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Come on in and sit back relax, you’re listening to Episode 177 of the WealthTech Today podcast. I’m your host, Craig Iskowitz, founder of Ezra Group Consulting and this podcast features interviews, news and analysis on the trends and best practices all around Wealth Management Technology.
Before we get into the interview, if you are listening now you’re an executive at a broker dealer, an asset manager or an enterprise RIA you should run not walk to a website, EzraGroupllc.com and fill out the Contact Us form on the homepage to meet with us about your technology platform issues. Our experienced team can assist with software vendor evaluations systems integrations, improving operational efficiency, software implementations and a whole lot more. You can take advantage of our free initial consultation offer by going to EzraGroupllc.com. Now, let’s kick this thing off.
Topics Mentioned
- The Rise of Alternative Asset Classes and Private Markets
- New Investment Strategies and Mass Personalization Supported by AI
- Customer Centricity, Digital Private Banking and Neo-Private Bank
- Wealth Management as a Service
Episode Transcript
Craig: Next up on the program, I am happy to introduce Urs Bolt who is a wealth tech expert influencer man about town man for all seasons, based in Switzerland and he’s graciously honored us with his presence. Urs, welcome to the program.
Urs: Thank you Craig. Great to be back. I think it was like three years ago and it was last on the program.
Craig: I have to go back and check the episode number if you’re on our website WealthTechToday.com, you can search for Urs’ previous episodes you’ll want to catch up on on the great things Urs has to say. So, thanks for being here again, can you please give people who don’t know you the quick 30-second overview of yourself?
Urs: Sure, probably, by the age already a veteran in the industry, more than 35 years experience in banking, investment banking, private banking as well. So I started when I was young as a trader to new trading fixed currencies also traded rate swaps, then got into the technology sector always regarding banking technology, risk management, data integration for risk management, integrating of fully management system regulator to reporting so that was like mid 90s until early 2000s. And client server architectures became dominant for all the applications around the core systems.
Urs: 2003 I got back into banking at UBS investment banking in the post trade area. Since then, it was actually often in rolling out business platforms always with technology attached to it of course, and recently I’ve turned two and a half years if company couple of TI in them out of Switzerland. But I will start a new role and back into banking in the fit new digital private bank. You can follow me from first of February and we’ll see it on Twitter and LinkedIn.
Urs: So we’re happy to be back and basically covering the more like a digital business native kind of digital wealth manager digital private banker with diverse background but recently build up my name also being an opinion leader in wealth management, digital wealth management wealthtech. That’s how we got to know each other.
Craig: I was just trying to remember when we met but we met over Twitter. I was always impressed with the stuff you post and still impressed. You do share a wide range of information, of course not only about wealth management but about payments and it also about different technologies, financial technologies, digital banking and other things around Europe. You do post some things in German so I have to bleep over those. My German is not good enough to read the tweets in German but more than enough tweets in English to go from if you want to follow Urs on Twitter, it’s @UrsBolt.
The Rise of Alternative Asset Classes and Private Markets
Craig: Now, the reason you’re on the program not just because you think you’re a great guy and love your stuff, but you just put out an article January 12 called “Predictions for the Wealth Management Sector 2023“, and I want to go through some of these. The areas that you believe are predictions that are going to change, Wealth Management technology and things we want to talk about so let’s just go through this and I’ll put a link in the show notes to this article so you guys can read it for yourself. First one you have here is the rise of alternative asset classes and private markets. Why is that on your list of predictions for wealth management?
Urs: Recently is obviously there was a lot of pressure on the market, especially last year. And you also see some asset manager almost all of them driving private market assets means private equity. Also private, but also exotic alternative assets in luxury investments for instance. There’s clearly a trend towards these long term holdings and to diversify your portfolios away from the listed equities and strategies which you already have. Every one of us is literally invested in whether we are invested in a pension fund our private portfolios or alternatives in diversified portfolios. I see that is clearly something coming and I also see that access which is given our roles to a wider audience so before it was always like you needed half a million dollars so there was only possible for upper high net worth individual segment or ultra high net worths and now that investment threshold came down massively almost by a factor of 10 depending who you look at, and this is made possible by the expansion of financial technology going into the investment area, so everything started with fintech, went to trading, etc, and now it’s also going into investments where you have long term investments, lifecycle events will go ten years and beyond. So this is definitely a trend which we can see.
