FINance & TECHnology - ASCOSIM Sironi_Ascosim.pdf · FINance & TECHnology Robo-advisors and...
Transcript of FINance & TECHnology - ASCOSIM Sironi_Ascosim.pdf · FINance & TECHnology Robo-advisors and...
© 2015 IBM Corporation
ASCOSIM - 5° Forum Nazionale - Aprile 2015
FINance & TECHnology Robo-advisors and Goal-based Investing
Paolo SironiIBM Risk Analytics
Director Wealth Management Risk Analytics and Thought Leadership
© 2015 IBM Corporation
Agenda of today’s presentation
What do we know today about FinTechs and robo-advisors?
Are robo-advisors truly disruptive?
How do we see the future of robo-advisors?
u
v
w
© 2015 IBM Corporation 3
FINancial TECHnology
FinTechs focus on the digitalisation of the financial system:
• Lending: LendingClub, Kabbage, OnDeck, Borro, Kreditech, Funding Circle, Wonga, Nimble, […] • Transactions & Payments: Klarna, Square, Stripe, PayNearMe, TransferWise, SumUp, […] • Research & Big Data: Yodlee, Kredit Karma, […] • Private Equity & Venture Capital: CircleUp, Our Crowd, AngelList, […] • Investments & Advise (robo-advisors): Wealthfront, LearnVest, Betterment, Nutmeg, FutureAdvisor,
MoneyFarm, Vaamo, Jemstep, Wisebanyan, Money On Toast, Schwab Intelligent Portfolio, […]
hINDEXING
£REBALANCE
£
robo-advisors
ADVISE
MC £INVEST
Some examples not exhaustive of industry reality
© 2015 IBM Corporation 4
Robo-advisors can be a disruptive global trendThe display order doesn't represent establishment date, quality nor business dimension
2015
2014
2013
20202030
2040
noticed
20122011
2010
matured
transformed
AUM 0.01%
venture capitalresearchconferences
+100% AUM
from robo-advisorsto robo-4-advisorsand GBI
© 2015 IBM Corporation 5
Robo-advisors are expected to grow fast.Source MyPrivateBanking: “Robo-advisors: threats and opportunities for the global wealth management industry" (2014).
Source Wealthfront: comparison of AUM growth versus Charles Schwab.
© 2015 IBM Corporation
RT6
Are robo-advisors
truly disruptive?
© 2015 IBM Corporation 7
Sustaining and Disruptive Innovation
1.Rate of improvement a client can absorb and a variability around [Retail, UHNW]
2.Sustaining innovation makes better products with higher prices for high end customers, until extra value can’t be priced up [HI-FI, personal advise]
3.Disruptive innovation introduces simplified and less expensive products/services, to appeal to new or less-demanding customers[iPod, robo-advisors]
4.Higher margins and more demanding customers once products gain foothold, improvement cycle restarts [iPad, robo-4-advisors, GBI planning]
time
perfo
rman
ce
sustaining innovation
disruptive innovation
innovation customers can
absorb
range of innovation customers can
absorb
© 2015 IBM Corporation 8
Who feels threatened? Not only humans
Platforms and custodians
Human AdvisorsActive managers(not so active …)
Mutual Funds and Index ETF
w automation of portfolios (Indexing 2.0)w transaction costs are approaching zerow tax harvesting can be maximised.
w personalised smart-beta and rule-based algorithms (Indexing 3.0).
w Millenials are more digital and social than Baby Boomers.
w All-In-One Vertically integrated Platforms and the shift to robo-4-advisors
The next generation of advisors will focus more on adding value in financial planning (“gamma”) rather than investment management (“alpha”).
Only “true active managers” will be capable to differentiate.
h h JIndexing 2.0 Indexing 3.0 Robo-advisors Robo-4-advisors
© 2015 IBM Corporation 9
What is the future of robo-advisers?
© 2015 IBM Corporation 10
From disruption to sustained growth
Robo 4
Advisors
Robo Advisors
Jdisruptive innovation
sustaining innovation
Investment Design for Wealth Managers
by Nobel Price Robert C. Merton: The Crisis in Retirement Planning (HBR, 2014).“The customer needs worry about three things only: her retirement income goals, how much she is prepared to contribute from her current income, and how long she plans to work. The only feedback she needs from her plan provider is her probability of achieving her income goals.”
Goal Based
Investing
© 2015 IBM Corporation
A true goal-based approach for asset allocation
11
A Exp. Return 4.5% pa
Volatility 20% pa
Exp. Return 5.5% pa
Volatility 30% paB
20%
40% 60%
80%
100%0%
20%
40% 60%
80%
100%0%
Probability
Probability
Equity EU
Equity US
Treasury EU
Treasury US
Cash
Equity JP
Equity EU
Equity US
Treasury EU
Treasury US
Cash
Equity JP
Advancedgoal-based Investing
Model Portfolios
loss goal
loss goal
All robo-advisors ask to state your age, your financial goal and your risk tolerance … but they use Modern Portfolio Theory which is not goal-based.
© 2015 IBM Corporation 12
de.linkedin.com/in/paolosironipso
@thepsironi
www.amazon.com/Paolo-Sironi/e/B00TLMSSA2
www.riskbooks.com/modern-portfolio-management-from-markowitz-to-probabilistic-scenario-optimisation
Thank you Investment Design for Wealth Managers
Paolo Sironi - IBM Risk AnalyticsDirector Wealth Management Risk Analytics and Thought Leadership
Author of quantitative books on goal-based and long-term investing