All wealth managers are looking for new ways to offer more personalized services, create new business models, and, ultimately, generate additional revenues. What new strategies can wealth managers use to reach these goals and take their business to the next level?Watch this highly informative webinar, which takes an in-depth look at the key benefits of open banking and reveals the opportunities it offers while still in its early adoption phase. Discover new possibilities for maximizing your operations and gain expert insights on how you can withstand market volatility. You will learn:
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David Kitai [00:00:02] Hello, and welcome to our webinar. My name is David Kitai. I am the Senior Editor here at Wealth Professional and it is my pleasure to be our host today for this important webinar, open banking and why it's great news for wealth management professionals. A huge thank you to our sponsor Croesus for leading the way on this fascinating and important topic. A quick housekeeping note, there will be a q&a session at the end of our webinar, and we encourage all of you to participate. Please enter any questions you may have in the q&a tab at the bottom of your screens, and we will try to address them during the q&a session. Open banking is still in the early adoption phase for much of the industry. But it has huge potential for wealth management professionals to offer more personalized services, create new business models and generate revenue. We have two experienced speakers who will lead this webinar today, Raghid Nami and Erion Karroqe. Raghid is a Senior Product Manager at Croesus and an expert in the wealth tech and fintech space. Erion is the Director of Business Development and Strategic Partnerships in Croesus and brings over 12 years of client facing experience in capital markets and fintech industries. I'll leave it to these two pros to lead our discussion today. Thank you.
Erion Karroqe [00:01:19] Thank you very much, David. Good morning, everyone. My name is Erion Karroqe. As you may know, Croesus is one of the largest wealth tech companies in Canada, and were leading the innovation path for industry. Several months ago, we started to get more and more questions from our clients and users about open banking and its implications on the wealth management industry, with dwelled into it and decided to structure and formalize our answers. Thus the webinar today, my colleague, Raghid will take the next 15 minutes or so, to explain and simplify this important topic. And then we will open up some questions in the end. Raghid is an expert in wealth tech and fintech. He began his career RBC direct investing, improving, and implementing tools for traders and solutions, improving services to investors, he then turn to technology consulting as a software application integration engineer. He is now a Senior Product Manager at Croesus, and is in charge of APIs and integration tools, as well as reporting capabilities. He holds a bachelor's degree in finance from the American University of Beirut, and numerous certifications in software development and product management. Without further ado, I'll pass it on to my colleague Raghid to start this webinar.
Raghid Nami [00:02:43] Thank you, everyone. Thanks for joining today's webinar, like my colleagues mentioned, we are going to explore the interesting new world of open banking, especially that it's a pivotal time for both wealth managers and wealth management firms to understand this concept, in order to adopt such an ecosystem when it gets implemented, and to have the tools to thrive in this rapidly evolving landscape. So I hope that what I presented to you today would be a value to you. Since everyone introduced me, I'm just going to jump over that. And let's look at what we're going to talk about today, we're going to explain what open banking is, and why this kind of revolution is happening. I'll explain to you what you should expect how you can succeed in such an environment? And what are the things to keep in mind. So let's dive straight into the subject. But before I give you a definition about open banking, you might be wondering, why is it called that? And does that mean that there's a system of closed banking that we don't know about? Well, technically there is. But we don't call it that. Closed banking is basically the current traditional banking system that we have, where you as a customer, have an exclusive relationship with your bank, and you interact with the banks and the banks alone to get your financial services. And this relationship led to the creation of these large institutions that have to develop different sub firms and lines of businesses to serve to serve your different financial needs. And there was nothing wrong with that, because as a customer, you didn't think about it too much. And you got all your services from one place. And the banks on their side, they had the commercial monopoly over dealing with you. But on the other hand, banks don't have the monopoly over innovation and bright ideas to improve your financial situation. And with everything going on in the market right now, and we'll talk about that in a bit. large financial institutions with a natural bureaucracy that comes with organizations of that size, can't move fast enough to keep up with the market, nor can they innovate as fast as the market to meet their clients changing needs, which leads to a need for a paradigm shift where the financial services get on board get unbundled into many different services offered by different providers who can deliver more value. And with the customers sitting at the center of this landscape, they become more empowered to select the providers that they want to work with to get the services that they need. And this reality will require different stakeholders to collaborate to keep the client's interests at heart. And this is where open banking comes in. Open banking will be that ecosystem that allows for the secure and efficient exchange of data between banks, financial institutions, and any other players that come into the space. It's really all about fostering a marketplace where different service providers will need to securely interact, share information, and make their services more convenient for the customers. The premise is that the customer will need to have full ownership over their data and agency to decide where they would like to get their service without any hurdle without any barriers, because they have the control to transfer the data from one place to another. So