Craig: We do get a lot of inbound requests from firms a half our clients at Ezra Group are wealthtech firms, broker dealers have large RIAs or aggregators of banks and such but half our clients are their software companies and also these markets, we’re getting a lot of inbound calls from new markets coming up, alternatives. You mentioned exotic assets aren’t we call your fixed assets or not liquid assets, illiquid, art, luxury items and things, yachts, they want to do with a marketplace to monetize or tokenize different assets. Do you see that really taking off? Is that just a fad or is that something that will become mainstream?
Urs: I think fear for work or exotics and click will always be sort of an issue. But the interesting thing is you really get access now via these platforms to almost anything, but there’s not one marketplace where you’re basically just to say about this category, this category and put together a range of alternative assets, maybe even mix in a total portfolio with traditional assets are listed equities, for instance, or bonds. But you have now I think the complexity will come now how to manage a wide range of assets especially when your family office or an independent wealth advisor which wants to give access to a wide range of alternative assets.
Craig: Indeed. Yeah, it’s it seems like something it’s really taking off in different ways because of as you mentioned, the different the technology is making it easier to bring these assets to market to manage them, to price them.
Craig: Many years ago I worked for a project for a company came to us they had an online, not a marketplace but software that was be allowed very wealthy to track their collections of handbags or jewelry or cars or other things and it was very detailed. And note there’s no application in our industry that does that because we’re all about investments, what ETF stocks mutual funds, do you have maybe alternatives like private equity, but no one tracks these types of physical assets. And he had a very sophisticated technology for that. And it was designed for all these different you know, he must have had 50 different types of collectibles with all the fields you would need, the different names of course the names of the manufacturers and all the different ways to judge them and rate them how valuable they are. And then he had a way for pricing experts to come into the platform with with specific ideas and roles say okay, you can only you can price these particular items that you are an expert in. You can’t delete or change them just update the pricing because there’s no feeds for handbag or for a Rolex watch. Are you seeing that, like oracles in the in the crypto world we see that coming as well.
Urs: Not really that new but if you told me it’s very interesting because it adds to the picture and the the perception I have so you will have you have more and more access to such information and data streams that could then also allow to create like an index in specific segments. So, you can actually almost apply direct indexing approach and then create the product out of this. So this is again an opportunity for I’d say alternative investment managers which can then put together like fractional shares of such an index, which then they have to create obviously then the underlying portfolio to it.
Urs: So, that will ultimately again, bleed to the way that people which are more in the affluent or even in the retail investment segment, get access to investable products without actually doing the whole hassle to get into each of such products and they sometimes might only be able to buy a fraction of 8 or 20% but you cannot buy 20% of a very exclusive Louis Vuitton bag or whatever your handbag is or whatever it is, right, or a Rolex watch for Breitling, whatever the luxury as it might be.
New Investment Strategies and Mass Personalization Supported by AI
Craig: The next topic you mentioned in your article is “new investment strategies and mass personalization supported by AI”. I don’t like the word personalization or I do like the word personalization, I don’t like how it’s being used. I haven’t seen mass personalization but hyper personalization is a very common buzzword that I think is overused, but how are you using these terms and what do you see AI doing around wealth management?
Urs: I mean in recent years we saw that the values play a bigger role now especially when it comes to the younger generation, they want to be environmentally friendly, following some ESG criteria. Others maybe want to exclude some assets which they don’t like. To make your personal investment strategy with all your criteria, you really need a new approach. You cannot continue the old way. Either it’s too expensive, too manual, or it’s not accessibly for lower investment amounts. That’s why I think the mass personalization is really that each of us could be on the platform, could be the criteria, could be we are human of course, but you basically need this technology platform which reflects that and provides you with risk and expected return strategic and tactical asset allocation and then needs to be automated through the execution. This is becoming possible with direct indexing, solutions with different approaches, but now the more advanced ones use machine learning or artificial intelligence to allow to create such portfolios in almost real time which is almost impossible to do without automation, it’s not possible with human interaction. That’s why the mass personalization is more able to scale such an approach to a much wider customer base than before. That’s exciting because it lowers the threshold, it gives access to more customers who have the same values but maybe less to invest in.
Urs: And cloud computing, such technologies are key as well, that you can offer this as a vendor, as a service provider, to basically have the wealth managers paying a fee per transaction, portfolio, assets, whatever, pricing can also be much more flexible than it was before when you needed to implement such a solution on your own.
