The new generation of digital investors has been dubbed: ‘The Re-wired Investor.’ This is in tribute to their digitally-native behaviour and insistence that all of their interactions with banks match the quality engagement which they get from Amazon, or Google, or Uber. ‘Almost half of wealth managers feel challenged in matching the speed with which mass affluent investors demand service’ says Steen Jensen, Managing Director, Temenos Europe. How is this being dealt with in Europe?
Jensen says: “First of all, I think that wealth managers are struggling to earn money today. That is why they have changed their attitude to wealth management in general and have been scaling to the lower end of the market. Low interest rates do not allow them to earn money. Mass affluents, in my view, require almost the same level of service as a high net worth individual. However, wealth managers cannot afford to provide this quality of service at the moment, but, that’s their goal. In addition, I think the wealth managers are struggling because they were looking at this as a retail market. Now they need to look at it as a mass affluent / private wealth market, and need to provide those extra services. However, of course for most of them, they do not have sufficient support or the proper platforms to come to the aid of the mass affluent in the way they want.
“Every individual today expects a high level of personalisation from the services they consume. But we have seen some wealth managers who have brought their introductory level of investment down to €10,000. Therefore, it is a very limited amount of money to get into this service. In addition, they will do that for a fee of less than a few hundred Euro per year plus a cut on every transaction. They make money on these deals but not very much. The idea is that these mass affluents will eventually grow up to be the high net-worth individuals the wealth managers need. And, because nowadays that process is quite quick, the number of people with a million dollars on their accounts is increasing. So a lot of them will soon become worth chasing in the future.
“I think that today these mass affluent clients are quite demanding. If we examine some of the first European banks who came to Temenos – they wanted to know how they could help the time-poor, mass-affluent class. We obliged and now there has been quite a rush to use these offerings. And, as I say, if they can get the initial investment level down to €10,000, it has huge potential.”
Matching the speed with which the mass-affluent demand service is seen by European wealth managers as their most important challenge. In our recent report, The Next-Generation Wealth Manager, European results, we said that 52% of European wealth managers quoted in the report see the mass-affluent segment as highly important to their practice while only 29% saw the segment as important 3 years ago.
There is no doubt that AI, and robot advisors, have increasingly come to market over the last three years, and the industry must continue with that roll out. With Temenos’ acquisition of Logical Glue, Explainable (XAI) comes more to the fore, because that makes it possible for AI to learn from human beings’ behaviour, not just ‘learn’ like a machine. With XAI’s deployment in private wealth, relationship managers will be in a better position to explain complex new positions to the client about what is happening and why it is happening. Temenos is the first to invest in this area, from a supplier point of view, and it will bring concrete benefits.