this is basically what's going to look like. But you might be wondering, why is this happening? There is many factors at play, and we'll dig into each one of them. The first one, obviously, it won't be news to you, there's a ton of innovation happening in the market, the entire financial industry is moving its systems and processes to the cloud to benefit from more powerful computing capacity. This will enable them to boost their services at scale. There's also a trend advocating for the use of specialized systems that we refer to as micro services. With that software vendors are focusing on offering solutions that do one thing really well. But that means that they will depend on other systems to get the data that they need. In order to successfully deliver these specialized services, and APIs or application programming interfaces, which are the tools to integrate these different systems are becoming more and more available by tech providers like Croesus, and financial firms even. We recently noticed that even custodians and Treasury services are starting to publish APIs, which means that everyone's going towards offering more innovation opportunities. After that, there's the increased availability, obviously, of advanced analytics, machine learning and artificial intelligence. I mean, everyone, and their grandmother is using charts up to now and asking for insights making, asking for recommendations on portfolios or even business processes. And more and more of this kind of technology is becoming available in the business tools that we use. To it blockchain. distributed ledger is not necessarily a topic that a lot of people understand or like to talk about. But it is building towards a landscape where it would become at some point the infrastructure to securely and transparently share data and ensure a complete audit of all transactions. And these tech innovations alone have propelled us like yours. But definitely there's other factors. So we're looking look at them as well. We're starting with a competition, I'm sure that you hear every day about the growing demand for personalized, transparent and accessible financial services. And the these needs are starting to be met by new market entrants, specifically FinTech startups, that are offering such alternatives. And these tech firms have realized the value of the investors data, because they can use it to offer these valuable services without the need to create an entire financial institution. And they have not been blocked by the lack of open data sharing. So far, quite the opposite. Data driven financial services are becoming more and more popular, because a lot of consumers are willing to share their financial data through a system method called Screen Scraping to benefit from these innovation innovations that are being brought. And just for those who don't know what Screen Scraping is, it's a process whereby a consumer shares their username and password of their online banking, for example, with a third party, and that third party logs in on their behalf, and copies the data that it needs in order to deliver on the services that it offers. The problem is that screen scraping violates consumer service agreements with most of Canadian financial institutions. And if consumers lose anything, they're responsible for it. Not to mention that it's also a risk and a liability because Canadians are sharing their banking credentials with other people. And this is another reason why open banking is becoming more important and more unnecessary, because it creates this secure environment for data transfer, and ensures that competition's competition is for the benefit of consumers specifically. Now, you might be wondering, well, if it's this risky, why is open banking the solution? Why not just shut down those fintechs and block all data transfer altogether? Well, it's not that simple. There are global regulatory initiatives are clarifying that data should be the ownership of the consumers and imposing that consumers have more control, more choice, and more value in financial services. And Europe, we're seeing regulations called the payment services directive, and the general data protection regulation which are enforcing these data rights. In the US. There's a there's also the Consumer Financial Protection Bureau, that is writing regulations to implement section 1033 of the Dodd-Frank Act also around data ownership. And I think there's it has been completed in the past couple of weeks, if I'm not mistaken. And in Canada, we have a digital charter on a federal level, we have the advancement of Law 25 in Quebec, and even Bill C27 on the federal level, which are also pushing towards that, not to mention the increased scrutiny on data privacy and cybersecurity just because of the industry requirements. So just this is, even if this is at a high level, I'm just going to jump a bit into what's happening on the Canadian side. actions have been taking taken to advance towards open banking, it's happening slowly but surely, the government set up an open banking advisory committee in 2018, to example, to examine the benefits and risks of open banking in Canada, and 2019. There was a consumer directed finance initiative that was introduced also to give consumers more control over their financial data that allowed them to share it with authorized third party providers. And then the open banking Advisory Committee released its final report in 2021. And it provided basically a roadmap for the implementation of open banking and Canada. This roadmap talks about the fact that the implementation should not be exclusively, neither government led nor industry led that should be joined. That should become operational by January 2023. The government should appoint an open banking lead designed the system. And this kind of system should be implemented in stages and stages that recommended to start with payment account data before expanding to other types of accounts. And it's focused obviously on data protection, data privacy, and having a governance framework to oversee the implementation of open banking. And 2022, the Canadian Minister of Finance appointed the open banking leader Abraham Tachjian, and Mr. Tachjian put in place a lot of working groups to discuss the system, as I mentioned that what the deadline was January 2023, unfortunately, nine months later, we still don't have anything in place. Strategy, and also, I think, announced recently an extension of his mandate. But basically, this shows that we're moving towards that, but we still have time to get there.
