Lively panel discussion on New Business Models in Wealth Management, featuring two of the leading wealth management software vendors identified in our new 150-page report “Digital Age Wealth Management“. 🏆
- Changing consumer trends
- Changing technology
- New business models
- New fitness landscape for wealth managers
This webinar was the second of two discussing some of the key trends from our recently launched report on “Digital Age Wealth Management“. The report introduces The Market Map, our own methodology which upgrades vendor assessment criteria to help those charged with selecting, scaling or investing in wealth management software solutions to make better informed decisions about what characteristics matter in the digital age.
The Market Map |
Some surprising results
We get very different outcomes compared to conventional evaluation studies. A lot of smaller vendors rise up the rankings thanks to advanced technology and flexible architectures. And for incumbent software vendors, it clearly distinguishes those that have kept up with technology change and those that haven’t.
Ben: Hi, everybody. Welcome to the 4×4 virtual salon today where we’re going to be talking about new business models in wealth management. So if you’re new to the format, let me just quickly explain why we call it a four-by-four virtual Cylon. So we have four speakers who might go into introduce in a second, we cover four topics, which today are going to be customer trends in wealth management, technology trends, new business [00:00:30] models, which is where we plan to spend most of our time.
[00:00:32] And then the outlook for wealth management. And in addition, we have four polls. So you’ll see on the portal that the polls are uploaded and you can answer those polls at any time and we will make reference to the results during the discussion. And then the last thing is we’ll take one question, one audience question per topic.
[00:00:51] So you’ll also see that there’s on the portal. There’s a button where you can leave your questions and I’ll incorporate at [00:01:00] least four, hopefully more than four questions during the discussion. Okay. Right. So let me introduce our speaker. So I’m going to start with what is my top left, which is Dimitri Panchenko, who is head of investments at Tinkoff bank.
[00:01:14] And Tinkoff bank is Russia’s largest digital bank with over 13 million customers, but it’s best known for its super app, which covers a whole range of digital services. In addition to banking, such as insurance travel and ticketing restaurant bookings. And [00:01:30] e-commerce. Tinkoff investments, which is the part that Dimitri leads was only launched two years ago and already has three and a half million customers using it for automated portfolio management, digital brokerage, and wealth management.
[00:01:44] Okay next. We have Chris Bartz who is CEO of Elinvar. Elinvar is a Berlin based wealth management technology company. It’s platform used by over a hundred wealth and asset managers in Germany covers the end to end customer needs by supplementing it services. [00:02:00] But those are third party application providers, but also third party services providers having recently raised another 25 million dollars in VC funding.
[00:02:08] And embark is now looking at scaling up the platform and increasing self customization. Okay next. We have Christine. Christine Schmid is head of strategy at additive. additiv is a wealth management software company operating across Europe, middle East Africa and Asia it’s DFS orchestration platform enables private banks and wealth [00:02:30] managers to deliver rich omni-channel experiences while giving them the intelligence to maximize customer.
[00:02:36] engagement and then last, but definitely not least. We have Bertrand Garcon who is CEO of Impaakt and Impaakt is a platform that is crowdsourcing the intelligence to be able to get beyond rudimentary ESG scores, to understand the real societal and economic impacts of companies, activities in doing so impact is helping asset managers to build better portfolios that better represent their [00:03:00] client’s preferences.
[00:03:01] And values. Okay. So we’re going to kick off now. And the first topic we’re going to cover is customer trends. And so I just remind you that there’s a poll that you can complete, and there’s also the ability for you to post a question, which I’ll put to the, to our panelists. Okay, Chris, I’m going to start off with you if that’s okay.
[00:03:20] So, Chris. We’re seeing a massive intergenerational transfer of wealth from, from baby boomers to that, to their kids and [00:03:30] grandkids rural. So seeing just through the change in, you know, in any economic activity that youngsters are controlling more investible assets, what is the impact in your view of younger people having more wealth than they have done historically?
[00:03:47] Chris: [00:03:47] First of all, thanks for the invitation and great to be here. Really looking forward to the discussion with all of you when we first thing from my perspective, which is important to understand, because sometimes it makes up when we are talking about gang people in Wells [00:04:00] tech, we are not usually not talking about super young teenagers, but we are often talking about people who are in their thirties or forties.
[00:04:07]So when this is important, when we think about like the puzzle, not in mind, The biggest difference from my perspective is that this generation is much more used to technology supporting basically everything in their daily diet. And one example I like is when you think about booking a restaurant and you’re out there on a regular basis, very good hosts are very used to know everything about [00:04:30] you.
[00:04:30] They know your favorite table. They know your favorite dish. They know your favorite wine. So you basically have a very consistent high end experience because this is driven by CRM systems. This is driven by good showing of knowledge, same as true for basically every service we use today. other OnStore experiences.
[00:04:49] One of the very few example, exceptions is as well as management because wealth management is done very manually. Very paper-based. And basically, if you advise us on [00:05:00] holiday, there’s a fair chance that you’re treated like a completely new customer, even though you are with the bank for quite awhile. And that’s, from my perspective, the biggest challenge.
[00:05:08] So traditionally the super manual process was part of the. Increased service because it was so personal. Now the lack of organizational knowledge is one of the biggest challenges and that’s from my perspective the challenge, but also the opportunity because whilst managers in their core are a very, very trusted partner and especially worst management time.
[00:05:30] [00:05:29] Also the clients who are younger. Half a hype based trust in these institutions, but they do expect them to really make use of all the knowledge. They have to share this knowledge and to create armies in the organization knowledge so that they are less dependent on a single advisor and what they discuss with a single advisor, but really benefit from the strengths of the complete organization.
[00:05:50] And this is a challenge from my perspective, wealth managers have to solve that they are better able to make use of all the knowledge they have about their clients to really. Develop the best and [00:06:00] most individualized solution for these times. And not only the solution that one advisor has in mind, but really the solution where the whole power of new formulation comes to the benefit of the client.
[00:06:10] And this is absolutely expected from the younger generation, as I said, not the 18 year old ones, but more the ones in our age group. If I look
[00:06:18] Ben: [00:06:18] around. Okay. Dimitri, I’m going to ask you the next question. There’s a follow on, I guess, to what Chris just said, which is what, you know, what Chris is saying, is that, do we trying to deliver personalized [00:06:30] services manually or through just a human interface?
[00:06:33] Means that you get quite a lot of spread of, of outcomes, right? Sometimes it’s good. Sometimes it’s less good. And, but it’s not that consistent. Do you think that that delivering that digitalization is the now the means to deliver really hyper-personalized serviced at scale? And is that where Tinkoff has, do you think a competitive advantage?
[00:06:55] Because it has just so much customer data because the super app covers so much of our [00:07:00] digital lives.
[00:07:02]Dmitry: [00:07:02] Yeah, so that’s a really interesting and a really important question because the Mo well only we don’t have any branches, so we don’t have an ability just to meet the clients and to do this paperwork.
[00:07:15] So our challenge and we have already done it. So we get three off. We got rid of every paperwork in onboarding by brokers services and I was saying that was one challenge now is to organize the asset [00:07:30] management services in the same way. So of course the reason is small problem here.
[00:07:34] There is an issue here because our customers would like to take everything under control and the brokerage services. And this means to this demand and. On the other side, we see the problems that people in this pit of so many fronts would like to. To see as an asset manager in there has, there is a bias that there should be [00:08:00] a very, all the professional guy who got the rules assets and will say some re difficult to end not so really clear speeches.
[00:08:08] And now we We are offering and work on the decisions, which allows us which will allow us to get 3000 is. And we, we succeeded to a little and maybe I will tell you about it later, or right now it depends.
[00:08:23]Ben: [00:08:23] Yeah, maybe if you wouldn’t mind, give me one, one example of where you’ve succeeded.
[00:08:30] [00:08:30] Dmitry: [00:08:30] So I think that’s all our robo-advisor is the best rural robo-advising decision in Russia. So we. We call it owl. As the belt I’ll Russia in Russia is a symbol of rezone capability. I don’t know. Is it the symbol somewhere else, but here in Russia, it’s very smart. So it asks the customer several questions about risk attitudes about investment horizon about currency and some.
