5 Things That Are Wrong with Wealth Management and How To Fix Them

[Music] thank you Sarah for the kind introduction good afternoon everyone thank you for joining us here at the abudhabi finance week as Sarah mentioned my name is Nadin hanni I present the business news on laia News Network and it is such a pleasure to be here with you today as moderator for this session entitled course correction five things that are wrong with wealth management and how to fix them over the next 20 minutes we are going to debate strategies for transforming wealth management with our panel of experts we are going to explore themes like the role of technology and driving Innovation across the wealth ecosystem and how to find better ways to give and take Financial advice when it comes to wealth management to discuss these themes it is our pleasure to have our panelists let me just tell you a little bit about each Mr hany kwi is head of International Bank of New York melon Han is based in London he's a member of bny melon's executive committee and serves on its European UK and Saudi entity boards Al also with with us is Mr Roger Rohana CEO of ala a wealth technology Venture focused on powering and growing wealth Enterprise franchises with an emphasis on the Mina region and Dr Maz Nar a senior partner at McKenzie based in the Middle East he advises and serves leaders in the financial services and Institutional Investor sectors with expertise in corporate strategy and risk and regulations gentlemen thank you for being here with us let's go directly into the topic hany you oversee a global market infrastructure platform you must hear and see a lot from your clients we're talking about five things that are wrong with wealth management what are they well uh thank you for having me maybe I start with the big one and I think a few others will will roll off of it the the most significant one I think is underinvestment in technology um it's interesting because we all have experienced for a long time now a highly digital highly convenient retail platform on your phone on an app sometimes it integrates third party capabilities and that's exactly what wealth needs and wealth had not invested in it's a very fragmented landscape so admittedly it's much harder to actually achieve that type of a convenient outcome but it doesn't mean that people shouldn't be trying and I think that you know you'll hear from my fellow panelists that there's a lot of attempts at solving exact that problem now by the way that problem also leads to some other problems uh Downstream for example relationship managers who are supposed to be spending a lot of their time actually uh in a commercial capacity because of the fragmentation of the reporting structures the clearing and settlement and custody structures within the wealth space and the model portfolios within the wealth space they end up spending way too much of their time actually trying to bring things together to to report to their clients and be able to deliver a layer of convenience that isn't otherwise tendered to by the technology and then that then drives Downstream implications in terms of the ability of that industry to attract new fresh talent that can actually make it better for clients at the end of the day so there's really a number of issues that are all interl really core to them is under investment in technology um basically when you were describing it I used to be the private banking business 20 years ago and it's basically exactly still the same thing today the way it's done it's very similar to the way it used to be before uh mtin let me ask you about what's going on so basically if you are talking about Trends in the wealth management industry what would you describe as the major trends that you are seeing there um yeah so I'll probably just list three or four I would say key trends I mean you know they say follow the money and you want to follow them one you have to follow the people so I guess the first trend is primarily demographics and how that is Shifting you see a few dynamics that we're observing now uh there is a generational passage of wealth primarily from Baby Boomers to the Next Generation that has been happening for you know uh the past few years but we're going to see this accentuate as naturally times goes by uh you do see some uh new entrance in the in the segment ments uh of wealth uh and I heard today across the conference we talk a lot about democratization the reality this is not only the passage of wealth but the creation of wealth in new segments um there is definitely more participation from women uh in the wealth segment across the globe you take the US for example I think around like 30% of uh Financial uh Assets in the US are today under the control so to speak of of women and this is you know something new this is a new segment so one is a lot of changes on demographics and we do see that also in our region uh you know so generationally we expect around $1 trillion doll to transfer from the previous generation to the new generation with that come decisions uh on uh you know whether you stay with the same adviser chances are people don't uh expectations change the second trend is um uh you know customer expectations in fact uh this has been definitely one of the biggest Trends and customers and maybe we'll get to speak a bit about this more uh expect more personalization uh they are much more open to receive their services in a digitized way um and they do expect things to be more transparent um and so you you know this is probably two and three obviously is the big one is technology and technology is uh uh you know disrupting the world of wealth uh be it in terms of cloud or AI or or data uh and and all of that I think you you see this even with with new players entering like fintex and so forth let me pick up on the idea of technology to ask Roger um the wealth man management industry hasn't been as disrupted up to now by technology as other sectors as we've heard uh Han and Maan mentioned as a the CEO of a company that is focused on addressing these problems what sort of Innovations do you think can play a transformative role when it comes to wealth management yeah so let me talk about three of them um the first