Risk Expertise – Key to Providing Sustainable Financial Advice Refinitiv takes a step towards improving compliance and operational processes for wealth managers by introducing the Fund Eligibility app. The app helps financial advisors to identify suitable fund share class from a fee perspective given a particular fund, and thereby reduce the regulatory and reputational risks. Considering the developments in the Swedish private banking industry, summarised in the recent consumer protection report by FI, we see the introduction of the app as a great development towards a more sustainable way of providing financial advice.
At the same time, we would like to stress the importance of a risk-based approach as a complement to this fund selection solution. The consistent risk-profiling methodology would help the wealth manager to deliver on customers’ growing demand for greater customisation. Moreover, a risk-based decision-support tool could be extended to provide a science-backed justification for each financial advice for a customer.
Robo Advisory –New Competitive Advantages
The combination of transparency-enhancing directives, customer demand, and technological progress have pushed wealth managers to digitalise their financial advice processes. Automation of the bank’s private banking processes has only recently begun, but first lessons learnt indicate the competition in the digitalised investment advice sector would be centred around different aspects compared to traditional financial advice.
In particular, automated financial advisers should be more meticulous in selecting their target groups, pricing strategies and corresponding marketing decisions. Moreover, unlike the traditional physical advisers, the automated offerings would exist in a segment of more tech-savvy consumers across all age groups that would not hesitate to change the service provider based on the quality of the received advice.
End of LIBOR: The Swedish approach
The Swedish Bankers Association’s alternative reference rates working group has recently released their first consultation, which inquires the financial industry on the reference rate alternatives selection based on the overnight market. There are two different suggestions put forward by the Association:
(a) The overnight interest rate without collateral, based on the loan transactions between the banks, other financial institutions and/or Swedish National Debt Office, with deposits or lending of the reporting bank;
(b) The overnight interest rate without collateral, based on the loan transactions between the banks, other financial institutions and/or Swedish National Debt Office, with deposits of the reporting bank.
Despite working on the alternative reference rate, the Swedish Bankers Association carries on supporting the reformed STIBOR, stating that it will remain in place in the short term. Therefore, it is safe to say that the Swedish approach to transitioning away from the interbank loans-based rate is more careful and conservative than what is happening in the UK. However, given the alternative reference rates developing in the Swedish financial industry, it may be of interest to look into the potential challenges linked to the transition from -IBOR.