ebook: financial advice with robo advisors (english)
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FINTECH SERIE BY innovation edge
MANAGEMENTFINANCIAL
ROBO ADVISORS
ENTER THE SCENE
How should youmanage yourfortune
01 Startups toconquer Wall Street
02 Could we haverobots insteadfinancial advisor
03
04 05 INF0GRAPHIC
How they workrobo-advisors
INTERVIEW
Joseacute Diego Alarcoacuten (Serfiex)
Startupsto conquerWall Street
01
A walkthrough of the fintech trends looking
to revolutionize financial advice ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
They are young and seek to
change the traditional model
of the financial world
Storming Wall Street A dozen
startups are looking to
compete with long-standing
companies or fill the void of
the traditional models A
pioneer in the United States
Wealthfront has moved more
than $2 billion in managed
assets in only three years with
an average shareholding per
customer of about $115000
Its competitor Betterment
nears $15 billion in assets
These figures are a far cry
from the large banks ndash Bank of
America is close to $1 trillion ndash
although they are attractive to
young people ( ) Dubbed
the Henrys (high earning not
rich yet) by Goldman Sachs
these customers do not plan to
go to a bank branch in their
lives and want to move their
money with just a click The
study by Accenture and
Partnership Fund for New York
City highlights that investment
in Financial technology has
tripled from 2013 to 2014
Fintech companies are
characterized by removing or
replacing banks and financial
institutions as intermediaries
promoting cooperation or
establishing new schemes for
more accessible commissions
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Fintech trends that entice
young customers
Digital Crowfunding Hybrid between Blockchain
technology ndash database that
records transactions with
cryptocurrencies and as the
BBVA Blockchain technology
The ultimate Disruption in The
Financial System report
explains it removes the need
for intermediaries and
significantly reduces costs for
banks ndash and crowdfunding
Companies are making offers of
digital stocks The US company
Ethereum stands out as it
allows developers to create
distributed applications define
custom currencies contracts
and even intelligent
crowdfunding platforms
(collective microfinance) To be
able to run programs in the
network you need to have a
certain amount of Ether the
platforms currency Another
platform is the European
Crowdcube which allows you
to create a portfolio of startups
with a minimum value of ten
euros and then keep track of
what happens to each of them
As explained on its website
many investors contribute
small or large amounts of
money to entrepreneurs and
businessmen to carry out their
project In exchange investors
receive shares in the company
and become its partners
accompanying the company in
its future growth
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Payment services with
low-cost investmentsThe star of services-based
investment is Robinhood the
broker backed by Silicon Valley
investors including Google
The broker with no
commissions or spreads aims to
democratize trading It is very
easy to use and you dont need
to have a minimum capital to
open an account Instead of
charging fees Robin Hood
charges interest on the use of
margins and charges for the
use of leveraging (increasing a
companys level of debt)
Robinhood allows developers to
create trading applications such
as graphics signals or
fundamental analysis Payment
products based on services to
attract the traders who are
most experienced with Robin
Hood
Robo advisor ( )As indicated above
Wealthfront and Betterment
stand out in these types of
services that create automated
low-cost portfolios based on
our profile by eliminating the
commissions of a managed
portfolio A model that prevails
in North America and is
coming to Europe In 2014
about 73000 customers
contracted such services in the
United States
Some trends that confirm that
the growth of startups
continues to increase In 2014
the assets of startups
dedicated to consulting in the
US reached $5 billion And
forecasts suggest that this
figure will have tripled to
exceed $15 billion by the end
of this year
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The rise of so-called robo-advisors is changing the
traditional financial management landscape in the US
and they are slowly being incorporated in Europe ( )
Could we haverobots instead of financial advisors
02
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Could a robot manage my
money Without a financial
advisor acting as an
intermediary Little by little so-
called robo-advisors are
changing the way money is
being moved in the US and
are beginning to reach
Europe This model means
customers do not need
financial advisors They just
have to turn on their
computer and fill out a
questionnaire Customers
report their risk tolerance
goals and investment and
their money is managed
automatically ( )
A model that according to the
consultant from GVC Gaesco
Albert Enguix has
experienced spectacular
growth of around 10 to 15
increase each year in the US
Around 73000 customers
have contracted these services
with a volume of 14 billion
euros in assets under
management at the end of
2014 This figure is expected
to rise further Enguix explains
that the model guarantees
absolute return investments
It sets controlling return and
