“We have access to all the strategies and can rank them, categorize, and then be able to build customized and diversified portfolios by combining modern portfolio theory with the data of the matched clients.”
Also, for security reasons, Luca suggests that companies should use blockchain and smart contracts, which provide transparency throughout all the aspects of the investment process and guarantee automated settlement of transactions. This will add value for the traders, who can be sure that every transaction is fair.
The value of open API and integrations
Luca is confident that platforms like Guruvest should have an open API. He claims that the key is in a diversification of integrations with different platforms, which requires the API to be smooth, open source, and easy to integrate. Moreover, he intends to introduce this idea into his own product:
“The system is open in that sense and that’s why banks could partner with us easily. Thanks to our broker-independent nature, they might partner for global advertising; other banks have approached us because they want to offer our trading strategies onto their existing trading platform as a form of social trading to their clients. Other financial institutions have shown interest in using our AI system for their own investment portfolio; all of this will be comfortable […] So we’re really building a protocol which is open to different players to connect.”
Such configuration of an outsourcing investment instrument enables its integration with the existing system consisting of the trader, which provides the trading strategies, and the investors. Moreover, it does support an entity in the middle that works as an affiliate, which takes trading signals from multiple traders and re-distributes them to the correct investor.
Social media for UX and personality trait reports
Luca likes the idea of using social media accounts. It is simple, quick, and there is no paperwork, which is very efficient. All you need to get started is to link your trading account, set your investment goals or what you want to invest in, assign a limit, and then it is ready to go.
As well as social media accounts providing a smooth user experience, the information they contain about the user can be utilized to construct a more precise risk profile:
“For example, users can register with a LinkedIn or Facebook account, which would help us to assess the risk profile in an easier way [than] starting with zero data […] That’s something that gives us a little bit of advantage.”
According to Luca, wealth management can also benefit from utilizing the personality trait reports created from social media account analysis. The findings that are acquired in this way can be integrated with a machine-learning algorithm—for instance, IBM Watson—and can then influence the investment decision making:
“There are companies that use [personality reports] for matching a client with a salesman. They know that this client has a certain personality and probably will get along with this specific salesman. So I think that, with the correct data policies, we can do the same to predict the investment behavior.”
He also states that the data acquired will be used for the sole purposes of protecting the clients from unreasonable risk and to provide them with the most relevant advice.
What will the wealth-management company of the future look like?
According to Luca, most of the robo-advisory solutions have business model issues because of very high customer-acquisition costs. The companies that intend to grow in the future should keep this aspect in mind and develop new models that are able to mitigate this factor. In Luca’s opinion, the easiest way to follow this practice is to become really open, to embrace different services, and to partner with different feeder companies in order to provide the best UX, as opposed to building everything in-house. In that vein, he holds up Revolut and N26 as examples, which grew by providing additional services throughout APIs and partnerships:
“Why does it have to be linked to the current financial services? Maybe it doesn’t. We are seeing a major shift, where banks are pushed by digitalization and blockchain technology, in a space where they are not experts. […] ‘We cannot do everything in-house; these guys are providing this great service, we just want to integrate with them in order to deliver more value to our clients.’”
Luca’s main message is the necessity of being open, whether for building partnerships or integrations, or for creating a valuable eco-system through open innovation:
“What we learn with these models and strategies [is that] you cannot just say, ‘Oh, I’ve made a model, it works great.’ It’s constant work which requires somebody to keep monitoring, modifying and evolving the models [over] time. This can only be achieved by aligning the interests of the various stakeholders through an open eco-system.”
As Luca anticipates, the only way for wealth-management companies to keep pace with the industry is to experiment and introduce daring and novel ways of using the technology. The one who puts together the right ingredients for the right recipe will be the winner: