Welcome to the third part of our Q&A mini-series with some of the experts we interviewed in our recent Future of Investment Report...
NED PHILLIPS, FOUNDER & CHIEF EXECUTIVE OFFICER, BAMBU
Can you tell us a little bit about your robo advisor tech and how you are working with wealth managers?
"The word robo-advisory—because it gives the impression that Bambu has a robot that gives advice—[some people assume that] if it’s a robot giving advice, it has to be better than a human. I often get asked, ‘how does your robot beat the market?’—of course, if I had a robot that could always beat the market, I’d probably be keeping him at home and feeding him my money.
"It’s surprising how many people look at B2B and B2C robo advisors and have a concept that there is a secret investment algorithm involved. Yes, we have AI—but primarily our technology is about how do you design and build a savings plan and investment journey, how do you use data to make that goal-based journey more intuitive, and how do you then get the right portfolio and make it all seamless. That’s what we help with."
So what are the advantages of using your tech rather than building their own?
“It’s really hard to design and build a robo advisor. It’s hard for a bank for two reasons. Firstly, the technology team at most banks do not have the expertise —the focus has never been to solve individual customer problems in individual segments—but more to keep the technology running. Secondly, it’s actually incredibly hard to build platforms similar to Nutmeg, Betterment and Wealthfront. So our simpler way of getting there is to build a suite of APIs that are modular, such that these can be assembled in a customised way to solve a bank’s digital wealth problem.
"A bank might say, ‘I want Betterment with my logo on it. I want to be able to offer B2C. Or, I want my advisor to have a digital wealth tool on his iPad so he could go through a financial planning journey.’ When we see banks trying to build it themselves, they tend to employ a department of 15 or 20 people for two years, yet these people rarely have experience building a robo. The other problem is that a bank will build a robo and think it’s done. However, the reality is that even what Bambu built six months ago needs upgrading. We’re upgrading all the time. Robo is a new industry, so you have to keep reinventing to keep up. So the main reason a bank would choose us is it’s hard to find the right people, it’s expensive to keep them on, and you need them to keep improving the product."
What is driving digital transformation in the wealth and asset management industry?
"In Asia, it’s what we call the rise of the super apps. Alibaba is the world’s largest robo advisor, and Tencent is the second largest—tech firms are all getting into finance and wealth. Every time we meet with a bank or a financial institution, when they think about wealth management, they only have one question on their minds—‘how do I sell more products using digital?’ But very few humans wake up in the morning and think what I want to do today is buy a balanced equity portfolio. What they want to do is achieve their financial goals.
"Whenever I meet a super app company—Google, Tencent, Ali—I have never met a disrupting tech company who says, ‘how do I sell more products?’, they only have one question—‘how do I keep the customer in my ecosystem?’. They don’t care about the product. The wealth and asset management industry is waking up to the reality that how you distribute and how you sell is so much more customer-centric.
"That’s the biggest difference. I’m excited when I meet asset managers and they say, ‘I’m trying to work out how to help my customer achieve their goals.’ Some are doing it, but how many? How many asset managers understand their customers’ goals? They don’t, they sell products, and customers don’t want to buy products, they want to achieve their goals. So that’s how we see digital disruption—firms that understand they need to change the narrative and solve their customers’ problems. That’s where the real winners will come."
What are the biggest challenges firms typically face when implementing digital transformation strategies?
"Number one, because they tend to lack APIs in the backend, they’re not able to make use of all the different fintechs and new technology applications. As such, the biggest change they could make is to switch from a legacy stack to a cloud microservices API. As for the frontend, the biggest change they could make is to think about how can they solve a customer’s problem? In other words, helping them achieve their financial goals. Interestingly, it would sell way more funds than thinking about how to sell them funds.
"We have a tool called ‘People Like Me’. Similar to Netflix—where you watch something on Netflix and you get recommended other films based on what people like you watch—it recommends you financial goals based on what people in a similar demographic has aimed to achieve financially. For example, it might say people like you are saving £1,000 a month for retirement. If firms put in a lot more effort into convincing their customers that ‘hey, we’re not trying to make you buy our products, instead we’re going to show you why they help’, they would probably sell a lot more."
What are the implications for firms that ignore digital?
"Covid has shown that if you sell wealth management products and you don’t have digital, it doesn’t work. You don’t have to be 100% digital, but any finance firm involved in wealth that does 0% tech, I don’t see how they will last a year."
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