[00:08:57] And some others. And after that, it’s [00:09:00] offers diversified and rather big portfolio. And so we launched it two years ago and it has already formed more than 9 million portfolios. Well, but, but the problem is another one. So we have some problems with conversion on the last step.
[00:09:17] So in comparison with our other decisions. So it’s as a conversion on the last step, when a customer should just put a final bottom and we tried to research and [00:09:30] we found out a very interesting conclusion. So. We researched what the user really do after the all offer teams, his portfolio he refused to buy it by
[00:09:44] But after that, he goes to our mobile application. So in as a part of mobile application and purchase the same stocks and bonds, we all recommended it to hitchhike himself. That means that our customers would like to take or to take the control. They would [00:10:00] like to take his final decision by themselves.
[00:10:03] And those it’s really interesting issue. And now where we’re working on the 2.0. To solve this problem.
[00:10:13] Ben: [00:10:13] A little problem, even. Why is that out? Yep. Okay, good. Kristen, we’re going to come to you next because I think Chris and Dmitri have raised a couple of really interesting questions here. Right? Which is the.
[00:10:23] There’s, there’s no doubt that technology can allow us and all the data that gets thrown off by digitalization can allow us to give you [00:10:30] to give much more contextual advice, much more, you know, to be, to deliver much, much more personalized service at scale. But as Demetrius saying, there’s always, there are always things that play with wealth management.
[00:10:40] They’re a bit distinct, right? There’s this sort of reassurance factor. There’s the, you know, there’s the there’s the ability for there’s the desire for people to take control? W, what does that mean? Do you think, in terms of optimal delivery delivery models for, for wealth management, do you think it, it sort of leads us towards some sort of hybrid [00:11:00] optimum delivery model?
[00:11:04] Christine: [00:11:04] So certainly an assisted one, certainly an assisted one. In particular in times where you have high volatility uncertainty. Is is very high. You not only need advice can be automated, personalized content but also. You want to know if, if there is someone behind it. So systems is something we, we clearly see to grow in terms of the business model on the, [00:11:30] on the robot side that you have the ability for a call center or even on the, on the wealthier side that you have a full fledged hybrid hybrid model where you can.
[00:11:42] In the digital interaction can deal exactly the same as in-person meeting the same efficiency, the same documentation handling the same. Advice handling optimization in a [00:12:00] very, very efficient way and seamless, no matter if we’re unfortunately rooking all from home again in a lockdown or meeting going forward again.
[00:12:11] So yes, we clearly see that trend.
[00:12:13] Ben: [00:12:13] And you think the key is to make sure that that whatever channel you use, the the experience is seamless and consistent. Right? And I guess the other, my follow-up question would be, do you think that, because I think, you know, the other surveys we see where it says that younger people, since we’re talking about [00:12:30] younger people always prefer digital channels.
[00:12:32] Do you think that will change as their wealth increases? And they may want more reassurance, more personal interaction or human interactions, right. Okay.
[00:12:42] Christine: [00:12:42] It has a function to, to the, to the amount of files. Does it need to be a human interaction? Not sure, but doesn’t need to be an assisted interaction.
[00:12:51] Yes, definitely. In particularly if it comes towards topics that we all will need which is financial planning [00:13:00] because it’s likely will have pension gaps. We had acid inflation that helped nevertheless interest rates, a record low and the pension gaps that need to be addressed need to be advised.
[00:13:11] So it needs very early financial planning guidance, and maybe even beyond. Pure pure vowels only we would call it valves and Hells pure Wells own. They’re really advising, advising the client, providing trust, providing stability. And in, in [00:13:30] simple terms, huh? Not with, not with the financial jargons, but in very simple terms.
[00:13:36] Ben: [00:13:36] Veteran I’m gonna continue next because I don’t know if you’re looking at the poll, but what people are saying is that they think that the biggest trends affecting wealth management will be the transfer of wealth. But then the next one that they’re highlighting is ESG. And so I think this is a nice segue into, into impact and your work, because I want to ask you a two-part question here, which is Is, we obviously see a massive increase in the [00:14:00] demand for ESG investments.
[00:14:01] Can we, can we attribute that also to demographics and maybe also to the sort of, you know, the increase in investible assets that young people hold. And then what effect do you think the pandemic is having on ESG investing? If any.
[00:14:15] Bertrand: [00:14:15] Well, yeah. Hi everyone. All of these trends are to the interconnected and we definitely see a very strong generation shift when it goes to increasing demand for ESG assets or impact investing or sustainable investment, you know, whatever you call it. [00:14:30]
[00:14:30] I’m sure many of us are around this panel today, have a, of teenagers as, as skeets or or close contact with teenagers. And you, you can see by yourself, how important does the environmental and social topics to that generation. And they’re just not, not important to them. You know, philosophically, they want to take action.
[00:14:48] I think that’s the, one of the main differences with the privileged in average. And it’s not that they, they might be more concerned with the environment that they’re more willing to actually take action. They might also be less cynical than we are, or that all parents are. [00:15:00] And one of the ways for them to easily take action is to actually transform their investment portfolio.
[00:15:05] They’re very aware of the power of capital in terms of transforming the broader economy. And we’ve been talking a lot about the digital revolution in a way that is taking place in the wealth management industry, like in any other sectors or maybe in a bit different way than in the other sectors, but it’s still happening in the wealth management industry.
[00:15:23] But there’s, to me there’s another as important triple addition that is taking place as we speak. And that is the sustainable revolution. [00:15:30] So you know, it’s I I’ve been myself working in the sustainable finance was the last 15 years. I can tell you that 15 years ago it was like A very niche market was only a handful of banks, you know, claiming that they were doing anything about environmental and social.
[00:15:44] Now, today you will struggle to find any, once you go to bank that says that they do not integrate any environmental or social consideration. And so it has become very mainstream of course, with a very diverse, I would say, level of, of Robustness. And [00:16:00] how serious is that really being integrated across the board in the investment process, but for sure, this is the, this is a huge shift in the, in the demand.
[00:16:08] And it is, it is largely fueled by the by the dinner generation shifts and youngest clients. They would probably put that on top of their demand to their web managers. And very often even before financial performance, this is something that we also realized it’s sometime for, for the youngest generation.
[00:16:25]The positive impact of the investment is the number one demand [00:16:30] before the financial performance of their portfolios. So-so so, yeah, that’s a, that’s a major change and this is a change that he’s now in itself leading to another wave. Of a differentiation and sophistication in the market because as ESG data becomes integrated by most every single bank, there’s no longer a differentiation available there.
[00:16:51] So now wealth managers are looking for what’s the next way. And the next wave is really about impact data. And the difference between ESG data and impact [00:17:00] data is that ESG is very much looking at the. I would say the responsibility of business, whether they, you know, they treat their employees well, whether they are to the right practices and the right policies.
[00:17:11] But the real question is really what is their, their, their, their value to society in a way. What is their core business model is bringing as as positive or negative effects. Yeah, and that is a very different question and much more complex. And this is where now the market is moving is to try to to to figure [00:17:30] out how to answer those questions and not stop just by saying, if you treat your employee well, and if you limit your CO2 emissions, that’s okay.
[00:17:37] You can still, you know, manufacture shoes or sell cigarettes, or we don’t care. Now, this is not, I think he’s over now. The market is ready to really answer that much broader question about what is your. Your net consolidated impact to towards the environment and society. And this is the, this is the, the, the new change that is taking place now.
[00:17:57] Ben: [00:17:57] Okay. So we’re going to come back to that because [00:18:00] that’s, you know, th there’s a lot to unpack in what you just said. So I think we’ll come back to that and we’ll address it through the subsequent sections. Right? So in terms of some of the sort of technology and business model challenges around getting that impact data so I just remind our audience, they can ask questions at any point and I’ll put them to the, to the panel, but what I’m going to do now is I’m gonna move on in the interest of time.