risks as its goals Through
robo-advisors investment
portfolios of customers who
move amounts of between
$50000 to $100000 can be
controlled The money is
invested in EFTs (Exchange-
Traded Funds) and volatility is
controlled the goal is absolute
return This is about making
portfolios under the famous
VVMSQ - volatility-value-
momentum-size and quality of
the composition of the
holding explains Enguix
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
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BBVA is not responsible for the opinions expressed here in
Startupsto conquerWall Street
01
A walkthrough of the fintech trends looking
to revolutionize financial advice ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
They are young and seek to
change the traditional model
of the financial world
Storming Wall Street A dozen
startups are looking to
compete with long-standing
companies or fill the void of
the traditional models A
pioneer in the United States
Wealthfront has moved more
than $2 billion in managed
assets in only three years with
an average shareholding per
customer of about $115000
Its competitor Betterment
nears $15 billion in assets
These figures are a far cry
from the large banks ndash Bank of
America is close to $1 trillion ndash
although they are attractive to
young people ( ) Dubbed
the Henrys (high earning not
rich yet) by Goldman Sachs
these customers do not plan to
go to a bank branch in their
lives and want to move their
money with just a click The
study by Accenture and
Partnership Fund for New York
City highlights that investment
in Financial technology has
tripled from 2013 to 2014
Fintech companies are
characterized by removing or
replacing banks and financial
institutions as intermediaries
promoting cooperation or
establishing new schemes for
more accessible commissions
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Fintech trends that entice
young customers
Digital Crowfunding Hybrid between Blockchain
technology ndash database that
records transactions with
cryptocurrencies and as the
BBVA Blockchain technology
The ultimate Disruption in The
Financial System report
explains it removes the need
for intermediaries and
significantly reduces costs for
banks ndash and crowdfunding
Companies are making offers of
digital stocks The US company
Ethereum stands out as it
allows developers to create
distributed applications define
custom currencies contracts
and even intelligent
crowdfunding platforms
(collective microfinance) To be
able to run programs in the
network you need to have a
certain amount of Ether the
platforms currency Another
platform is the European
Crowdcube which allows you
to create a portfolio of startups
with a minimum value of ten
euros and then keep track of
what happens to each of them
As explained on its website
many investors contribute
small or large amounts of
money to entrepreneurs and
businessmen to carry out their
project In exchange investors
receive shares in the company
and become its partners
accompanying the company in
its future growth
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Payment services with
low-cost investmentsThe star of services-based
investment is Robinhood the
broker backed by Silicon Valley
investors including Google
The broker with no
commissions or spreads aims to
democratize trading It is very
easy to use and you dont need
to have a minimum capital to
open an account Instead of
charging fees Robin Hood
charges interest on the use of
margins and charges for the
use of leveraging (increasing a
companys level of debt)
Robinhood allows developers to
create trading applications such
as graphics signals or
fundamental analysis Payment
products based on services to
attract the traders who are
most experienced with Robin
Hood
Robo advisor ( )As indicated above
Wealthfront and Betterment
stand out in these types of
services that create automated
low-cost portfolios based on
our profile by eliminating the
commissions of a managed
portfolio A model that prevails
in North America and is
coming to Europe In 2014
about 73000 customers
contracted such services in the
United States
Some trends that confirm that
the growth of startups
continues to increase In 2014
the assets of startups
dedicated to consulting in the
US reached $5 billion And
forecasts suggest that this
figure will have tripled to
exceed $15 billion by the end
of this year
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The rise of so-called robo-advisors is changing the
traditional financial management landscape in the US
and they are slowly being incorporated in Europe ( )
Could we haverobots instead of financial advisors
02
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Could a robot manage my
money Without a financial
advisor acting as an
intermediary Little by little so-
called robo-advisors are
changing the way money is
being moved in the US and
are beginning to reach
Europe This model means
customers do not need
financial advisors They just
have to turn on their
computer and fill out a
questionnaire Customers
report their risk tolerance
goals and investment and
their money is managed
automatically ( )
A model that according to the
consultant from GVC Gaesco
Albert Enguix has
experienced spectacular
growth of around 10 to 15
increase each year in the US
Around 73000 customers
have contracted these services
with a volume of 14 billion
