We’ve gathered the most exciting highlights from the digital advice innovation landscape as well as the latest news related to balance sheet risk.
Automated Financial Advice
More than a third of new DIY investors in the UK (up from 11% last year) opt for automated financial advisors (Nutmeg or Moneyfarm), rather than for fund supermarkets like Hargreaves Lansdown, as demand for low-cost investments gradually rises. However, the DIY investors pursuing the low-cost robo-advisors tend to possess significantly smaller funds on average (£10485), compared to a standard customer of fund supermarkets (£47000), thus forming a new customer segment in itself. Link.
Nutmeg, the UK’s largest robo advisor with funds under management amounting to £1,5 billion pounds, establishes a feature allowing the customers to receive the first advisory session with a human advisor and an option to continue the personalized financial advice and Nutmeg’s fund recommendations for £350. Scalable Capital, a robo-advisor backed by Black Rock, introduces an option for human advice as well. Link.
Royal Bank of Canada is launching a national-wide digital financial advice service, which will cost 0,5 percent management fee on funds under management, which should be at least $1000. Link.
Nutmeg launches a range of environmental, social and governance (ESG) portfolios and expresses the intention to provide the ESG scores for the whole range of the investment products. This is a drastic change since the companies’ former “no set” attitude to the ESG performance of the products. This move puts Nutmeg in line with other robo-advisers Wealthsimple and Wealthify who provide socially responsible portfolios. Link.
BetterWealth, the Malmö-based automated financial advice provider, has launched a service offering customers a digital investment service with portfolios containing a larger proportion of sustainable investments. This is the first robo-advisor in Sweden with a sustainability focus, which reflects the company’s intention to tap into the demands of the millennial generation. Link.
Balance Sheet Risk
Swedish Finansinspektionen publishes the capital requirements of the largest credit institutions and banks in the national market. The published requirements list Sweden’s three major banks, Handelsbanken, SEB and Swedbank, as well as Landshypotek, Länsförsäkringar, Kommuninvest, Svensk Exportkredit (SEK), SBAB, Skandiabanken, Avanza and Nordnet. Nordea moved its legal residence to Finland and is now under the authority of ECB. Link.
H&R Block teamed up with IBM in 2017 to put the Watson supercomputer on the desks of 70,000 of its tax preparers. Using the Watson as an example, the article explores the changing roles of tax accounting preparers and provides arguments for why the artificial intelligence should be perceived as a tool rather than a threat by the accountants. Link.
Standard Chartered uses data mining methods in order to model illiquid products. The bank’s efforts are a response to new market risk capital rules (FRTB) punishing the risk factors with patchy liquidity and gaps in trade data. Link.
One of the world’s largest banks, Wells Fargo, plans to focus on the adoption of the standardized approach instead of developing its own market risk capital requirements under FRTB. However, Han Zhang, head of market risk analytics at the bank, expressed an intention to switch to the internal model approach further “down the road”. Link.