one is very sort of front end and the other two are infrastructure related but they're as transformative so let's start with the first one which is really the gorilla in the room what's on everyone's mind Ai and in particular the rise of large langu language models if you if you think about the the moments of Truth in wealth from the moment you're prospected to the moment you're on boarded the moment you make a financial plan the moment you're you build a portfolio and you're recommended that portfolio the moment it's executed and rebalanced and then everything that comes afterwards in sort of like being current with current events uh reacting to the news all of those moments are going to be automated um by Ai and you'll sort of live in Two Worlds when it comes to the experience of wealth you'll have a first world for the people who prefer it um which is fully automated where you deal with a complement of chat Bots avatars that like are that talk to you and that look like something that's adapted to you and then for the other people those who prefer to deal with still RMS and advisors um they will continue to do that but the RMS will will be turbocharged by co-pilots that tell them what to talk about with you what fits you etc etc so that's the that's the first one the second one is the shift from monolithic to composable architecture where really the onus on the tech is focused on interoperability and harnessing data and really one of the examples of of how that manifests itself from a from an end user perspective and that's something that we're doing at ala is um you can adapt the experience that the user goes through depending on that Persona so depending on your level of wealth your level of sophistication um your history with the bank you will be able to see a different screen different information go through a different workflow um and then the third the third piece that I that i' um talk about is cloud um it seems like sort of like old new news but most of the industry in wealth is still run on Prem um and in a nutshell what what cloud will will enable it's the classics right it's um analytical power um and it's much faster cycles of innovation and so as a user whether you're an RM or whether you're an end investor you'll just see much more Innovation sort of like hitting you and new tools will be brought to you on a much much faster Cadence ma Central to all of that as customer needs you spoke about changing demographics Roger just outlined what technology can do how do you see the changing customer needs as we go forward yeah that's um fundamentally the objective Remains the Same you know from the early days where kind of wealth started being part of you know what we what we seek for ourselves for the Next Generation so you want to protect your wealth and you want to know that it's in a stable place that is always there you know and despite the disruptions this is remain this Remains The Objective and you need the security and we when we talk about technology also there's always that security and data privacy element absolutely and I think to your point you know when I talk about safety I talk about kind of you know holistic safety so you know and and these have been always the themes that govern if you'd like uh uh the different periods in history however what has been changing now and I I think we the three of us have touched a bit on this I'll just dwell uh a minute on is one uh so if you run any type of survey every year you see that the propensity for people to accept the usage of digital only has increased even in big decisions such as basically managing your wealth and I think we've passed the Tipping Point at least in some of the servic we've done recently where it varies across region but we are passing the 50% so 50% or more of people are now much more open to saying just want to deal with it digitally the second thing is I think Roger T touched on this is people expect to be treated like persons we might be surrounded by machines but we still want to feel like individuals uh and with it comes the challenge on the technology side but also Comes The Challenge on how can you remain human in your interactions how can you complement technology with with that uh Touch of humanity um and the third thing is transparency there is an an increased level of you know I want to understand what are you Ching me in terms of fees what is the value that you're generating in terms of fees for me and so that's kind of probably if you'd like uh a number three for me this this is how kind of in general uh customers are or investors are expecting things Roger basic also problem when we think of wealth management is access access to the right products you have institutions that give you access the other one doesn't depending also on the RM and his skills and his talent so how can Innovation and technology also solves the problem of access yeah so there's there's two components to your question I'd say there's one which is in most situations I have to go through an RM to to access a product or to do a to do a lot of tasks there's a second which is I don't have access to the product the product is not on the Shelf so for the first one look in it it is reassuring in many ways to have to go through nrm it brings trust there's a human touch Etc but for those who don't but but but it also exposes um you to the specific worldview of the RM his or her knowledge right and so it sort of like buckets you um and so what we're doing and and what we see a lot what we're seeing on the market and it is going to to come across is um either to go through sort of like an AI right where um the the the approach is much more analytical um or to to support zrm um in providing you advice right so so that's number one when it comes to access to products um most banks want to give access to a variety of products whether across geographies asset classes Etc the problem is the plumbing underneath is extremely complex um and integration is complicated and so what we do is we are partnering with a lot of players in the back end to bring a unified exper experience and a variety of products to our clients so that they can um serve it to theirs um Han you you have worked or covered the Mina region