euros in assets under
management at the end of
2014 This figure is expected
to rise further Enguix explains
that the model guarantees
absolute return investments
It sets controlling return and
risks as its goals Through
robo-advisors investment
portfolios of customers who
move amounts of between
$50000 to $100000 can be
controlled The money is
invested in EFTs (Exchange-
Traded Funds) and volatility is
controlled the goal is absolute
return This is about making
portfolios under the famous
VVMSQ - volatility-value-
momentum-size and quality of
the composition of the
holding explains Enguix
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
They are young and seek to
change the traditional model
of the financial world
Storming Wall Street A dozen
startups are looking to
compete with long-standing
companies or fill the void of
the traditional models A
pioneer in the United States
Wealthfront has moved more
than $2 billion in managed
assets in only three years with
an average shareholding per
customer of about $115000
Its competitor Betterment
nears $15 billion in assets
These figures are a far cry
from the large banks ndash Bank of
America is close to $1 trillion ndash
although they are attractive to
young people ( ) Dubbed
the Henrys (high earning not
rich yet) by Goldman Sachs
these customers do not plan to
go to a bank branch in their
lives and want to move their
money with just a click The
study by Accenture and
Partnership Fund for New York
City highlights that investment
in Financial technology has
tripled from 2013 to 2014
Fintech companies are
characterized by removing or
replacing banks and financial
institutions as intermediaries
promoting cooperation or
establishing new schemes for
more accessible commissions
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Fintech trends that entice
young customers
Digital Crowfunding Hybrid between Blockchain
technology ndash database that
records transactions with
cryptocurrencies and as the
BBVA Blockchain technology
The ultimate Disruption in The
Financial System report
explains it removes the need
for intermediaries and
significantly reduces costs for
banks ndash and crowdfunding
Companies are making offers of
digital stocks The US company
Ethereum stands out as it
allows developers to create
distributed applications define
custom currencies contracts
and even intelligent
crowdfunding platforms
(collective microfinance) To be
able to run programs in the
network you need to have a
certain amount of Ether the
platforms currency Another
platform is the European
Crowdcube which allows you
to create a portfolio of startups
with a minimum value of ten
euros and then keep track of
what happens to each of them
As explained on its website
many investors contribute
small or large amounts of
money to entrepreneurs and
businessmen to carry out their
project In exchange investors
receive shares in the company
and become its partners
accompanying the company in
its future growth
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Payment services with
low-cost investmentsThe star of services-based
investment is Robinhood the
broker backed by Silicon Valley
investors including Google
The broker with no
commissions or spreads aims to
democratize trading It is very
easy to use and you dont need
to have a minimum capital to
open an account Instead of
charging fees Robin Hood
charges interest on the use of
margins and charges for the
use of leveraging (increasing a
companys level of debt)
Robinhood allows developers to
create trading applications such
as graphics signals or
fundamental analysis Payment
products based on services to
attract the traders who are
most experienced with Robin
Hood
Robo advisor ( )As indicated above
Wealthfront and Betterment
stand out in these types of
services that create automated
low-cost portfolios based on
our profile by eliminating the
commissions of a managed
portfolio A model that prevails
in North America and is
coming to Europe In 2014
about 73000 customers
contracted such services in the
United States
Some trends that confirm that
the growth of startups
continues to increase In 2014
the assets of startups
dedicated to consulting in the
US reached $5 billion And
forecasts suggest that this
figure will have tripled to
exceed $15 billion by the end
of this year
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The rise of so-called robo-advisors is changing the
traditional financial management landscape in the US
and they are slowly being incorporated in Europe ( )
Could we haverobots instead of financial advisors
02
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Could a robot manage my
money Without a financial
advisor acting as an
intermediary Little by little so-
called robo-advisors are
changing the way money is
being moved in the US and
are beginning to reach
Europe This model means
customers do not need
financial advisors They just
have to turn on their
computer and fill out a
questionnaire Customers
report their risk tolerance
goals and investment and
their money is managed
automatically ( )
A model that according to the
consultant from GVC Gaesco
Albert Enguix has
experienced spectacular
growth of around 10 to 15
increase each year in the US
Around 73000 customers
have contracted these services
with a volume of 14 billion
euros in assets under
management at the end of
2014 This figure is expected