[00:18:22] We’re going to move on to the next section around technology. And Christina wants to come to you first. And I want to ask you in your [00:18:30] experience, do you think that wealth managers are starting to look at technology decisions and evaluations a bit more through the prism of business model evolution? Or do you think that’s, do you think they’re still looking at it through some sort of more traditional or more traditional lens?
[00:18:47] Christine: [00:18:47] Hmm, it’s a very good question, Ben. If, if you can split the business model approach down into three layers. So the operating model, the sourcing model and the servicing model, then I [00:19:00] think they’re looking into it increasingly from a holistic point of view. Let’s, let’s, let’s start with the business model per se, and then the operating model.
[00:19:09] So. In the past, the operating model was mostly focused on pricing. I bringing the costs down and efficiency up. This has changed. And I think the clear, clear trend there is as well, that banks are increasingly aware of that. They’re part of that becoming part of the technology and [00:19:30] the solution. The term they’re to use is the banking as a service.
[00:19:33]Not only can they position themselves, that’s, that’s, that’s a business model decision they have to take. But also can they use and build up on existing technology with their teams? On on the sourcing model side, I think we’ve, we’ve we’ve payment. We all have learned that we need, we need, we didn’t know, Pence’s dumb open banking.
[00:19:54] We need to integrate the best solutions that are out there and, and fast and in an efficient [00:20:00] way. So. There clearly some, some trends, trends are visible on the sourcing model side, which is cybersecurity, which is anything that has to do with data analytics, personal advised advice is a big trend.
[00:20:15] And there you need the best partners to do the data analytics as well into wealth management and the servicing model, which is as well part of the business model decision. Clearly. It’s it’s w you’ve asked me before it’s about [00:20:30] hybrid or assisted robot. It’s about serving the client seamless bead remote, as we trust now, discuss, or be it in, on client meeting.
[00:20:40]The second trend there, and the banks have, have to make up their mind in terms of how they’re positioning in terms of omni-channel. So it’s not only e-banking, it is increasingly mobile or parallel and the clients want to see the same one to do the same actions. I think [00:21:00] yes, banks are targeting the business model approach really focused these days and are very supportive of doing the changes, honestly.
[00:21:11] Ben: [00:21:11] Dimitrio I want to ask you a follow up question on that, which is so first of all, I want to ask you, so what are the, some of the technology challenges that you face in your business? You know, is it around data analytics or is it just more around scaling the platform to meet the demands of, you know, millions of customers?
[00:21:30] [00:21:29] And then the second question I want to ask you in relation to what Christine just said is how do you at Tinkoff bank decide what you will provide? No sales versus what you will partner for. Where do you draw the line in terms of your, you know, your core competencies?
[00:21:45] Dmitry: [00:21:45] So let’s start from the first question.
[00:21:47] It’s, it’s a challenge and difficult question because yes, we are growing a really fast to be attracted to more than 2 million new customers surgery. Here and the editor [00:22:00] only 5 million clients at all. So our part is more than 40% during the last year. And we have about a 1 million active for customers and of course that’s a challenging problem for them.
[00:22:12] That’s a challenge. Question four. Taking the decision what should be first to, so the provider reliability or the silvers, or to run very quickly to the new products, new decisions. And of course we try to keep the balance and we try [00:22:30] to provide the providers at the same time, the scalability for.
[00:22:34] New customers for new activities. Brokerage businesses are really difficult by the fact that you should be ready for incredible for, from credible client customers activity. And you cannot predict it. So if you can predict that you’ll be Warren Buffett or something like, or, or even higher. So in this aspect, we should provide incredible reliabilities.
[00:22:56] So which can be more reliable than, [00:23:00] for example, it’s a common time, maybe 10 or 20 or 50 times. And that’s a problem because for example, as the start of as a moment of. When the American stock market starts, let’s just say it could be yeah. 1 million customer at the same moment. And they’d like to start trading and we should succeeded and they should provide a service.
[00:23:23]We shouldn’t, they shouldn’t give any delays something like that. So we don’t have the ability to, [00:23:30] to be mistaken. And then the other one points that at the same time I should think about the products, the product development, and of course for our small team, it’s a serious issue. But I think that we succeed, succeeded visits.
[00:23:43] So we try to find balance and we the I think we provide the speed is number one in Russia by the product development. So we release new features may be at least one time per month. And we. [00:24:00] Seriously keeps this speeds of the space in order to satisfy our customers. And I forgot the second one question.
[00:24:09] What should be in the center of a
[00:24:13] Ben: [00:24:13] bank, a broad offering in your super app? And the question is where do you partner, where do you think you need to do it yourself? Or is it, do you think it’s about data? Is it about owning critical datasets? Where do you, where do you sort of think about your core competence and what strategic.
[00:24:28] And if I’m provisional [00:24:30] is Bazzi provision
[00:24:31]Dmitry: [00:24:31] Maybe it seems to be strange, but the customer is the customer’s needs. The customer seizures is in the central. So it’s the first, so everything we do which should be should be the war to there’s increasing all the level of customer satisfied.
[00:24:46] And so he’s happiness and so we don’t think about, Oh, we should add some data smart data decision or sounds like that. So the reason is to improve the the customer’s life to give him some new [00:25:00] features to increase the speed of decision of his problem and And of course from this follows our data and smart decisions and which we widely implement in our everyday VOC.
[00:25:13] So if, if, if you need can share some samples, but. So, so, so the customer is the first time that he’s in the center and we take all the resources to solve his issue, data, smart, search, official intelligence machine learning [00:25:30] or, or sometimes it’s not really good to admit it, but I, we, we can hire more.
[00:25:37] Then more, more hundred to 200 supports the guys to solve the problem in this exact
[00:25:43] Ben: [00:25:43] moment. Great. Thank you. And then Chris,
[00:25:48] Dmitry: [00:25:48] of course we don’t like Sosa such decisions, but we have to do it sometimes.
[00:25:54] Ben: [00:25:54] And thanks, Chris question for you, which is so, so I’m not the only time. I’m sure I plug it, but we just did.
[00:26:00] [00:25:59] We just published a big report and wealth management. And as you know, Alan VAR is one of the, one of the systems that we looked at. And one of the things that we thought was pretty, something unique about your business model is the extent to which you allow data sharing amongst the tenants of the system.
[00:26:14] And the question I wanted to ask you is. You know, while that’s obviously incredibly value in terms of so turbocharging data network effects, how do you get rounds, data privacy concerns, and with that kind of setup,
[00:26:29] Chris: [00:26:29] I [00:26:30] mean, first of all, I think we all should acknowledge that it’s completely normal and absolutely part of every industry and also increasing the finance industry that not one single player is providing our services, but rather speaking about the value chain and then the extra quality and the delivery for the final user.
[00:26:47] Comes together by the company combination of competencies. And this is typically in the like most high end service. So for example, if you’ll think about the family office, you have DPMs managing a certain part of [00:27:00] the walls, and then you have a family office, or it has a, which has a complete overview, but still the DPM has certain part, the parts he or she is managing.
[00:27:08]And they are, they have the full transparency about everything they need to make their job. And it would be, and that’s basically also the way we look at it. So it’s important for us on the one end that we have all the security limits in place. And we are that’s untypical for a tech company, but from our perspective, very valuable, we are fully regulated financial institution, even though we’ll be focused on the technical [00:27:30] side of things.
[00:27:30] So we are 40 bathroom license, which. Requires that we Inforce and make sure that we have all the same security limits than a traditional bank. Starting with GDPR and ending with a bat. Second thing, this we use the most modern technology for that. So for example, we have something which is called roll level security.
[00:27:49] So for every data set, we have. We can define on the data sets, which use off the platform has access to this data set. And this is something dynamics, or if we can add basically [00:28:00] user rights and did it use the rights to a certain data point. And we ensure transparency. So for example, if it’s if a DPM, as well as someone else should have access to the same set of data, so easy, easy age the most simple example would be you have an independent discretion of portfolio manager and you have a custodian bank and both have an overlap of a client data access, or for example, the asset information is visible post, but certain information around the investment strategy is only visible.
