Hybrid advice: Anything goes in private banking

The spectrum of clients in wealth management ranges from autonomously decisive, well-informed investors to wealthy investors who value personal advice. In order to serve all groups according to their preferences, private banks are embarking on the path of digital transformation towards hybrid banking.

At the end of 2016, the majority of participants in an online survey, conducted by the investment strategy magazine Funds Europe, were certain that by the end of 2016 customers gaining an advantage  due to open architectures. In this respect, digitisation affects private banks as intermediaries: it challenges their traditionally exclusive role – and it opens up new fields of action for them. Financial institutions are changing and developing strategies for new advisory models. The hybrid advisory zone designed by Betina Wunderlich (Accenture) shows how they can meet customers’ different expectations by cleverly combining personal and digital services (see figure).

Source: Accenture (2018)

 

As the survey mentioned at the beginning, almost 60 percent of the participants were committed to the fact that investors are better informed today. In this respect, hybrid consulting approaches should leave room for autonomous investment decisions, as well as for consulting with people on an individual and personalized basis. A large number of investors are already positively engaged with automated portfolio management (Robo Advice), while in private banking personal advice continues to play an important role. A balance must be struck between all these requirements, or they should be taken into account in a holistic approach. As in other areas of banking, institutions must “define their role as part of the new service ecosystem and shape the banking landscape of the future accordingly with their competitors,” writes Betina Wunderlich. In addition, she expects a “redesign of pricing models” away from pure investment towards the advice she receives.

Both Robo Advisory and Personal Consulting use machine learning algorithms to align the investments that best fit the client’s current situation and requirements. However, Christian Brandlhuber of Teramark Technologies GmbH urges caution when analysing capital markets. He sees the future in forecasting systems “that are hybrid in the sense that they can interpret semantic concepts recognized in the data against the background of a macroeconomic situation and thus combine both theory and data-centered approaches”. On the one hand, this makes it possible to include changed regional framework conditions in global markets in the forecast. On the other hand, automated decisions are linked to the world knowledge of the consultants.

Our private banking portfolio enables financial institutions to implement an individual, digitally transformed consulting strategy. For example, the private bank Hauck & Aufhäuser uses our Bionic Robo Advisory for digital asset management.