Raghid Nami [00:12:34] And that is just also an indication of the fact that implementation in Canada could take some time, because the sector is also regulated both at the federal and provincial levels. So coordination is definitely going to be difficult. But that is just one side. Like I mentioned, beginning financial institutions will need to play a role as well. Canadian banks have started to open up to open banking, they've connected bank account data to fintechs, through APIs, and they're moving away from screen scraping. To date, each one of the big banks has been connected to a data sharing network or aggregator, which means that we're moving in the right direction, even if it's the limited to focus agreements, specifically into bilateral agreements between the banks and these aggregators. But we can't say that Canada is too far behind, even if we're still moving slowly. Some countries have already established something through legislation. In the UK, for example, the open banking regulations have been in place since 2018. And they only finalized the implementation of the framework completely this year in 2023. Australia has been on its own open banking framework since 2019, as well, and others have been taking a voluntary approach, the United States doesn't have something completely managed through a framework, there's taking it more in a liberal approach, if you want. And depending on the country, the scope and extent of open banking varies. So some of them focus only on payments, other look at other broader data access. So it varies really. But all of these changes that are happening are definitely doing one thing. They're empowering customers, they're giving them more options, better experiences. And that would be normal that they also start to expect changes from their advisors and financial institutions. If we look at customer expectations, investors are becoming more digitally savvy and they're being spoiled if you want. With high quality digital user experiences. They have no longer accept they no longer accept tolerance for friction and professional relationships. And they expect digital tools and they expect Hybrid advisory models. If we dig into some statistics, as of 2019, 50% of the digitally active population of Canada has adopted FinTech services. And another survey found that 73% of millennials would be more receptive to financial services from tech companies like Google, Apple or PayPal than their own bank. After that, 52% of high net worth investors globally seem to be unhappy with digital maturity or lack thereof of their current wealth management firm. So investors especially millennials are no longer interested in looking at an Accounts performance on its own. They care more about the broader contribution of their investments to their life goals, so they expect goal oriented plans and personalized experiences. A study by Gartner confirmed that 82% of high net worth Millennials expect their advisor to have a holistic understanding of their needs, and 80% of their of these investors expect their advisors to act in a socially environmentally responsible manner, in accordance with their volunteer values. And Capgemini also reported that 51% of high net worth investors are unsatisfied with their current wealth management firms lack of personalized offering. So, investors are demanding more transparency, more control on multiple levels. They want to know exactly what they're paying for, and how their preferred investments are performing in real time. And they want them to match what they want. And they want control over where their data goes and the type of services that they receive. So with all this happening, wealth management firms are required to adapt their business models and remain relevant. So what is what should you expect as a wealth management professional? For starters, it's important to note that the concept of open ecosystems will not be limited to banking, open data as a concept of an ecosystem that is also being built to make data available and usable and accessible manner for the benefit of owners of that data. Generally, they are the consumers. This broader trend will eventually connect various sectors like Telecom, home services, medical, financial, and any other data centric industry that you might think of. With financial services. Open finance represents an interconnected financial ecosystem that benefits both customers and financial institutions. Its objective would be to boost transparency and competition across financial services, and to use open APIs and any relevant tools to share the data and facilitate the collaboration among the different stakeholders. Open banking is the aspect of open finance that uses these APIs to connect banking systems to third parties, and then enable the fluid exchange of banking data and enhance collaboration and decision making for clients. Similarly, if we focus on our industry, the wealth management sector, an application specific to us can be referred to as open wealth describes an ecosystem where financial institutions and approved third party providers securely share data. This will facilitate personalized investment advice. It will also improve financial planning, and will help offer a wider array of wealth management services. By integrating data both financial and other ways from financial institutions from tech companies from even third parties into wealth management services, open wealth is poised to transform the industry. The system primarily offers two advantages, one access to a broader contextual set of customer data, and to access to a diverse and integrated assortment of tools to add more value more efficiently. The result is a more comprehensive view of your client's financial situation, leading to a shift in how financial advisors and clients handle financial planning, and it also ensures the provision of more tailored and valuable services. And to reach the potential of an effective open wealth ecosystem, we need to understand that several actors have to mobilize obviously, the main player is financial institutions, including wealth management firms, because they play a crucial role in providing investment products and financial advice. And so far, they've been the main custodians of the data center companies are providing the technology platforms and the tools necessary to implement innovative, open health solutions that everyone will benefit from governments are going to be very important because we will count on them to put the regular story framework in place and follow up on it to ensure that participants in the open ecosystem will uphold the standards of data interoperability, data security and data privacy. Investors are the beneficiaries of open wealth services, they are the ones who use the platforms and receive the financial advice. So listening to their needs is crucial to move the system in the right direction. And developers are definitely the main drivers of this evolution. They will be building the software applications. They will be powering open wealth ecosystem towards transparency, efficiency and customized services for clients. And finally, specialized service providers, tech vendors, those who are offering platforms in terms of advisor tools, APIs, data analysis, cybersecurity, cloud services, or any other solution necessary to the success of open health ecosystem are definitely going to be helping in that direction as well.