[00:28:30] [00:28:29] Discretion of portfolio manager and then, but there’s at the same time, there is information which is only visible to the custodian bank. So for example, if the same, see client has multiple mandates with motor B DPMs, all the English, the same custodian bank, then the custodian bank has a full access. Of all this kind of information and each thing a DPM only sees the information from his perspective, individually perspective, and that is something we manage based on basically what the seek science defines as what is the [00:29:00] goal through target and what is his desire to access?
[00:29:03]So we have the combination of the technology. We have a combination of transparency and the last thing is then process. And there are there are also situations where we are actually the neutral third party. So one example for that, and that’s something we are now very much looking into in the context of extending our platform to even more partners on the provide side is traditionally, for example, you are a benchmark provider, or let’s assume you a pothole and you are now contributing a certain [00:29:30] information to the portfolio.
[00:29:31] Your price models were very much limited to the set of information available for you. So you could in the end, go for a license fee, one of the, but that’s pretty much it, but your service might actually be very valuable to increase assets. So with us as a neutral party, we could also support system logics where we say, okay we price based on assets, but that does not necessarily need to know all the information, but you can trust us as a third party who is able to facilitate this because we, as a [00:30:00] neutral instance, have the information from both sides.
[00:30:02]And then both sides can trust us. And we think that’s very valuable in a world where it’s more about. More and more about the ecosystem and not one single player providing everything, but in the end, it’s always about the value chain and the ecosystem where everybody focused on core competencies. And we try to bring these together solving topics
[00:30:19] Ben: [00:30:19] like this.
[00:30:20] And just one more question, one more. Follow-up do you, do you also use the sub collective data to train. Collective models, you know, which might be on, you know, understanding, [00:30:30] pricing across all your different customers or I don’t know, fraud threats, or, you know, I don’t know what those models might be, but do you also sort of try and common models?
[00:30:39] Chris: [00:30:39] Only in very, very limited ways. So to be very explicit to our model is not. So I always try to, I always compare there’s like the Google and then therefore the service is cheaper and there’s the, where the user have to pay. But on the other hand and everything is optimized for protection. We ended up at the side of things.
[00:30:59] So we [00:31:00] really focus on, yes, we charge our users, but on the other end, we really protect whatever they share with us. So therefore for example, when it comes to pricing investments for the juice out of loss, we don’t do any analysis there because we think that’s in the interest of our partners, that their data is really protected when they shared with us.
[00:31:18] And we want to be a neutral, trusted instance. Yeah. Where we use information as, for example, when it comes to it security. So we do maintain the security for the whole platform, and we do make sure that a threat [00:31:30] analysis is used in a way that we really protect everyone using our platform. But there is something where we don’t need to use any confidential data, but more general flaws, excess behavior and stuff like this to really make sure that the security is maximized for every user, but our trusted, confidential, confidential information is.
[00:31:48]Protected and only used in a way that it’s transparent to the respective user, which includes all patrons.
[00:31:55] Ben: [00:31:55] Fantastic. Good. So I remind the audience that they can ask questions and I will put [00:32:00] those to the panelists, but in the absence of those questions, I’m going to move on to you better. And I’m going to move us into the section where we want to spend most of our, what is know a good proportion of our time, which is new business models and betterment.
[00:32:12] I think if you don’t mind, if you wouldn’t mind just explaining a bit your business model, because it is very, very unique, right? So if you’ve known, explaining the business model and then. You know, it relies on user generated content, which is not a model we often see in banking. Right. And particularly one on which people are placing heavy reliance on that data to build portfolios and that kind of [00:32:30] stuff.
[00:32:30] So so if you would mind just explaining a bit the business model and then kind of talking about some of the challenges with user generated content and how you get it to the right level of accuracy and timeliness and all the kinds of things that a, a regulated financial institution would expect.
[00:32:48] Well, you were muted federal.
[00:32:52] Bertrand: [00:32:52] Sorry about that. Yeah, so I was seeing just so the, the easiest way around to, to guide you through that is just to let you know why we created the impact of the first place [00:33:00] and this, it was because we were. I’ll serve clients of of traditional ESG data providers and not very satisfied with the type of data we have, partly when the, you know, this, this move that I mentioned going from moving away from easy data into impact data, which is a very complex question.
[00:33:17] And and I think one of the reasons why we’re frustrated is that the the, the normal model that is Dominant in the financial industry is the single expert model. So you know, you want to have an information and you ask the, the expert of [00:33:30] the, I don’t know of the car industry, what they think about the impact of Renault and they will produce a report and you buy the Freeport, but impact.
[00:33:39] Is, is a far more complex question than financial performance. And we know that punishing performance is not so easy already, but impact is, you know, is way beyond that and you need to aggregate at the type of information. And and that, that, that is very hard to find in, in the mind of one single experts, you know regardless of how knowledgeable is that expert.
[00:33:58] And so. We thought it [00:34:00] was only two ways of being able to really measure the impact of companies and to, to, to get to manage that that level of complexity. One was a pure AI models that can really, you know gather a huge amount of information and try to make sense out of that. Or the other way is collective intelligence.
[00:34:16] So picking the brains of a, not just one single expert, but silence and silence of contributors, who you know, each of them having a, a small part of the information and having a way where you can gather all that information in a structured, [00:34:30] vetted, organized, documented way so that you can build the collective knowledge about the impact of the company.
[00:34:35] And that, that is really the the bases on which we created impact. So it’s a collaborative platform. It’s not a Wiki, but it’s very similar in a way to the processes that you could see in Wikipedia. There are many levels of, of quality control and, and vetting information because of course the power of collective engine intelligence is huge, but the, the risks are also very important, right?
[00:34:57] In terms of fake news and distortion of [00:35:00] information and, and you name it, right? So you need to have a very strict and very robbers control. Quality control mechanisms. If you want to make sure that the end results, the research and the scores that you produce are actually of a very high quality. So I’m not going to detail all of those mechanisms that are in place, but the, the, the answer is that it took us some time, but we now have a very robust and gene to produce that research in a very high quality and with a with a power, with a bandwidth [00:35:30] studies, you know, as no equivalent in terms of scale to any other single expert model, because, you know, we just added more contributors.
[00:35:35] And so the sky’s the limit in terms of all of the capacity to produce that content that’s skate. Now, once this is done, the other benefit of collective intelligence is that. There’s not one single person that decides that a plastic pollution for Nestle is more important than feeding the planet or vice versa or how much one should be weighted against the other one.
[00:35:55] Right? It’s a collective rating in a way it’s collective assessment. So you basically reflect [00:36:00] what is the common consensus from, from global civil society, which, which in itself has a lot more value than just asking Beckham what he thinks about Nestle or asking Ben, what it thinks about Toyota.
[00:36:10] Right. Yeah. And so that, that, that the model, we also use artificial intelligence, but not as a way to directly calculate those scores really more the way to assist with the research process. Making sure that analysts you know, get access to the writing permission in a quick way and in a structured way, and then can process that information [00:36:30] using the human brain for what it does best and using the artificial indigenous for what it does best.
[00:36:34] And I’m not trying to. Use one to do you know what the other ones should be doing and that’s, that’s the model we have. We we’ve been developing.
[00:36:40] Ben: [00:36:40] And then just, just one more question for you, which is what’s the hardest thing about scaling. Impact because, you know, I’m one level, you know, insurance you’ve talked about, right.
[00:36:50] That’s critical. Another level is getting sufficient coverage of topics. And that seems to be where you’re using AI. What about actually attracting the two sides, right? Because you’ve got the classic chicken and [00:37:00] egg problem, right? You need to have a lot of researchers in order to attract a lot of asset managers.
[00:37:05] And with the asset managers, you won’t get the researchers. How have you overcome the chicken and egg challenge? Well, I’m
[00:37:10] Bertrand: [00:37:10] not sure we have we’ve we’ve all I mean, it’s just a part of the solution is just to have a, you know, a do to get your investment capacity, right. And to have the right backers in terms of investors so that you can have the time to build that knowledge before you can actually sell it.
[00:37:26] And you have access to accept that, you know, it takes some investment and some time [00:37:30] before you can gather all of that research and produce it at scale, then only you’re able to sell it to two clients, which is what we do. Now. We have, we have reached that, that point where we can, when we start studying that research to decline, it took us some time before we could actually gather, you know, research on Southern’s of companies.
