Executive Summary

A recent study on the jobs that are most likely to be replaced by robots in the future predicts that personal financial advisors have a 58% risk of becoming obsolete and ranking first place compared with all others.¹ Interestingly, from a historical point of view, the banking industry has been among the first adopters of online advisory services. For example, Citibank and Chase Manhattan provided the first home banking systems for their customers already in 1981, and the Norwegian Focus Bank offered mobile transactions in 1999, long before the Apple iPhone was launched in 2007. The digital development of banking can generally be split into three phases, each focusing on a different area of digitization:²

• Internal digitization (phase 1). The first phase of digitization concentrated on internal processes, such as advisory, payment transactions, or portfolio management. Here, banks focused on the automation of financial services processes like, for example, cash transactions with ATMs.
• Provider-oriented digitization (phase 2). In the second phase financial service providers focused on the integration of core banking systems. For this, they had to standardize processes and application functions which were delivered from standard core banking solution providers such as SAP or Temenos.
• Customer-oriented digitization (phase 3). This third phase of digitization is centred around customers and their processes, redefining today’s inside-out, product-centred to an outside-in logic. This phase is characterized by the application of new IT developments like social media, robo-advisors, cloud computing, etc.

However, instead of continuing this forward-looking tradition, banks remained very passive in automating customer advisory until now and instead, in recent years, such solutions merely emerged from non-banks like Betterment or Wealthfront. Currently, banks quickly follow-up in developing or integrating robo-advisor solutions into their existing environment. The reasons are the technological advancements that come from artificial intelligence, blockchain and big data, etc., combined with changing customer behaviour, which lead to a fundamental change in client interaction. One prominent example is the robo-advisor. Although robo-advisors still only account for a very small part of the total assets managed by human advisors, the potential seems huge, be it in established markets or in emerging ones like China. But do clients really prefer digital-only over human-only solutions? The answer depends on the technological affinity and the complexity of clients’ needs and very often leads to hybrid models which involve both personal and robo-advisory: there is no one-size-fits all approach. And it’s not only the millennials that use them, their adoption may be beyond demographic factors. One reason for using them is the rich customer experience provided by robo-advisors, which also applies for other digital client-facing solutions (e.g. chatbots, gamification tools, etc.), which allow for improved personalized services. With increasingly open application programming interfaces (APIs), it becomes easier to link to banks’ existing systems – like Lego bricks, even across company boundaries – and thus enhance a “seamless” customer and service experience for clients.

Summarized, this part focuses on how client advisory might change in the future, driven by technological advancements.