Raghid Nami [00:20:20] So how can you as a health professional succeed with Open Wealth? Well, the first thing is, that we need to clarify to confirm is that you will succeed by embracing open up as an advisor. This ecosystem will equip you with tools that you that will help you incorporate new services and new data sources into your portfolio management platforms. This will help you gain a comprehensive understanding of your clients circumstances and enhance your relationship with them. Open wealth will allow you to access your clients external data securely, without risking their credentials. And with clients authorization, you'll be able to access details like accounts, credit, or any other data that you need even non financial data if necessary. With all this information, you'll have the opportunity to create individualized investment plans based on each client's goals, limitations, and the market conditions even another significant advantage of open wealth is the real time data access providing insights about your client's portfolio. This will enable you as an advisor to make better informed investment choices, monitoring market trends, and seize the opportunities as they come back. Additionally, access to a wider range of investment products means your ability to diversify your client's portfolio with the potential for optimized returns, and sometimes even reduced fees with the efficiency that open wealth brings, and what wealth what the wealth of data available, you will deepen your engagement with your clients because you'll have more opportunities for more meaningful discussions to strengthen your relationships with them. And when you offer valuable advice more consistently, you're more likely to retain your client over the water. Not to mention the fact that an integrated system will boost your efficiency and productivity, because now you can view update information across systems without having to manually transfer data. The integration also introduces the opportunity for automation tools that could streamline processes such as portfolio rebalancing, Client Onboarding, among others. This would reduce the risk of human errors liberates you for high value tasks, including building stronger, stronger client relationships, and growing your business. And speaking of growing your business, and ecosystem like open wealth, will expose you to the possibility of building partnerships with other companies and fintechs, which will open doors for us to develop new markets and sell your services in area you might not have had access to in the past. So as wealth managers, you might be thinking that you just need to wait for your institution to implement open banking. But I invite you to reconsider your role in this. Some of management firms will probably choose to wait for the banking sector to pave the way before joining. And this approach might be prudent when implementing new systems. However, we already know that open banking or open wealth as an ecosystem will hinge on two main factors, one systems that are interconnected via APIs, and two forward looking business models that are leveraged leveraging this ecosystem. And these two aspects require time to develop. And any framework that the government puts in, will probably come with deadline. So the recommendation is to be proactive, I invite you to initiate conversations with your firms to start discussing open banking, to advocate for the investment in more integrated systems, and to determine your needs as key players in this evolving market. And you won't have to worry about the integrations themselves in any sense, because technology providers like Croesus will take care of technical complexity. And you as well, professionals will only benefit from the result of these integrations. And by planning ahead and building your potential business models in this new market, you can position yourselves for successful collaborations, along with all other wealth tech providers. Now you might be wondering how to think about your business models and how to approach building your business in such a new world. The first thing to consider is how to approach the data being shared through these integrations. Because the opportunities start appearing when we think of the market with the foundation of a data custody model. What does that mean? Let's just refer first to the Canadian Bankers Association to explain better. They said banks in Canada are trusted custodians of data and will continue to put their customers at the center of trusted innovation. And just like banks are custodians of capital assets, for example, I believe we need to look at data with the same perspective. And as soon as you have such a perspective, your business approach would start evolving. This might sound foreign as a model. But we can't imagine it's more different than when industry first proposed the idea of working with external independent advisors, and offering them back office and custody services. Or for the first time a firm considered allocating accounts to an external portfolio manager and an SMA or UMA well, we wouldn't be surprised that at the time there have, we'll be surprised if at the time there wasn't any resistance, and worries about losing the clients to those external managers if they perform better. Yet, these models now, our standard practice, and data custody, in my opinion, represents the next significant shifts in the industry. And I bet many of you in our minds attending today's webinar are already brewing some fantastic ideas and models around it and I can't wait to learn about and as you start building your business models, we're open wealth, here are just some factors to keep in mind. First thing is definitely innovation. If you're listening to this webinar, assume that you're trying to remain at the forefront of digital innovation, and you're willing to adopt new technologies and business models that can help you deliver greater value to your clients. Keeping up with these innovations will maintain your competitive advantage, especially that innovation in financial services is going to lead to an intense fight for customer loyalty. Second, in terms of personalization, open APIs will make it easier to tailor your wealth management services, meeting the unique needs of each client focus on specialized tools and services that will process vast amount vast amounts of data for you, because they will help you customize your services and will be your major differentiator. Third thing to look at is definitely cost effectiveness. Open banking will simplify interbank and inter institutional transactions, intermediaries will become less necessary, because everything will be interconnected, so costs on transactions should come down. And so leveraging this efficiency to provide competitive fees, and maximize your client's returns on investments will also make them more loyalty. Obviously, we talked about security in the beginning of the presentation, so APIs they are powerful connectors for systems and as secure as they can be. Their introduction to an open online environment adds security vulnerability and complicates protection. So prioritize subject cybersecurity in your firm's, and focus on data privacy. And one of your tools to ensure security is compliance ensure that you adhere to all relevant laws, regulations and industry standards, especially concerning data privacy and consumer protection, but have that be your minimum, and always add on top of it in terms of your own criteria. And finally, collaborations are at the heart of an ecosystem like open banking, or open off partnering with various stakeholders, whether it's our FinTech firms, or service providers, or other financial institutions. This part these partnerships or collaborations will give you the advantage of offering a cohesive and superior customer experience. In summary, we still have time before this ecosystem gets implemented in Canada, but we know it's inevitable. So I hope this presentation helps you understand a bit better what it is, and give you some ideas on how to prepare for it and succeed with it. Thank you, David.