[00:37:47]Yeah, and I think the the other challenge is probably the fact that for that to work, you need to attract a very large community of contributors who might not have a complete alignment of [00:38:00] interest with your clients. And just give you a very concrete example, like in terms of coverage. Of course, and investors would like to have this kind of information for the largest companies in the world.
[00:38:10] Some of them being completely unknown from, you know, from the average Joe because the B to B companies or, you know, so, so get gathering information and gathering data and gathering greeting on Amazon or or alphabet or Toyota. That’s easy. But when you do move to some of the companies that are interesting for investors, because they [00:38:30] big companies in terms of market cap, but they do not.
[00:38:33] They’re not consumer goods company then of course, it’s a bit more of a challenge. So you have to, to find ways of actually making sure that your contributors on the platform can get interested into those. And the main way of doing that is, is just to make sure that they come to the platform for the right reason, which is an alignment around impact measurement.
[00:38:51] Most of the players, we have, they come here because they want to understand, they want to contribute to measure that impact. And if you can explain why this big company is important in terms of [00:39:00] impact and why they should contribute to the rating, then the job
[00:39:04] Ben: [00:39:04] on. Perfect. Thank you very much. So to meet you, I’m coming to you next and I’m sorry to do this, but this has, this is a three part question.
[00:39:12] Okay. I can remind you about the parts later, but the first question I wanted to ask you is yours is a business model that also has also had to overcome the chicken and egg problem, right? Because you needed to have millions of customers in order to be aggregate services for those customers. So how did you overcome the chicken and egg problem?
[00:39:28] Question number one. [00:39:30] Question number two, I can remind you later. Question number two, why don’t we see more super apps in Europe? You know, there are, there are, you know, there are many, many super apps in Asia, but you’re the only one sort of really successful super app in Europe. And then the third question has been put by the audience, which is how do you manage kind of all the data aggregation.
[00:39:49]We’re in this world where we’ve got GDPR. PSD two. I mean, how do you, how do you solve, you know, piece together and amalgamate data sets in a world where you know, that you’ve got sort of fragmented regulation [00:40:00] and more, more, you know, more regulation around data privacy. So, yeah. So first of all, how did you overcome the chicken and egg challenge with, with Tinkoff bank?
[00:40:13] You’re you’re you’re muted. I think Dimitri,
[00:40:20] Bertrand: [00:40:20] you’re you’re on mute.
[00:40:23] Ben: [00:40:23] Sorry,
[00:40:27] Dmitry: [00:40:27] let me elaborate a little how [00:40:30] I struggled with this problem.
[00:40:31]You know momentum today we realize it and that means that we don’t have any time for her relax, so we don’t have any time to gather resources. So we encourage shout team. We. Try to get more sources for, from the, our ecosystem.
[00:40:49] So there are big, we call it the whole Holy war. So it’s a big, huge discussion of we discuss there was the main targets for us and the Alec system [00:41:00] and now there is a decision that it’s Incofin investments is accelerating a lot. It’s succeeded in a lot and in our culture, in our DNA to, to help us all, all the bank now, sports it’s income from investments because it’s good moment.
[00:41:13]It’s a good time. And We really need we don’t, we don’t have any time to just think about it. We should deliver, deliver, deliver, or so we should keep the same space and we should scale our reliability. So we scale our infrastructure and I think [00:41:30] that’s is, is the issue not about solving the problem of chicken neck.
[00:41:35] We just widen, widen it and widen it. And Try to in reach our capacity to, to, to be able to do a lot at the same moment. And so we scale our business maybe twice this year so on as the staff our it team. And we are trying to do it very fast. We try to attract as a staff from not only [00:42:00] from, from different regions from our countries and maybe even more so the decision on his own disease.
[00:42:06] And so I think that is the challenge, which we are managed to solve it. And I think that we. We changed a lot, so three months ago, and now it’s the security difference. Believe me. So the sleep, not really much, but it’s a good time for
[00:42:25] Ben: [00:42:25] us now. And then, and then why don’t you think there are more super apps? [00:42:30]
[00:42:30] Dmitry: [00:42:30] Hmm. I was thinking about this question and my first idea was that it’s the point for huge scientific researches because it’s not so simple question. I think yeah. There are several important points which played a huge role in this the level of, of, of competition. Maybe the concentration of big players and small players.
[00:42:53] So We saw that in Europe and United States this process took much [00:43:00] more time and maybe was a behavior and habits of the customers have already formed and that’s important. And but after all we all don’t know what will be the next, because I think that Amazon, which is now seems to be only.
[00:43:14] E-commerce for a common customer. So Google, which seems to be only a search for common customers, all or, or Facebook all these super apps have more ambitions and our X system will have a lot of ambitions [00:43:30] and we would like to be more fuchsia would like to provide more services. And so.
[00:43:36] Ben: [00:43:36] And then Demetrius one more question. That’s come in from the audience here, right? This is good. We’re getting lots of questions from the audience now, which is it’s about your, your international presence. So I understand that Tinkoff only operates in, in Russia. What’s the plans to take tink off internationally, particularly in light of the fact that it’s kind of the only European super app.
[00:43:56] So why not go to the UK or Germany or one of the other [00:44:00] countries with thought populations in Europe?
[00:44:04]Dmitry: [00:44:04] I I’m not sure that I can count I can disclose in our our plants and our ambitions. I, I just can say that we recession actually everything, every abilities and possibilities. So we are interested in.
[00:44:20] In, in, in increasing the old business, but I’m not sure that I have what Sarah right now at the moment. And there is a well known Startup which is called [00:44:30] vivid money. So it’s well known story. It’s already presented in our in a, several regions of Europe. And so there is a connection between our companies, but it’s a well known story.
[00:44:43] Okay. Okay. So it’s a FinTech, it’s a FinTech
[00:44:46] Ben: [00:44:46] story. Okay. So, so in other words, is your answers kind of a bit, watch this space and a bit, we’re not doing it necessarily through the Tinkoff vehicle. We’re making investments and using capital to expand. Okay, good. [00:45:00] Chris coming to you next, which is, you know, how like banking as a service has become like this really big trend or at least a much hype trend, right?
[00:45:08] This idea that, that you can embed. Banking into any distribution channel and maybe, maybe a bit like with, with Tinkoff right. You, you embed into channels that already have lots and lots of customer engagement. And we see this a lot in payments. We see this a lot in, in lending. W why haven’t we seen it more, do you think, in wealth management, and do you [00:45:30] think that’s about to change.
[00:45:34] Chris: [00:45:34] So, I mean, starting with the last question, obviously, I think it’s going to be it’s about to change because otherwise it would not make much sense. But when we look at the overall or the underlying trends, I think. The reason why it started in payment and in other areas is because they are, we are very much speaking about economies of scale and we already speak about very, very high price pressure, whereas in wealth management for example, [00:46:00] in Switzerland, but also in other areas for quite some time, we had very high unit economics.
[00:46:05] And so it was actually possible to pay a lot of people, a lot of money for very menu work. And you still see team structures like one assistant supporting for advisors to serve clients. So basically you always had the option to go for some menu, a big opt ins that are going for a technical solution.
[00:46:24] That’s one reason. And the second reason from my perspective is that okay. And when we think about wealth management, [00:46:30] we are actually talking about a very, very fragmented industry. So you have private banks, you have DPMs, you have family offices, you have a lot of players in this industry. And therefore you had less parties who were able to really support huge investments in tech infrastructure.
[00:46:47]And so from my perspective we have now the interesting situation that exactly the last part is the fragmentation of the market. We’d be the driver for Ross tech as a service. And so the [00:47:00] technical side. Because all these players are interested in upgrading the idea, but they cannot do the investment themselves.
[00:47:06] They know a few of the pressure due to expectations or organization knowledge. One of the points we talked about earlier due to pressure on the margins due to increases in rigorous so that there are no manufacturers that actually force everyone to invest in technology. The split of the value chain.