for a very long time let's talk a little bit of the about the regional dimension of wealth are there any uh specific Solutions needed for this part of the world when we talk about the Mina region there is I think um there's a there's a trend that I will mention first building on mazin's Trends earlier that I think is worth watching very closely and that is that uh by the way wealth assets have grown year after year for many years until last year 2022 um wealth assets have declined we know the backstory to that um but not in the region so in the region assets uh wealth assets domiciled within the region have actually grown and are expected to continue to grow over the next few years and that's according to studies done by our friends at McKenzie and others um but 70% of those assets of wealth Assets in the region are still invested overseas now that compares to only 25% for other regions so the global average of ass wealth assets invested overseas is 25% it's 70% here and locally domiciled wealth wealth assets are growing so the trends are very encouraging for anyone who wants to be in the wealth business or has established credibility in the wealth business but there are a few things that they need to do to be able to capture it Roger has mentioned a few of these you have to have product on the shelf or you have to have access to product open architecture is a very good thing but as the more you open your architecture the more you hit brick walls from the perspective of fragmentation and the difficulty that hopefully technology helps solve from the perspective of consolidation so you open up your architecture you need an architecture layer you need an infrastructure that supports it and then you need access to products and services and then you need reporting layers that sit on top of it and you need model portfolios that sit on top of it and you need RMS that know how to use that entire stack that's a complex piece of kit that needs to be developed and delivered to the market and and um the the the General Dynamics in the region are very positive to be able to deliver into that type of a problem set when we talk about the region we have to talk about Abu Dhabi we are gathered here in the Abu Dhabi Finance week maen what kind of ecosystem ABAB is trying to create when it comes to wealth management um look I really think uh obviously I've been part of uh this region for a long time now it's my almost 20th year in Abu Dhabi and you could kind of see a little bit uh we this place has always had the ingredients but I think lately it's kind of shaping a recipe if you'd like Al together uh and we talked about stability uh and I think this is ingent number one in that recipe and it's probably the most important most important and it's holistic stability it's not just you know it's not just the currency it's not just you know the rule of law it's not even kind of the the positioning of the place and its place in the world and how respected it is so one is a there is you know an anchor around stability uh two regulations and we're in a place that always wants to be ahead in terms of regulations be it even new assets crypto and others and is not afraid uh to explore experiment uh third um Talent uh this has become a place that actually attracts and nurture talents we're surrounded by campuses from top universities as well um and fourth I think you know uh this is It's a captive Market to begin with you have more than a trillion dollars in Sovereign assets you have more than a trillion dollars in family offices around the region here and many of them here in in in in Abu Dhabi uh you have uh trillions of dollars as Hy were saying was saying that are generated from the region some are offshore but there's no no reason why this cannot be kind of a a global Center um so I think that's kind of probably where where our time is running up so let me ask you just two final very quick questions hany what do you think are the differentiators which will decide the winners from the losers in wealth management going forward I think we mentioned a few of them to give you some time back I do think that people who to think openly with an open architecture mindset can access um world leading product sets know how to marry Global portfolios with local portfolios know how to bring um private Market access together with public market excellents are going to win um and then you need the technology layer that supports that entire stack uh through good investor portals ADV portals um om's um and uh and and custody clearing all the things that a wealth manager doesn't want to have to do themselves but they've got great supporters uh that are going to give them that that capability Roger um my final question which is I think very important is that you launched last week your fintech ala established here in adgm let us finish by you telling us how this came together sure uh thank you for the question so it's really two global leaders that are highly complementary embracing the same thesis and it's a four-prong thesis wealth is growing in the region wealth should be managed in the region um there's a real lack of Technology infrastructure to support um players here succeed in their incredible Ambitions and Abu Dhabi is the ideal place to launch this platform from and so on the one hand you have B melon where Tech leader in the US um on the other hand you have Lunette um ruthless Capital allocator with deep connectivity into the financial ecosystem in the region um when you have two such players with a common CIS the conversation went pretty fast um and and maybe uh let me maybe just conclude this conversation by thanking you Nadin for for moderating and um thanking you all for being here um we're going to just maybe show you um something we we're very proud of our a launch video of our company that that we announced uh uh uh last week and again Ma and hany thank you for for being uh with me here on stage thank you we wish you the best of luck and thank you for bearing with us and let's watch the video [Music] together [Music] get thank you thank you gentlemen for your time with us and thank you for bearing with us a glimpse into the future of wealth management thank you very much thank you thank you