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Technology: between trust and suspicion

Maybe you’ve experienced a similar situation to mine the other day; in a friend’s car, with the four passengers divided into two camps. The first couple was in favour of everything the modern vehicle had to offer in terms of driving assistance, crammed as it was with sensors and technology. The other two were distinctly cautious, preferring to rely on control and human instinct. We could have carried on arguing all day about statistics and other beliefs, had the driver not brought out a conclusive argument. His car had literally saved him from what could have been a serious motorway accident a few months previously, by swerving automatically to avoid being hit by a lorry he hadn’t seen.

 

By Laurent Pellet
Limited Partner & Global Head of EAM, Lombard Odier Group

 

Perceived risks and emerging opportunities

That anecdote is a good illustration of our very human need to experience the advantages of technology for ourselves before adopting it. On paper, the first iPhones and Spotify didn’t have much of a future ahead of them...until users couldn’t live without them. It’s the same sort of story with the technologies we use in finance, or may use in the future. They have the potential to affect financial analysis, portfolio management and interactions with our clients and partners – who themselves are often calling for secure and intuitive digital solutions and platforms.

But we mustn’t be naive: risk management must be at the heart of all technological developments. According to the 2023 Barometer published by insurance company Allianz at the start of the year, the biggest risk identified by Swiss companies is cyber-attacks. Let’s not forget that even the Federal Council takes the digitalisation of the entire financial centre very seriously, to ensure that it remains competitive. Last year it issued a report and road map on the subject, entitled “Digital Finance: areas of action 2022+”. This highlights 12 essential measures if Switzerland is to retain a strong financial centre in the digital age.

 

After compliance, it’s time for technology and growth projects

For independent asset managers, compliance issues trumped technology developments until the end of last year, which was the deadline set by FINMA and the Financial Institutions Act (FinIA). 

Most of them are therefore embarking on a new era that will be synonymous with recognition and new opportunities for the profession. But this new life comes at a price: it will mean increased demands and the implementation of new FINMA procedures and directives. Players will need to acquire new skills to develop their business model and focus on new vectors of growth and ways of generating income.

Technology will be key for companies to remain viable for the long term, optimise and automate their internal processes to increase efficiency, cut costs and reduce human error. With this in mind, partnerships and cooperation between banks and the Swiss ecosystem of Fintech companies makes a lot of sense. Together, we can enhance productivity and create synergies, enabling us to alleviate the burden imposed by reams of regulations.

Solutions like Wecan Comply and OpenWealth are designed to encourage banks and independent asset managers to work together to standardise existing processes – indeed, these are already out there. These solutions reflect the shared desire of custodian banks and asset managers to work together to define common standards.

 

Facilitating interactions between banks and independent asset managers

Under the Wecan Comply project, which facilitates interactions between banks and independent asset managers, various banks have signed up to the initiative because the stakes are high; rationalising processes, reducing the workload involved in compliance and information sharing in real time, thanks to blockchain technology. In the future, there will be many more potential applications in the blockchain space for asset management services such as NFT and smart contracts.

Not all asset managers have a Portfolio Management System (PMS) yet. It will be increasingly difficult for them to continue to operate without something like PMS or a more integrated CRM and/or a suitability and appropriateness process management system.

It will become essential for a custodian bank working with asset managers to develop and implement digital flows between the bank’s system and the PMS used by the asset manager. Notably, downstream integration means trading orders can be sent from their PMS and execution received in real time.

Contrary to the popular belief that digitalisation goes hand in hand with dehumanisation, human contact will remain at the heart of wealth management. Meanwhile, new technologies will help boost relationships, facilitate communication and optimise processes, freeing independent asset managers to approach the future with more clarity, and to focus on their core business.

 

 

Biography

Laurent Pellet joined Lombard Odier in June 2017. He assumed responsibility for the Group’s External Asset Managers department in 2018.

His career began with Ferrier Lullin, where he held various positions for more than 15 years, including Head of Credit and Risk, and subsequently Head of the External Asset Managers department in 1997. In 2006, he joined Julius Baer to lead their External Asset Managers business for the French-speaking part of Switzerland and Western Europe. In 2012, his responsibilities were extended to cover Monaco and the Middle East.

Laurent Pellet is a graduate in Credit and Risk Management and in Quantitative Portfolio Management from the University of Geneva. He also holds a Diploma in Digital Finance Law from the University of Geneva and the ‘International Certificate of Private Banking and Wealth Management Retreat’ from the Swiss Finance Institute. He is a Certified Wealth Management Advisor (CWMA).