[00:47:24] We discussed new trends like Bhutan is working on when it comes to impact. [00:47:30] So all of this in the end needs to be translated into Intel technology. Most of the players lack the resources to do the investments themselves. And therefore we see, do expect that there will be an increased demand for whilst tech provided as a service.
[00:47:45] And this then comes together and that’s, from my perspective, a very interesting dynamic with much more evolved regulation about the usage of services as a service. So for example, when we think about the various, the most fundamental thing of the infrastructure as a [00:48:00] service of meaning cloud service, cloud infrastructure Actually only in the last years, at least in Europe, we really see regulation taking off there a much better view by the regulator, much more consistent view.
[00:48:12] And they’ll basically everyone has a clear framework how to use cloud services that can still be improved, but which already allows us to use it in a secure way. And from my perspective, this like increased demand increased pressure in combination with a better regulatory framework. As a very good [00:48:30] moment.
[00:48:30]And I do expect that over the next year, as we were seeing significant increase in usage of Wells take as a
[00:48:36] Ben: [00:48:36] service. And where do you think, well, we’ll be into which channels do you think it will be embedded? Do you think it will be, do you have a sense of that? Would it be like lawyers, probate lawyers, for example, will it be accountants?
[00:48:48] You know, what channels do you think w w will be used to offer up wealth services that aren’t directly proprietary wealth channels?
[00:48:57] Chris: [00:48:57] I would I would expect that we see [00:49:00] this basically as the things we already see today done manually, we will see them executed in a better Dignitas supported way.
[00:49:09] So for example, I was responsible for the product management and the complete offering of a private bank based in Bowden. The maturity of the client acquisition was done through networks. And we were working together with lawyers, working together with techs, advisors, working together with all different kinds of [00:49:30] parties who also have the same client group, because in the end, from the perspective of the client, especially your client, it’s always about the holistic view.
[00:49:39] And I would expect that this is now being more and more supported so that you have in the end, again, an ecosystem of parties serving a client, but they are all supported in a better way so that the client has a better overall experience. And then the client can decide for himself. What does he want to discuss with whom but the level [00:50:00] of available information and the the possibilities to share data in order to improve service was significantly increased.
[00:50:07] Ben: [00:50:07] So you think it’s kind of a shared cost of customer acquisition and then across many plants. In other words,
[00:50:14] Chris: [00:50:14] I would say it’s like it’s a network of people working together and doing strategic partnerships. And one thing I usually discuss with partners of ours, when they think about that target operating model in the past, the core assumption was I’m a wealth manager.
[00:50:29] I [00:50:30] view what I’m doing. Tomorrow it’s much more about, okay, what is really my unique core competency and what are the things that better do with partnerships? And that can include things like I’m not actually managing the complete portfolio of a client, but I’m focusing on your certain part. And I it’s, for example, it’s G strategies or impacts for the juice buyer by another provider then extends to one of the things about real estate.
[00:50:52] For example, burden in Berlin. Most whilst management clients have a significant share of their portfolio in real estate. Then who are the parties supporting [00:51:00] this part? Then it goes further to the tech side of things. And so far for that perspective I think everybody in this industry needs to have a much clearer view about what is the, what are the individual core competencies?
[00:51:12] What are complimentary services to this, and how do I execute on these combined business models? And therefore we will see many more business models executed. From an ecosystem for supported with strategic partnerships. And then the question is how do you [00:51:30] support this technically, but also how do you support this from the legal point of view and how to really strengthen the strategic partnerships?
[00:51:38] But I think we are definitely far, far away from the times where one single institution was able to support everything. And we will definitely now going into directions where it’s much, much more about ecosystems by the way that also offers opportunities the other way round. So we just mentioned PST to PhD is much is a lot about sharing Ben, bangs, sharing [00:52:00] certain account information with other parties.
[00:52:02] I can also imagine going forward that whilst managers can establish themselves as a trusted party. To advise clients on other things. So Christina pointed out the the as one example and I think that’s completely right from my perspective. The question really is, okay, which information does the client wants to share with whom?
[00:52:22] And in the past we already saw in the individual levels that clients shared, for example, information about their business and their family died with their [00:52:30] advisor. I would expect that going forward there’s opportunity for more data to be shared with the wealth manager who then advising on this holistically.
[00:52:37] Together with parties and we’re supportive.
[00:52:40] Ben: [00:52:40] Fantastic. So Christine to you next. So a common theme of this section has been, you know, the growth in ecosystem based business models. So my first question to you is what other examples do you see of ECOS ecosystem based business models in wealth management, but they also want to put to you a couple of questions that we’ve had from the audience there.
[00:52:58] One is to what [00:53:00] extent do you think the pandemic has accelerated. Digital transformation in wealth and wealth for wealth managers. And then we also had one about data sharing, right? Which is how do you create a sort of quid pro quo, you know, for the suppliers that share data with you to make it worth their while to do so.
[00:53:18] So, sorry to put, so a bit like the Patriot three-part question to you though. So let me know if you need to be reminded of any of the parts. Okay. Let’s, let’s
[00:53:28] Christine: [00:53:28] start with the the [00:53:30] one that the pandemic accelerated desire for wealth managers. It clearly has accelerated the demand for tech, but in, in different ways But banks often used to build, to build their own and particularly the large ones.
[00:53:46] Now these days they can build an existing models. And I think there, there is a shift. Happening there in terms, in terms of speed in terms of no longer coding, but more on the configuration side, but still [00:54:00] having the, the end mile. So the, the client journey on full control The second one I would say is, is really the end-to-end.
[00:54:09] Okay. We want, we want an end to end solution UX. Just want to change my color and my logo and get it out fast. This is, this is a need for the ones that were not digital before before COVID hit us. And so. There is a full fledged solution in between the ones that really want customized built itself [00:54:30] and from an end to end.
[00:54:31] And I think as, as well as tech providers, all the T if you have, you have to play the full level between an end to end solution, but also providing just a means that the partners can build themselves, but it has definitely, definitely accelerated. And it has affected the business models. That’s with this cost before I think your second one Was on utterly consistent based business models.
[00:54:54] Am I right Ben? Yep. Okay. In terms of [00:55:00] ecosystem based business models, I think we can firstly, as well look across the financial industry. And w we spoke about financial planning before. The need to bring in impact sustainability data. So if we look into financial planning, it’s, it’s about, it’s about stability security, and there is a, it’s a combination of, of banking and insurance.
[00:55:24] So. I remember one of the studies looking into affluent opera, affluent clients and how [00:55:30] satisfied they were with we’ve kind of life protection offering provided with, with their wealth management side was around 9% that you don’t 9%. So there is a clear need for simple ecosystems and that provide services.
[00:55:48] From pension to free savings and even on top, for example, a life insurance and in a simple way. In a very simple way. So their ecosystems there, and that’s where oddity for example [00:56:00] is with its health and wellness offering established. The second ecosystem, one is really breaking up in the past. The banks have sourced the investment products.
[00:56:11]Proper due diligence came on the recommendation list. These days there is an ecosystem of investment providers and other platforms. Growing examples are daily or other examples are chant too, and it’s, it’s a link into DS investment providers that is, that is [00:56:30] needed going forward increasingly, and you need to have the flexibility to bring them into your offering for the clients as well, that this is something that’s happening within the industry.
[00:56:40] And then maybe adding up to what Chris has elaborated on, on banking as a service. Yes, clearly we see, we see this trend and in terms of the channels, it can as well be that the bank themselves become the channel. I E that the banks provide their service in terms of a supplier [00:57:00] aggregation and provide.
[00:57:01] WealthTech wealth, wealth management services to other smaller banks, even to insurance companies. So it’s not only within the technology within the banking sector itself, but it could as well be a wealth tech provided verdict. Client has its traffic, his or her traffic. So typically what we use daily is on the consumption side where we use daily is on the mobility side.
[00:57:25] Once we’re free to be more mobile again, and. [00:57:30] To provide the financial service there where the client goes on on daily needs is certainly something which we would expect to grow going forward. And the last journal, the last channel is with with corporates.
