen in the next 50yrs, food AI advisory will happen and the best way will be to integrate these services with the advisory of today`s conventional assets in wealth management. My US dollars, my Canadian dollars, my euros, my Swiss francs[1], and my food consumption, risk management, diversification; all in one place.

In the US, the USDA issues a monthly report on what food should cost families nationwide, presented in four different priced plans: thrifty, low cost, moderate cost, and liberal. Food costs, as a % of income, have been declining dramatically in the US (not the case in emerging markets). Whether food costs are 10% or 40% of household incomes, the point is there is a huge opportunity to manage `what and how I eat`, and just looking at the food budget which misses the entire opportunity.

My vision is that there is no distinction between PFM, robo advisors, private banking for HNW and health. Our wealth and health have to be managed in one place. Ideally, lets deploy blockchain technology to manage our data in a `personal locker` fashion and then let’s outsource the processing and the insights from this data to the best algorithms that act in our interest and advise us on what to eat, what to buy, how to diversify, how to rebalance, what risks match our goals etc. Whether it is food or money.

Tokenization can also unlock value in this context by creating communities linked by incentives built-in the tokens, that share similar food habits and or financial goals.

Blockchain can protect us from the data monopoly slavery and enable us to unlock value.

Fintech can empower us as asset owners of these new values.

[1] These are my personal actual holdings since I have lived in each of these currency places and still hold accounts. Still looking for an aggregator to view and manage all these on a single dashboard. Fintech is not done.

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

Machine Learning for RIA loyalty and customer engagement; by Morgan Stanley

 

loaylty

Wealth management and AI is a natural combination. Standalone Fintechs, innovation labs of incumbents and of financial services IT providers, are all somehow working on this (3 types). There is another war of talent going on this area too. All three types of Financial services providers are looking for Data scientists and competing with all other industries (commerce, life sciences, and manufacturing). The market is tagging experienced conventional quants as AI experts. Public companies (mainly banks) are competing for tech branding.

I realized that I have not written about Morgan Stanley as much as Goldman or JP Morgan. Of course, this is not deliberate. I am well aware of the heads on competition between which of course is accentuated from business media. Look at the headlines during this reporting season and you will undoubtedly get a sense of this short-term pressure that public markets and the quarterly cycles, inflict.

What caught my attention this time about Morgan Stanley, was the release of the new version of the so-called “Next Best Action” system to the 16,000 RIA of MS. This system has been around for several years but as a rule-based system suggesting investment options for advisors and their clients. A system that every single bank with a wealth management offering has and that we all as clients wonder which is “best” (as if that is the right question in the first place since none of these rule-based systems could be customized).

Morgan Stanley’s “Next Best Action” is using Machine Learning to support advisors in increasing engagement. The success of this tool will be measured by its effectiveness to enhance the dialogue with the client whether it is through in-person meetings, phone calls or pure digital channels.

Like me, most of us are sick and tired of emails with pdf attachments of several analysts covering Alibaba (that I care about accumulating) and not knowing how to make sense of that. All of us, are realizing that only because of KYC stringent requirements, advisors look to incorporate our life events and goals into an investment proposal. Morgan Stanley’s “Next Best Action” system is using ML to advise clients on what to consider based on life events. For example, a client had a child with a certain illness, the system could recommend the best local hospitals, schools, and financial strategies for dealing with the illness. The system monitors and learns from the reaction of the client to the “Recommendations” and based on the client responses, improves the quality of ideas each day.

In a way, the system thinks for the advisor on a daily basis and presents relevant information and continuously improved recommendations. The advisor has a choice and can send customized emails and texts to clients. The system in a few seconds finds the clients’ asset allocation, tax situation, preferences, and values.

The system is empowering the advisor and this is where the potential of widespread adaptation lies. Never forget that tech adoption is always more of a cultural issue rather than a technical one. In machine learning, the more the system is used the better the next best actions are.

If the community of the 16,000 Morgan Stanley advisors make the “Next Best Action” their ally, then MS will have an edge and a loyal army taking care of their clients.

This is not about disintermediation. ML can build loyalty for the intermediaries servicing clients and at the same time offer continuously better advice to end clients.

This not some version of robo-advisory focused on best on-boarding and low fee execution. It is enhancing a hybrid wealth management offering in a way that offers a cutting-edge (value) to those using Morgan Stanley as a platform provider (i.e. the advisors) and the end clients.

Morgan Stanley has established its tech center in Montreal – Montreal Technology Centre. It has grown to 1200 tech employees focused on innovation in low-latency and electronic trading, cloud engineering, cybersecurity, AI/machine learning, and end-user technologies.

Barron’s reports that it took MS about 6yrs to develop the “Next Best Action”. The main KPI is customer engagement.  The other five variables monitored are: cash flow, brokerage business volume, new advice clients, the level of banking business, and account attrition.

Morgan Stanley draws from million conversations to build its AI

Efi Pylarinou is the founder of Efi Pylarinou Advisory and a Fintech/Blockchain influencer.

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.