David Kitai [00:28:26] Thank you, Raghid for a fascinating talk and sort of leading away in an important and as you say, deeply innovative area of the financial services industry. To all of our attendees, when entering the q&a session, again, if you would like to ask a question to Raghid or Erion, don't ask a question to myself, I would not have a good answer for you. Please enter them in the q&a section at the bottom of our screen. And I will ask our two presenters for you. I've had a few questions come in one of which is actually just a technical question around recording. So this webinar is being recorded and it will be distributed to attendees. So stay tuned for that I believe it's going to sort of come in the next week or so. So you will be able to refer back to this. And it will be posted on the website publicly. Now getting into some of the media questions. One that's come in what would be the first steps to take Raghid or Erion if you if you want to weigh in here. If a wealth management firm would like to use APIs to connect its system to a third party?
Raghid Nami [00:29:38] Yeah, that's a great question. Obviously, that when we start thinking about using APIs or starting to just integrating systems altogether, the recommendation would be to start from the objectives and not necessarily from the simple usage of the system. So as a firm, determine the goals and objectives that you have for are building these integrations, what you're trying to achieve with them. And based on those objectives, I would recommend you engage any internal stakeholders that you have, whether it's IT teams, operations, risk management, even the legal side or compliance side, to ensure that everyone is on the same page for what you're trying to achieve. And after that, you can perform a compliance review to ensure that when you're transferring this data, you're covering all aspects of like I mentioned earlier, security, compliance and regulatory frameworks. And after that, when you start looking at that, and you decide, okay, this is the model that I want to follow, these are the solutions that I want to implement, you're going to start looking at third party vendors or potential partners to work with. And it would be sometimes it might be easier to just pick a specific vendor and go with them directly. But I would recommend you put a basically an evaluation set of evaluation criteria for your vendors or for the platforms that you want to work with, before you look at specific names. And this way you identify based on your objectives, what your criteria are to work with someone as a partner. And based on that you can start assessing partners, and assessing the technical requirements to implement these partners, whether on your site or theirs. And this way, this would reduce a lot the risk for your firm when you start implementing it. So this is how I would I would follow this is the approach that I would follow when I start thinking about implementing integrations with APIs as such.
David Kitai [00:31:33] So that kind of systematized thoughtful approach, we're not sort of jumping into something headfirst, you're taking the appropriate steps necessary to ensure security and also risks are being considered. That's yeah, that's a fascinating answer. What about some of just the open avenues that that open banking brings? I've got another question coming in. Can you elaborate more on how we could create new services with open banking?
Raghid Nami [00:32:00] Yeah, that's a great question. So definitely open banking is going to be a vast world, I'm going to focus specifically on the wealth management side, because on the banking side, there's a lot of opportunities as well. But the way I would think about it for the application on the wealth management side, would be taking the highest level of service that we offer, usually to, let's say, the most exclusive clients that we might have on the private banking side, or those additional services that we usually offer that we can't scale as much because they currently are very expensive to offer. The interesting side of open banking is that this kind of these kinds of services, with the integrations and the partnerships that become available, can be offered at scale and can be powered to be offered to any wealth management client. What does that mean? What kind of services are made referring to? It could be, for starters, definitely the holistic financial overview where you are able to see all your data, like I mentioned, for your investors, so you're able to offer a really complete financial plan for them, and a wealth management service that oversees all their assets in general, and their data. But also it pushes towards enhanced advisory service. So because you have the data, you're going to have more insights into what to do, you're going to integrate the investment platforms, we're going to be offering educational tools that are relevant to them, you're going to be able to enhance your interaction and the engagement with the clients. You can even start offering lifestyle and non traditional services, whether it's concierge services, or financial health, well being services that are just integrating with this platform. And we're seeing that in some aspects of the market where even advice is no longer limited to financial advice, but health advice as well and everything like that, because that comes into planning of how you're going to plan your future life. And also in starting to integrate other aspects of like social investing, or do you want to integrate investment clubs in your services or social socially responsible investing, that becomes also more important, you get more ideas of how to manage digital wills and estate planning, and all of that, whatever you become, as a health professional, specialized in whatever service you have, you can end up productizing it and offering it through an API, for example, to embed in other platforms, whether it's another FinTech that you're working with, that you're embedding your service into, or just the marketplace, whatever kind of marketplace where you can offer your service just by offering this integration of this product or service. So there's a lot of opportunities. What matters is I think, three factors. One is innovating in a client centric manner to ensuring that your regulatory compliant they have regulatory compliance, and three that you that you focus on the security of the data and the trust that you bring when you're offering this service.