[00:57:44] Ben: [00:57:44] Yeah. So employee wellness,
[00:57:49] Christine: [00:57:49] neglect that. So where we have your payslip, literally you have your savings.
[00:57:55] Ben: [00:57:55] great. That’s breaking up as well. Okay. Right. So we’re moving, we’re running out of time. So we’re going to [00:58:00] move quickly into the last section, which is kind of the outlook for wealth managers. You know, the fitness landscape, if you like. And Dimitri, I’m going to come to you first, which is how, yeah, they can, you can answer this in general or you can answer this from a Tinkoff effective, but how do you sort of change culture within an organization in order to adapt to the digital age?
[00:58:21] Because things are so different, right? I mean, we’ve been talking about how the business model is based on opening up to fair buck is not kind of, you know, building a wall around your [00:58:30] business. So. You know, how, how do we get organizations and the people within organizations to adapt culturally in order to be able to launch and run digital age, business models.
[00:58:40]Dmitry: [00:58:40] It’s a little bit of a strange question for, for us. And it’s understandable why because we, as the digital absolutely digital platform from the day one. And so I think that is the problem for us is a little bit opposite that we should attract some customers. We are not so digital digital radio, and there is a [00:59:00] sheriffs that such customers, but.
[00:59:01]So about, in the aspect of our personal digitalization channel culture I think that’s special culture, special people to describe how, how it was created. So, so it took a, it has taken several more than 10 years and as a special atmosphere, I admit it. And I stress it’s it’s it’s it’s incredible atmosphere. We try to. Hire a young guys for verse Monte guys from [00:59:30] the best two universities. We try to pull them into the Metro culture.
[00:59:35] We try to encourage them to share with them our main values. And so Well, we are really concerned about the happiness and so everyone is really interested in, interested in delivery in the results in developing new products. And for me as a, as a leader of All this thing which is called
[00:59:56]My target is to ma not to encourage [01:00:00] and not to rule them to to deliver products, but to maybe sometimes, sometimes stop someone in order to solve the problem of chicken neck. So It’s a special atmosphere is by a special team. And it’s absolutely creative. And the productivity is really, really high.
[01:00:15] The butter, the roots of this atmosphere lies maybe more than 10 years ago, how it was the creator, how it was created. And that’s why for us, it’s a serious [01:00:30] problem too. In doctor, the people specialists from some other financial institutions. So because when I have a trade-off as a leader to promote some young guy who is 24 to solve some really difficult issue or to hire specialist with 25 years over experiencing our from our arrival.
[01:00:56]I will choose the first option because so it’s our [01:01:00] DNA and it’s our method.
[01:01:02] Ben: [01:01:02] Great. Fantastic. Coming to you. Next spectral is I’m going to give you the opportunity to kind of get on your soapbox. Yeah. Right. Because W we all know, right. So I read a statistic that I think by next year I was on like 50% of all investments will be based on ESG criteria.
[01:01:16] Right. But as you yourself say, you know, like you get this, you get this, these weird situations where oil companies can, can have a better ESG score than in a wind turbine manufacturers or whatever, because, because of the [01:01:30] way these, these, these scores are calculated. So, so my question to you is, are we gonna move beyond just.
[01:01:35] Investments based on ESG investments based on much, much more accurate kind of reflections of what companies actually the impact actually have. And is that going to become a source of differentiation for asset managers?
[01:01:49] Bertrand: [01:01:49] Well, the, yeah, of course my answer would not be no. I mean, if, if I, if I believe the answer would be, no, I would not be in this business, but yes, definitely.
[01:01:55] We actually starting to see that. I mean, we have started to see that for already a number of months [01:02:00] You know, one of the limits of the ESG data that you just described is that it is fairly agnostic of the basically of the, of the sector of the industry, of the whole business model. So regardless of the fact you producing again, cigarettes or, or shoes, or or hamburgers, doesn’t really make a difference into your ESG score, which is quite, you know, Quite a shock for people that are starting to discovering what ESG is all about.
[01:02:23] But this has been my reality for the last 15 years. And now this is a reality that is now coming to an end because the market becomes a lot [01:02:30] more sophisticated. And when you talk to an clients, particularly wealth management and clients. So the younger generation that that we’ve been discussing at the beginning of that session, you know, you cannot tell to those guys that you’re creating a, a sustainable investment portfolio to them.
[01:02:44] And the first line is in the portfolio is a, is X on. And and that if more is right, so. So it, it doesn’t, it doesn’t work anymore. I mean, we’ve reached the limit of that model. I think empty now we were trying to figure out where, where the companies, where do we think is right. And [01:03:00] now the question is our company doing the right thing and that’s a fairly different.
[01:03:04] Question. Right. And and we are, you know, one of the reason that makes me think that we are going to move to that new dimension very quickly is actually financial performance. If you look at the incredible movement, you could see on some sectors on the last two years, like energy, right? If you look at the market caps, the global market caps off traditional.
[01:03:27]You know, oil and gas companies [01:03:30] compared to the new players in the renewable energy, you know, like five years ago, it was, it was still like the old world where the the old giant where like, you know, 20, 40, 50 times bigger than the than, than the renewable energy players. Now, if you look in terms of market cap, which again is, is not a direct reflection of their economic weight, but still sell you a lot about how investors think about that.
[01:03:54] There is just huge. Sectoral relocation. And this is what impact investing is all about. As [01:04:00] opposed to ESG investing, ESG investing, doesn’t make you change your sector allocation. It’s just that in you that if you want an all company, then maybe you, you, you, you should choose a, I dunno, total instead of Exxon, right?
[01:04:10] But impact investing is about thinking what is the core business and what are the value of each of those businesses to the word. And then, you know, rethinking that may be, we want to have less of a. Of energy providers coming from fossil fue, as opposed to energy providers coming from renewable energy.
[01:04:26] And that that’s a much more fundamental [01:04:30] reallocation of portfolios, which, which did not really happen until now. This is also why sustainable finance and Tina as really. Largely fail in to that mission of changing the world for the better, because it didn’t change the asset allocation, but now this is what is happening.
[01:04:45] And to do that in a, in an organized olderly and robust way. You will need data. I mean, just like always in finance and investment data is King. And if you don’t have the right set of data to make those kinds of investment decision, [01:05:00] then you would just keep on, you know, making blind decisions that are not based on facts and you would keep replicating the same mistakes.
[01:05:08] So we need to put in the hands of the financial industry, a very rubber set of data. On the impact of companies so that when you decide that this company as overall a positive impact on society, this is you know, this is backed by facts and evidence and spouses. And again, it’s not easy, it’s complex because companies engage in a number of [01:05:30] operation.
[01:05:30] Then their, their impacts might be very positive for one community and very negative for another one. So it’s a very complex question, but it’s a very crucial question to answer if we really want to You know, to, to transform the economy and make sure it is actually benefiting the the common good and given the size of the challenges we all face with.
[01:05:48]Us or kids and everyone on that planet climate change is just as a small, a smaller, those challenges. I mean, there’s many more coming after that, the biodiversity, and we see, you know, we saw with the [01:06:00] pandemic, I think there’s, you had one question. I, I had an answer actually, whether the pandemic has accelerated that move.
[01:06:05] Yeah. Definitively because the pandemic is, has been in a way, you know, a way of rebuilding those, those fragilities in many business models, say it also a way of. Of immediately putting to the front, those businesses that bring a, a very high positive value to society. You know, when the societies is being under lockdown, then you get to see who are the guys around you, you know, [01:06:30] that’s T working because if it.
[01:06:31] Don’t work any more than the, the, the, the word stops. Right? So, so that’s a very good way of revealing, you know, what are the the positive value companies and business, and those ones are the ones that are going also to over perform. Economically and financially in the, in the years to come because they will they will, they will benefit from from that interest from investors, from consumers, from governments that we get more support.
[01:06:53] And the one that are not going to that direction are going to face, you know, increasingly you know, negative wins by being to [01:07:00] to to prevent them from growing, from being a good financial performance. So, so the correlation between impact. And risks and returns you’re going to increase. And my view is that You know, people of my generation, we were born and grown in the world of investment with a two dimension word, which was risk and return people of my parents’ generation, actually, when they went into the investment community, they were used to, to deal with only one, one dimension, but was returns, right?
