At the Economist’s Finance Disrupted event in London, COO of UBS’ Wealth Management Arm, Dirk Klee, wants banks to collaborate with fintechs rather than compete with them. According to Klee, “We are embracing fintechs and actually we believe that there is great innovation. We need to find very smart ways to partner up and improve our existing business model.” Klee also references roboadvisors, who are online wealth managers that “rely on a high level of automation to adjust portfolios,” and how UBS is building its own roboadvisor product that leverages human investment experience to bring more value to clients.
We’ve seen traditional banking systems adjust to the modern technology environment in different ways – some banks allow you to deposit checks from your phone, and some, like Chase, even have their own mobile payment products. With the rising popularity of fintech, it makes logical sense for banks to leverage automation to bring greater value to clients.
However, regarding Klee’s aim to use both automation and human experience to improve investment advice, I would caution that human experience only goes so far. When comparing index and managed funds, many investment professionals find that passively managed index funds (where the portfolio mirrors the market index) are simpler and often outperform actively managed mutual funds (where the portfolio is managed by managers who try to beat the market). I believe that experience is not a crystal ball, and that experienced managers can completely predict where the market is going to go next.
Sources:
http://www.businessinsider.com/ubs-dirk-klee-fintech-roboadvice-china-2017-2
http://www.investopedia.com/university/quality-mutual-fund/chp6-fund-mgmt/