David Kitai [00:35:05] Okay, I've been overusing the word fascinating. But that is fascinating. It's, it's an interesting sort of, it's an area, I love what you brought up about holistic advice, because I know, you know, in my day to day talking to advisors all the time, that's the sort of the concern, and there are so many areas around whether it's retirement or the intergenerational wealth transfer, or bringing in that next generation of clients reaching out to, you know, us millennials, or whatever we want to call ourselves to try to see to sort of see where the next areas of opportunity are, there are so many lessons in in sort of delivering that holistic style, and to be able to do it via these platforms sounds, again, like a, like a real area of opportunity. And something that I know, you know, seems to dovetail well, with many of the acute pain points, that at least I've heard from advisors. And so the next question coming in is someone else who likes this idea, not just me. And they say they liked the idea of open Roth, but they're wondering where the sector could go in five or 10 years, considering we're sort of at the cutting edge. Now, what, what are some of the sort of the opportunities down the road?
Raghid Nami [00:36:16] Yeah, that's a very interesting question. I can't say that I can, I can know where we're going. But I'll give a speculative answer, what I would where I would expect to see it go. What we can see for certain is that everything is becoming more digital digitized. Technology is becoming the infrastructure that's powering all of our financial institutions and, and all of our services that we're getting. And that will create a lot of hybrid opportunities or opportunities for hybrid models of service. We heard a lot about, for example, robo advisors earlier, but now we noticed that robo advisors are more going to power the, the actual human advisors during their work, they're giving them the superpowers. So an advisor, where, who is giving a service to a client can now benefit from the robo advisor to power, their offering and their advice, in a sense, where they're automating a lot of tasks that they need to do. But they're focusing on what's important, they're focusing on the client. And the same, in the same manner, I think there's a lot of opportunity in the coming five to 10 years to improve our services as wealth management firms in the same direction, there's definitely going to be a lot of competition, because the industry is, is becoming very appealing. But the evolution has, is going to end up being client centric. So there's going to be a lot of focus on the values of investments, the interest, like you mentioned, right now, the interest in the demographic shifts, what Baby Boomers needed is not the same as what Millennials need is not going to be the same as what Gen Z need. And the interaction was with them, it's going to be different. So I look forward to see how that is going to change over time. But like I mentioned earlier, one thing I think is certain is that data is going to be considered a core asset. And a lot of the models are going to be revolving around that for sure.
David Kitai [00:38:27] Okay, okay. Brilliant. Yeah. So I've got someone else here who's asking what market is there for firms that don't embrace open banking and open wealth? Right, where were you know, we talked about all the opportunities that we see for them and all these possible ways. But for those who don't necessarily want to join with technology, and it's interesting that you were talking about sort of how technology and the advisor can work together in platforms like these, as opposed to the kind of the past narrative of IT technology versus the advisor. I think, I think that's gone by the wayside now. But it's interesting to see how that's how that's developing. But the hypothetical advisor doesn't want to deal with all this. Is there a market for that advisor?
Raghid Nami [00:39:09] That's also a very important question. I think in the short term to the medium term, there's definitely going to market that there's always a market that's going to stay for that because it's definitely a cultural a cultural mindset, if you want that we need to get over some clients prefer to stay offline, right. Some clients who are more traditional prefer not to have their data shared with at all not available through any technology system. They prefer the pen and paper, and they prefer to stay just stay there. So yes, in the short term and medium term, we're probably going to continue to have a market like that. On the longer term. However, I think this is going to change and this is where we're going to have an entire generation that no longer cares because they know that all of their data is online. And at that point, if a firm isn't specialized in something that's really niche, and really necessary, and its services are not using technology, because of that specialized service, they might not have that competitive edge anymore. Obviously, there's a lot of people that trust established brands, and they love them. So they might continue working with them until a certain limit. But yes, that's this is basically how I see the market, the only thing that I would consider maybe also delaying the potential for full migration towards technology is integration, for sure. So if there's something that like, requires people to be disconnected, or to have something that's not technologically based firms that are not on the platform, 1[00% could be could rip could continue to operate. But then after that, it's all gonna be based on the innovations of technology, and how much we're able to implement security through this technology. I hope this answers.
David Kitai [00:41:11] Yeah, I think it does. And it's, again, another interesting way, and to talk about that generational shift, where folks like us are very comfortable with again, I realize my data is everywhere, and is owned by everyone. And that's fine, I'm the commodity, but to be able to use that to my advantage is, I think, an interesting way to play things, as opposed to try to sort of push against the tide and, you know, end up falling behind the pack to mix three metaphors that. So for those firms who want to adopt open banking and open wealth, what are some ways they can get that competitive can excuse me competitive advantage, right? If lots of firms are heading this way, and they're all moving towards these platforms? What are some sort of small tweaks or big steps that a firm could take to really get above the pack? Or ahead of the pack?
Raghid Nami [00:42:08] Yeah, that's a great question as well. And so here, just to clarify, like the, I think my entire presentation to the entire concept of open banking is, is based on the concept of the availability of data. And any firm or wealth manager will have access to that data. But the access is one set one thing. But the key differentiator is the creativity of how you deal with that data. Because the idea is, even if you have all the data in the world, if not using it properly, to bring forward more interesting services or innovations, you're probably not going to be that different, and you're not going to win in this market. So obviously, any firm that wants the competitive advantage, when they have access to the data, they need to focus on that superior user experience. What am I offering for my service for my clients? What kind of services am I bringing for them? And thinking of okay, how do I creatively ensure that I offer personalized services at scale, because I'll be able to use these automations to process vast amounts of data and offer that specialized service specifically for my clients depending on what they need. And this is where we're going to start to see niche or even sudden niche services or group. Yeah, services for clients that are that we thought today are very similar. But when we started digging into the data, we're gonna notice that there's more groups of or segmentation that we can do what we can do in our client base, that we can offer more specialist services for them. And this is where the creativity plays a role to create the differentiation.
David Kitai [00:44:01] No, absolutely. And I mean, it's interesting. So another questions come in, and it's sort of it's almost the converse of my view of like, okay, my data is out there, it's fine. The when, when advisors are going to be explaining these concepts to their clients, right, you know, who may not necessarily have background in financial services, let alone this level of technological complexity. What are some ways that they can communicate these ideas to clients in a way that succinct that easy to understand and that demonstrates the security inherent in the system that doesn't provoke this fear of crucial financial information is making its way online into a place of mystery and vagueness.
Raghid Nami [00:44:43] Yeah, very important question. This is this is definitely going to be the biggest, the biggest concern moving forward. And this is where the focus on the collaboration between the government and the firms will come into play, because it's about creating that security system that everyone's going to be comfortable presenting to clients. Because at the core of it, like I mentioned earlier, the idea is not to share the data with anyone without the consent of the customer. The idea, the whole concept of this ecosystem is to give the ownership or the agency to, to the customer. So if you're my client, David, I'm going to be forced with this kind of system to show you exactly where your data is going. And to show you exactly or to give you the decision of where you want your data to go. So as soon as it's presented as it's the ownership that is given to you, as an investor, you're given the full authority to deal with that data. So I can no longer share their data with another third party without your consent. Even if it's under oath, even if it's part of a, what do you call it, if it's part of any agreement that we've signed, it has to be transparent for you, it has to be clear for you that I am sending this data to this third party to offer you the service, do you agree to it or not. And that's to start with just the consensus on the consent site that's about building these consent mechanisms and enforcing them to ensure that any service provider is, is getting the consent from their clients, before sending that data that's on the one side. The other side is definitely what you mentioned, which is the security of this data transfer. And this is where we need to leverage the technology to its full extent to ensure that we have solid cybersecurity and solid is basically an ecosystem that solid enough to ensure that there's as minimum as like, as low or even none of the vulnerabilities that we want to see. But obviously, we know this is not realistic. So ensuring that there's compliance mechanisms that come into play, whether from the regulatory side or from the firm's themselves, to ensure that when data is transferred, when data is transferred, it goes through the proper routes in a monitored manner to ensure that there is no leakage anywhere. And financial institution has to play a role when it's building. Its partnerships along with any potential third party through this ecosystem, they need to have a set of criteria, where there's their posts imposing on their potential partners, saying that if I'm publishing my APIs or my data to send to you, you need to follow a certain set of standards, and you need to basically be compliant with them. And this is where everyone becomes confident that okay, everyone is playing on the same level, we're all focused on the security of the state of for the benefit of the client. And based on that, I think the message will become clearer when we're presenting it saying, We've recorded the basis, we know that, that we have all the audits necessary for compliance. And we're giving you Mr. Client key control of deciding where you want your data to go. And this is all under your control, basically. I hope that that's clear, or that helps, but yeah,
David Kitai [00:48:34] I mean, yes, hold me, I'll be your client. No, I mean, it's, again, it's that that level of clarity and laying out that that level of security is absolutely crucial, because it is a huge concern for so many for so many clients. And I'm sure it will only continue to grow, but to show that there was that degree of diligence available was just as this is crucial. So I've got two questions left. For on any of our attendees, feel free to ask any more questions in the q&a? I think we've got time for maybe one or two more past these two if, if they come in. Otherwise, we'll just end a little bit early. So this, here's an advisor sort of ready to go into the brass tacks, if at all. You've talked about the benefits, you've talked about the opportunities what's the cost of adoption here?