Craig: One of the areas that I see AI helping out, I wrote about this on my blog 3 or 4 years ago, you mentioned risk, risk tolerance, risk assessment, which feeds into your model. So knowing the client’s risk, then deciding which model to put in which is often automated. Usually they’ll have five models, and the clients go through the risk assessment questionnaire, it gives them a score which puts them into a bucket, which assigns them a model. Pretty straightforward. But I found with my study of psychology that once you start asking questions to someone about things they don’t really understand, like what their risk is, we do it every day, we understand those questions. But a person off the street, maybe they’re an accountant, maybe they’re a lawyer, maybe they’re a doctor, engineer, who know what they are, a nurse. They don’t think about risk and what that means, they’re seeing these questions for the first time and trying to understand, what do I feel like I can lose, I don’t know, what are these tradeoffs?
Craig: No matter how many things you give them, they still won’t really understand what those tradeoffs are necessarily, or know how they actually would react in a market downturn, that’s really what everyone wants to know, no one is worried about how the client’s going to react when the market doubles. They’re worried about how the client’s going to react when the market gets cut by 50% and I think AI is a great tool which will start taking over risk tolerance and risk assessment questionnaires by saying, give me your name and your social, or your social media links and they’ll just run through all of your social media posts, all your transactions from your other advisor, and they’ll see how they’ll actually respond or what their sentiment is. And that’ll be a much better indicator of what their actual response is than asking them the questions.
Urs: For sure. I was thinking, one of the startups accessed Facebook data but in the end it was not possible because Facebook didn’t allow access, it’s very closed especially in Europe where we have stricter laws around social data. You can really make a better user experience by running simulations in near real time and really see the impact, what would happen if that scenario is the case or reflects a case in Switzerland or based in the US, with currency fluctuations , and just make it much more tangible that people really understand, okay if that’s what happens to me, I think I need to take less risk, maybe reduce the equity share of my portfolio, or I could even take in something else, possibly some Bitcoin, some crypto, even illiquid at least in the crypto space, and it would actually diversify your portfolio.
Urs: Especially when you see now is still under pressure, Bitcoin recovered again, still don’t know how it’s going to end up, obviously some people are more positive about it. But on a dynamic level and not going away in this age AI is definitely helpful to all of us, whether you’re a small investor or a family office.
Customer Centricity, Digital Private Banking and Neo-Private Banks
Craig: The next area you have in your trends article is customer centricity, digital private banking and neo-private banks. So I don’t want to them as much as how they relate to wealth. So I’m much more interested in the holistic view of wealth, where advisors don’t just look at assets, they look at liabilities, budgeting, other assets, insurance. Because if you don’t see al those things, you’re not really seeing a full picture of your client’s financial life. How will banking integrate with wealth? Will we see more of that going forward, more advisor integrating with the banking products, or expense and checking accounts, expenses, credit cards, pulling in all that information? 
Urs: One way I see that becoming more of a reality is because we have new players now. The incumbents, they don’t seem to be especially good to offer such solutions, at least that’s my perception. Even though some banks work on these, but to see to have a complete view of your liabilities, of your future cash flows, etc, there are startups out there with IT solutions which can help incumbents or even new players. On the other side I see private banks, which really don’t have a legacy culture behind them. They can really build it fresh if they can really focus on the customer. But it’s also the only way actually, to gain enough customers, because you really need to differentiate your self as an incumbent, you already run a successful business in wealth management it may be less pressure.
Urs: So this whole customer 360 goes along with new plays coming into market, new wealthtechs which offer this holistic view. So there is a number of it and I follow some of them in Switzerland, in Sweden, and others. I see that’s now becoming more of a need for customers, especially now in these challenging times we have now, with interest rates coming back, the inflation rate, etc. There’s a lot of change and people realize they might need to change their behavior and their investment strategy tactics to plan longterm for their retirement savings.
Craig: There’s so much that can be done, so many tools and so much more advice that can be provided when you’re combining different assets looking at the client’s full picture. It’s also better for compliance. The more you know about the client’s financial life, the better. We had someone on the program just last week, called TaxStatus, where they, with the clients permission, of course, could download all of their history from the IRS. And now while that might seem a little creepy, the issue is that not that you want to learn more about the client than they want to share with you but that lessons clients don’t necessarily remember all the things that they have all the contributions that they made all the jobs that may have had all the income they may receive all the deductions they may have taken. And rather than having to upload the 1040 statements, their tax returns, and then scan them just download right from the IRS. So that’s where we’re going where advisors could have everything about a client’s tax situation, which would help in onboarding tremendously, you just know, wouldn’t have to keep asking all these questions and annoying the client. They’ll just download everything they’ll have it and now it’s working. You don’t even go back your business, Mr. Client and you live your life not spent a couple hours answering my questions. So do you see that possibly happening in any European countries as well?
Urs: It should we have like open data initiative from our government tool. I’m just wondering, does the IRS then provide an API so that let’s say third party vendors, can allow their customers to download this automatically because that’s one trend that I see. I believe strongly that people like you an me or almost anyone professional Wealth Advisors or financial advisors, that their customers will be happy to do so even in self service via the platform and then once they have this overview, talk with an advisor and go through where can they optimize their financial situation? And I think that’s a great way to use to tax data. It could be possible hopefully in I don’t know, what’s the current status in Switzerland, if you can do that, because I’m not familiar as a tax advisor, but I certainly going to have a look at these two, because that’s also service to the citizen to allow that use your own data for your own purpose, and you already make the big hassle to add to them all in the tax database.
Craig: Oh, definitely. I was very bullish on it, very excited when I hit when I met this the founder of the company last week, and I was talking about it. It could be a game changer. But another area I wanted to talk about and we’re running out of time, that was quick, integrated data and analytics, having more data, whether it’s banking data, credit card data, insurance data, other types of financial data, will help with analytics and help understand clients. That’s where the AI can come in. Because most advisors are empathic or empathetic, they’re very quick and photographic memory. They can review data and come up with ideas or understand the clients but I think most advisors maybe don’t have the time.
Craig: That’s where the AI comes in that can review all this data and provide next best actions get provided advice to the advisor. Who should you talk to next? One of our clients we work with was a company called Catchlight, and they reviewed all their technology AI based technology would review an advisor’s pipeline of leads, and then do all this analysis and look on public sources and maybe some private sources to come back with the financial life complexity score, with their theory is the more complex a prospective clients financial situation, the more likely they are to work with a financial advisor.
Urs: That’s what they see. This advisory experience, the customer it just you and me but he has already prepared the data it goes through his whole client portfolio and then it will even learn from the whole customer base possibly even beyond if you use a cloud based service and an unorganized way if it can spell it right. And that that that could really increase the service quality massively.
Urs: One challenge I see is that the traditional Wealth Advisors they will be very conservative. But maybe one reason is also they don’t have access to such tools. I mean, imagine you you become an advisor yourself and you have all these tools available. You and me would love that. I see that’s why that is a huge potential for wealthtech going this direction data driven, I call it rather like data driven bank I call it data driven wealth and financial advice. And it is clearly a trend that you need the data. First you need to integrate them you need to ask them in a homogeneous way. And then you can apply machine learning and other algorithms you can also use whatever chatGPT conversational, natural language processing approach, which helps you to communicate also more accurate with all the small print as well. I mean, when you try it out you really astonished what’s coming out. You might not be rocket science, but that’s what we don’t need that, financial management. You don’t want to be a complete outlier. But you need you need a much higher level of quality for standard advice. I think that will really lift the quality and also then the financial. Let’s call it wellness of each customer.
Wealth Management as a Service
Craig: So the last topic I wanted to cover in your article for trends for 2023 and wealth management is outsourcing wealth as a service. So I think I know what that means. But can you explain what you mean by wealth as a service outsourcing?
Urs: It goes exactly what I said before you have more and more such analytics data ready to use for advice for new financial plans, investment strategies, also funding. Such services will be more and more available via the cloud. So you basically can outsource that part of it and consume it as a service and you pay them per each claim portfolio. Or it’s very, let’s say demand to even the other part of the outsourcing is especially for the let’s say family offices independent wealth managers, for instance, Chief Investment Officer services an easy the only environment it’s very demanding the macro level very complex, you have to economic impacts, you have the moving in a very fast pace into multipolar world and you see how the global economy is becoming more fragmented makes it very difficult. So you need you need very professional investment. Let’s say advice for serving the whole customer base and that’s one part of it. There are obviously various players in the market, how you can consume such services I believe that that will become more common for almost every segment.