[01:07:27] The risk dimension actually. [01:07:30] Was developed in the 1970s after the oil crisis, when the markets started to be a lot more volatiles and we developed, you know, many tools and, and data to measure the volatility and those risks and integrate that. Now it’s really about risk and return. That seems to be like the norm for people of my generation, but in five to 10 years, You know, if they will look at us and say, you know, how could you not just look at the impact as, as, as, as a major driver for performance.
[01:07:55] And and I think we have now already enter that, that new word where investment is [01:08:00] about risk return and impact and adjust returns around those three dimensions.
[01:08:05] Ben: [01:08:05] Nice. That was full of stuff. Sound bites as well. I love that. Yeah. Not just about doing things right, but about doing the right things, you know, that was great.
[01:08:12] Great stuff. Okay, Chris last question for you. So we’re gonna have two more questions. One is for you Chris, very quickly, which is so Dimitri talked about culture and he’s he’s also, you know, he’s also talked about the technology advantage that, that Tinkoff bank has, is it technology and culture that stops incumbents from being able to [01:08:30] adapt as quickly as new entrance?
[01:08:31] Or do you think there are other factors at play as well?
[01:08:37] Chris: [01:08:37] I think that I would not say that it was primarily technology and culture. I think indeed there are some other factors. So for me, one of the main differentiating factor when I look at who is acting and who is waiting. It’s basically the incentive model on the decision-making level, you can argue that this part of culture, but I would also argue that’s part of the incentive model.
[01:08:59] So [01:09:00] if you are there, for example, if you are. In a company where you are there for them as a decision maker for the next 10 to 15 years, then you are much more likely to act. Then you are. Then if you’re in a company where you actually start planning your retirement and we all know the technology shift comes with risk and I think.
[01:09:18] If someone tries to ignore that, that would actually not be a fear. So every change of a business model and every change of technology, which is part of the change of the business model comes with a certain risk. [01:09:30] And I, I do understand every decision maker who tries to evaluate this risk also from a personal perspective.
[01:09:36]And for that reason, I think that’s one key driver. The second key driver from my perspective is from, for the last 20 years or even longer, technology was not seen as a strategic component when it comes to financial business models. So for quite a while, for example, one, one very simple example.
[01:09:56] I’m also the chairman of the advisory board of the ministry of finance in Germany. [01:10:00] And one of the first things we actually did is we made it help, make it easier for us. People was a tech background to become a board member at a regulator company, because usually all the regulation is optimized in order to make sure that the decision-makers have the financial knowledge.
[01:10:17] And for example, I able to do the credit reassessment or do in the case of an asset manager, do the portfolio management. But there was basically no benefit of having a technical background, rather the opposite of what rather hard for you. [01:10:30] And so for that reason to pick up the technical techno point of yours were on in the second or third level of the organization, and usually only done after the bot already made the key business decisions.
[01:10:43] But if you look at something like the PCIs mandate I don’t know if all of you and or everyone in the audience is familiar with the end. The business mandate for is roughly 20 years old. Now it falls every developer at Amazon to make sure that every service is programmed in a way that it [01:11:00] can work with every other service.
[01:11:02] So today we call that microservice architecture in its core and also accessible for, for third parties. And I would argue that’s one of the reasons why AWS is as successful as they are. In the bank, typically the relations were of no interest and product complexity. Increasing technology complexity was not considered at all as a challenge or being able to update later on was not considered at all a [01:11:30] strategic question.
[01:11:31] And so from my perspective, I would more focus on what is the incentive model for the decision-maker. What is the core competencies on the decision level, body? Decision-making body and how it is regulator impact. Also things like this where I think we need to change that. Then a third level is driven by actually the first tool, understanding technology as an opportunity.
[01:11:56] So not only a, and this is something we discussed earlier already. Not only [01:12:00] think about it as something which helps me re reduce cost in my current model or help me increase efficiency in my current model, but rather opening up new opportunities. So how can I basically enable new things by, for example, being a trusted party across different business fields, or by working together easier in an ecosystem and having this view And then from my perspective, you end up with with actually a much more agile organization and taking [01:12:30] the right steps was more, much more high, much higher likeness.
[01:12:32] And we all know strategy, strategic decisions are always decisions on that uncertainty, but you improve the likeliness of being white.
[01:12:40] Ben: [01:12:40] Fantastic. Christine, last question comes to you and to some extent is to slightly redress the balance, right? Which is, we’ve talked about some of the challenges or obstacles that the incumbent organizations have when it comes to innovation.
[01:12:51] So having the right skills on the board, you know, challenges around incentives, challenges around culture, technology, debt, all these things that we’ve been talking about, but [01:13:00] where are the big advantages where we’re doing? Cumbents have. Where can they bring sort of, you know some of the existing advantages into the new world to help them to be more successful.
[01:13:12] Christine: [01:13:12] Thanks a lot, Ben. Fully agree with what Chris has said. First, we need a mindset. Change. Technology is strategic. It’s a strategic component and it’s an opportunity as well and opportunity for growth for an economy. Now on top the incumbents have the [01:13:30] clients at the moment. They have an existing client base often have a large existing client base and can serve them better.
[01:13:37]If they do the next generation, that’s an F if they do the next generation link successfully, they would have some Ella have, then the next client base, if they’re not already a banking somewhere else. So that that’s the first one. We all know that customer acquisition costs are very, very high for new entrance into, into the wealth management market.
[01:13:58]The second is [01:14:00] they have the existing customer acquisition channels. So they have established channels bead through advisor B through other channels and they can target either in person or hybrid on the existing clients side. Now with an omni-channel model, you as well can address prospects on top of your existing clients, but also simply interested in your company.
[01:14:25]People. And the third one is, and I never thought that we’ll [01:14:30] mention that, that way. Honestly, it’s, it’s the trust and the brand and the regulated for the next decade or century, you’re here to stay. So whenever it’s, it’s getting, it’s getting shaky in the markets and we had a fantastic, fantastic run retail investors are in the market and are trading.
[01:14:48]We will, at some point, see after that asset inflation, we have seen setbacks. So the banks, they have dull and boring brick and mortar. They have a balance sheet, they have a huge report. [01:15:00] They have equity, they have liquidity on the balance sheet. As I said, they’re regulated for the next century. Which, which is trust and brand.
[01:15:08] If they get the order two things, right. Which is the mindset change. No, it’s not the place to wait for your pension. It is the place where you need to change the company you’re running and make it fit for the next decades. And secondly, technology strategic. And I think then they’re nicely positioned, but
[01:15:30] [01:15:30] Ben: [01:15:30] I say, yes, No, sorry, sorry.
[01:15:35] I didn’t let you finish. Sorry, Christie.
[01:15:38] Christine: [01:15:38] I think if, if that, if they get that combination or that, then they can avoid the, the risk that they have, which is that the change is a gradual until it was sudden. So then need to act now.
[01:15:53] Ben: [01:15:53] Fantastic. Okay, bye. So fortunately we’ve we’ve run out of time. So I just would like to say thank you to our four [01:16:00] panelists.
[01:16:00] I think we’re very lucky to have four such interesting speakers from four such interesting companies. And thank you for the lively discussion. And thank you also for answering all the questions that we didn’t have time to, to, to put you life. So Dimitria in particular, thank you for answering all those questions you’ve been getting, and we’ve been getting loads of good feedback.
[01:16:17] So I don’t know if you’ve seen bear Tron, but you just had a kudos. For impacts Andrea. And and then lastly then just to thank you all, everybody who, who listened life, thank you for, for interacting with us, for your questions, for your [01:16:30] comments, for completing the polls. And for those of you listening after the fact, thank you to you too, for watching the recording and then look out for the next four by four.
[01:16:39] So we’re the next one we’re already pulling it together. It’s going to be on talking about crypto. Whatever it is now really a true investible asset. So look out for that and thank you again for attending and participate.
[01:16:52] Chris: [01:16:52] Thanks for the invite. Thank you.