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 Technology is likely to appeal to multi-tasking millionaires with
little time to spare. However, wealth managers must also win the
trust of younger investors who have experienced two downturns during
their formative years plus a furor over Swiss banks' involvement in
tax evasion.
In a fifth floor office just off Zurich's main shopping street,
researchers at UBS <UBSG.VX> are testing dozens of technologies to
see what could make the world's biggest wealth manager more
appealing as fortunes pass to the next generation.
"How do you get under the skin of clients today, because they often
work on their mobiles and they manage their wealth in their spare
time," said Dave Bruno, head of UBS's innovation lab. "It might be
in the bathroom, it might be waiting for a flight."
Bruno and his team are designing video games, including a prototype
puzzle for iPads and smartphones, and looking at virtual reality
simulations to help people visualize what are often complex
investment portfolios.
They are also working on technologies that allow clients to log into
their accounts using their voice patterns and facial features, doing
away with the time consuming and frustrating need to answer security
questions.
UBS has opened a second research lab in London and plans another for
Singapore later this year. It is also exchanging ideas with
financial technology start-ups as well as Google and Amazon..
FACEBOOK, NOT FERRARI
UBS Chief Operating Officer for wealth management Dirk Klee said
clients need investment advice and performance. "It's not just being
a 'concierge service'," he said.
Many millionaire and billionaire customers, whose ages average more
than 65, still welcome the concierge service - such as sorting out
the paperwork on their new Ferrari.
But in the next few years private banks must deal increasingly with
clients who are perhaps 30 years younger as what is often family
wealth passes down to the next generation. These people grew up with
the tech bubble bursting around the turn of the century, followed by
the 2008 financial crisis.
This is shaking things up at Switzerland's private banks, which are
already reeling from a U.S.-led campaign against tax cheats. This
has effectively ended the industry's secrecy rules and encouraged
publicity-shy customers to withdraw hundreds of billions of francs
from Swiss accounts.
Meetings are increasingly held over video links instead of in banks'
wood-panelled rooms overlooking Lake Geneva, while clients will look
to social networks for investment advice and to compare portfolio
performance.
Some of the technology being investigated is less familiar than
simple video conferencing. It includes Facebook-owned <FB.O> virtual
reality goggles Oculus Rift, which can present clients' portfolios
as a city.
"Which pieces of your city are missing? You don't have a water
system in place, which might be your investments into a certain area
in the alternates market," UBS's Bruno said.
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"Your skyscrapers are too tall, you're invested too high here. There
are ways to use the new technology to do things in finance that are
quite cool and interesting for our business model."
DIGITAL RIVALS
Cool technology notwithstanding, banks still need to get the basics
right, according to Felix Wenger, a director at the Zurich office of
the McKinsey consulting firm.
"The industry is still in the process of making sure things run
smoothly and don't break down," said Wenger, who compared the
technology wave in private banking today with the motor industry in
the 1950s when it needed to ensure cars ran safely and reliably.
New digital wealth managers, such as British-based Nutmeg and
U.S.-based Wealthfront, are keen to play up the trust issue. "Almost
universally, every study is showing that investors under 35 have
grave mistrust of existing banks and brokerages, and are seeking a
solution from the technology industry," Wealthfront Chief Executive
Adam Nash said.
Sometimes called "robo advisers", these online services ask
customers questions about who they are and what they are saving for,
just like conventional advisers, but then they use an algorithm to
devise an investment strategy.
Wealthfront, which was launched in 2011, has over $2.4 billion in
client assets but it is dwarfed by established private banks where
managed assets can top $1 trillion.
While the robo advisers can target people with a minimum to invest
of $5,000, many wealthier individuals still want a tailor-made
service with a well-established name.
"Trust is the fundamental problem for online players," McKinsey's
Wenger said. "You don't wire $1 million to 'onlinewealthmanager.com',
but you would to a well-known banking brand."
Ultimately, Klee believes banks which offer added value to clients
will survive, just as Internet pages full of medical advice did not
make doctors redundant.
"That's what's happening in banking. You need a highly qualified
adviser who navigates you through all the data that is available,"
he said.
(Editing by Carmel Crimmins and David Stamp)
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