Craig: One area I see wealth as a service helping is expanding the reach of advisors into other areas where they wouldn’t have access. So especially with apps, different apps that have a customer bases or employee bases like Uber for example. They provide a lot of services to their drivers, they rent the cars they even sell them cars, lease them cars, provide them insurance, why don’t offer them a retirement plan, through one advisory firm and manage their retirement through the app. You can take a deduction into the 401k or for or other plans or other apps that have can offer these types of services to their communities, to their employees to their customers. Hey, we know if you want to retire you want to open an account savings account even or just something simple a budgeting account. There’s lots of options. Do you see that as something that’s a viable option where you are?
Urs: Absolutely I see that especially as a large potentially the fastest growing Asian economies. So you basically now financial inclusion is getting much better. You get the basic banking services, the middle class is growing. They have yearly annual growth of the GDP is about 5, 6, sometimes 7%. Even now even though China is a bit lower, but just looking at the Philippines, they still have strong growth even though the pressure is also there in terms of inflation, higher energy prices, food etc. But to embed such services like Acorns style, I was just talking with one startup intrapreneur this morning about this view probably hopefully can work together can help provide some advice for a startup and I see that they’re moving upward into where you need financial literacy as well which can also consume from independent platforms. So these for this, what is more embedded services, you will need to have proper platforms which can integrate that through API’s or just that it’s technologically easy to consume and build customer experience around the services. So I see there is a lot of potential for wealth as a service for vendors, for consumers and also for the intermediaries providing the services.
Urs: And of course when I am here which is probably important to mention, Switzerland is home of like 25% of private wealth globally. So Swiss financial institutions Wealth Management manage about 25% of global private wealth, and a few years ago, the open wealth like an analogy to open banking, we have now the open valve API’s available so you can share the portfolio data transactional data, customer data for KYC etc, which I think will be important to scale up search services, aggregators, services, advisory services, which we were talking about just before.
Craig: I think the wealth as a service will also help drive the first western base Super App like WeChat. So once we once you can build in wealth as a service into the application, especially payments applications that combine those, then you may see more of a probability of a WeChat like Super App taking hold here, because I think WeChat in China is one of the biggest banks by assets just from cash float. So money that people put into their WeChat app to pay something they have to prepay or overload their cards with money. That is that I think was north of $100 billion in assets they were putting that into they were sweeping that into an interest bearing account for their customers which is which is great. So that’s something they couldn’t do themselves, they had cash lying around. Now you can just load it into the app, have it into an interest bearing account, but also have it available immediately for us to pay your laundry or dry cleaning or pay for a restaurant, whatever you need. So having that ability in some of these apps I think would help and a Starbucks is one of the US has biggest banks. Just on their cash float from their app.
Urs: Absolutely. But super apps really there is a reason why they come from Asia, starting with China Southeast Asia. Same what you said about WeChat is now happening with Gcash in the Philippines where you can also have the cash balance, being invested getting interest straight out. But I think in the western world in the advanced economies, I don’t think that the Super App going across your whole life needs will become a reality. I think it will be more vertical or siloed. So that’s where I think because of the complexity of your financial situation and the need for advice you will that they’ll be more integrated that will come from new players. You might you might definitely get it from banks as well from incumbents, but they still have a customer base in the legacy culture which also makes it difficult for them to go into this direction but for new players these days, they’ll pick opportunities of any talk about Starbucks, you know, you’re not going to have a large portion of savings in the Starbuck wallet, or whatever it is in whether it’s in the States or in Europe. I mean here. I think in Europe, it’s not that widely used. We’ll see more of such Super App strategies trying to gain from this if startups coming into the market.
Craig: Urs, we have run out of time and you’ve said it all can you please tell everyone where they can find more information about you if they want to learn meet you they want to interact with you because it where can they go?
Urs: Surely where I’m most active is on Twitter. Again, it’s @UrsBolt if you type in my name, or spoke into Google you immediately find any of the social media profile or you find my linktree or LinkedIn. Very easy to reach me, Urs, Bolt like the sprinter. So this combination is very rare in the world and lucky with that name combination. My first name is real Swiss name and not very common any longer. So happy to to get in touch with me and ask me whatever you feel like if I don’t know it myself. I can certainly find the expert who can also answer the question.
Craig: You’ve always been gracious about that on Twitter I find, thank you very much. And thanks for being on the program Urs, I look forward to talking to you again soon.
Urs: Thank you, Craig for having me on again.