Raghid Nami [00:49:21] That's a very interesting question on the question, actually. There's definitely going to be some costs depending on where the firm is at this point. Because it's, it's a new business model, right? With just like any offering any new service or any business model, there is going to be a cost to implement that. So whether it's from the infrastructure costs that you have to implement, if you have, let's say, legacy systems, they might not be easy to integrate with other solutions. So you might have to consider the strategic investments that you need to make with your systems or are you able to add a layer on top of them that connects them to Other systems outside. So it will vary depending on the company or the maturity of your technology. But these are things that you're going to have to look at, look at of, okay, what's my infrastructure, and how much do I need to invest, to be to open up to such an ecosystem, that's one. The second cost that I can think about is, of course, compliance and regulatory, like we said, this is very important, and having the monetary monitoring tools in place the systems to ensure the ongoing compliance is gonna be important, and this is not, it's not gonna be easy to do these things manually, you're gonna have to have systems to do that. Because once all of your data is, is connected, you're no longer you're no longer transferring paper documents, right. So doing the manual reviews is going to be more difficult. So having the systems or the solutions to perform these compliance checks, is going to be very important. Also, because everyone loves to have everything, like, immediately or all transfers are happening immediately, this is something that we're going to have moving forward with integrate systems like, like open banking, so there's going to be probably some operational costs on how to, to shift from the current operating models to the new operating models, you're gonna probably have a lot of savings in terms of implementing systems that scale, but you're probably gonna have to just do some retraining of your teams on how to manage these systems, to to ensure that you continue operating in an efficient manner. And beyond that, it's ends up being up to the firm on how much they want to invest in marketing of the services or research and development to add more innovations, because this is where it's gonna be. This is where you're gonna get your, your advantage if you want. This is what I can think about. I'm not sure if you might think of other potential costs, but there's definitely going to be a shift in the strategic investments that come with, with such a change in our business model, for sure.
David Kitai [00:52:13] Okay, fantastic. Thank you. So just as a final question, you know, as advisors leave this webinar, and start talking to their firms and their clients and their colleagues about the concept of open banking, and what are, let's say, the three takeaways they should have from your presentation today, what are the three lessons you hope that advisors have learned today and can take forward into their into their work?
Raghid Nami [00:52:38] That's a very good question. Well, I hope that it was valuable for everyone, for sure. What I would recommend that they focus on when they're discussing this, this concept of open banking within their firms is one to look at their requirements. If me as a firm, I haven't had a concept of partnership of or concept of collaborations with other firms to offer additional services to my clients. What kind of services do I want? And what are the criteria that I want to see in a potential partner? This is going to be a very important question that I need to ask, too. I my systems ready for something like that? Is my operational model. Ready? Is, is my back office ready for these kinds of integrations? If yes, that's great. Maybe you're going to be quicker to market than many people? If not, okay, maybe we need to look at the strategic investments that we need to make. And three, is are we ready as a firm from an operational sides compliance wise and business wise to understand to start looking at these even legal side to start undertaking these kinds of partnerships? If not, what are the processes that we need to put in place to, to get up and running and become ready? Once we have these three doesn't matter at that point, at what point? Open banking comes into play? Because you're going to be ready, I'm going to have the model set the operations set and the technology set for winning if you want, and this, this kind of forward.
David Kitai [00:54:27] We love to end on winning. Okay, beautiful. We'll repeat that is all of our questions for today. So all I can really say is on behalf of Wealth Professional, thank you so much to both yourself and Erion for a fantastic presentation. I'll reuse the word fascinating because it truly was. And thank you to all of our attendees for joining us. And thank you Croesus for sponsoring the delivery of this fantastic webinar.
Raghid Nami [00:54:55] Thank you very much.
David Kitai [00:54:57] Hope everybody has a great rest of their day. Be well.