to rise further Enguix explains
that the model guarantees
absolute return investments
It sets controlling return and
risks as its goals Through
robo-advisors investment
portfolios of customers who
move amounts of between
$50000 to $100000 can be
controlled The money is
invested in EFTs (Exchange-
Traded Funds) and volatility is
controlled the goal is absolute
return This is about making
portfolios under the famous
VVMSQ - volatility-value-
momentum-size and quality of
the composition of the
holding explains Enguix
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Fintech trends that entice
young customers
Digital Crowfunding Hybrid between Blockchain
technology ndash database that
records transactions with
cryptocurrencies and as the
BBVA Blockchain technology
The ultimate Disruption in The
Financial System report
explains it removes the need
for intermediaries and
significantly reduces costs for
banks ndash and crowdfunding
Companies are making offers of
digital stocks The US company
Ethereum stands out as it
allows developers to create
distributed applications define
custom currencies contracts
and even intelligent
crowdfunding platforms
(collective microfinance) To be
able to run programs in the
network you need to have a
certain amount of Ether the
platforms currency Another
platform is the European
Crowdcube which allows you
to create a portfolio of startups
with a minimum value of ten
euros and then keep track of
what happens to each of them
As explained on its website
many investors contribute
small or large amounts of
money to entrepreneurs and
businessmen to carry out their
project In exchange investors
receive shares in the company
and become its partners
accompanying the company in
its future growth
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Payment services with
low-cost investmentsThe star of services-based
investment is Robinhood the
broker backed by Silicon Valley
investors including Google
The broker with no
commissions or spreads aims to
democratize trading It is very
easy to use and you dont need
to have a minimum capital to
open an account Instead of
charging fees Robin Hood
charges interest on the use of
margins and charges for the
use of leveraging (increasing a
companys level of debt)
Robinhood allows developers to
create trading applications such
as graphics signals or
fundamental analysis Payment
products based on services to
attract the traders who are
most experienced with Robin
Hood
Robo advisor ( )As indicated above
Wealthfront and Betterment
stand out in these types of
services that create automated
low-cost portfolios based on
our profile by eliminating the
commissions of a managed
portfolio A model that prevails
in North America and is
coming to Europe In 2014
about 73000 customers
contracted such services in the
United States
Some trends that confirm that
the growth of startups
continues to increase In 2014
the assets of startups
dedicated to consulting in the
US reached $5 billion And
forecasts suggest that this
figure will have tripled to
exceed $15 billion by the end
of this year
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The rise of so-called robo-advisors is changing the
traditional financial management landscape in the US
and they are slowly being incorporated in Europe ( )
Could we haverobots instead of financial advisors
02
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Could a robot manage my
money Without a financial
advisor acting as an
intermediary Little by little so-
called robo-advisors are
changing the way money is
being moved in the US and
are beginning to reach
Europe This model means
customers do not need
financial advisors They just
have to turn on their
computer and fill out a
questionnaire Customers
report their risk tolerance
goals and investment and
their money is managed
automatically ( )
A model that according to the
consultant from GVC Gaesco
Albert Enguix has
experienced spectacular
growth of around 10 to 15
increase each year in the US
Around 73000 customers
have contracted these services
with a volume of 14 billion
euros in assets under
management at the end of
2014 This figure is expected
to rise further Enguix explains
that the model guarantees
absolute return investments
It sets controlling return and
risks as its goals Through
robo-advisors investment
portfolios of customers who
move amounts of between
$50000 to $100000 can be
controlled The money is
invested in EFTs (Exchange-
Traded Funds) and volatility is
controlled the goal is absolute
return This is about making
portfolios under the famous
VVMSQ - volatility-value-
momentum-size and quality of
the composition of the
holding explains Enguix
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Payment services with
low-cost investmentsThe star of services-based
investment is Robinhood the
broker backed by Silicon Valley
investors including Google
The broker with no
commissions or spreads aims to
democratize trading It is very
easy to use and you dont need
to have a minimum capital to
open an account Instead of
charging fees Robin Hood
charges interest on the use of
margins and charges for the
use of leveraging (increasing a
companys level of debt)
Robinhood allows developers to
create trading applications such
as graphics signals or
fundamental analysis Payment
products based on services to
attract the traders who are
most experienced with Robin
Hood
Robo advisor ( )As indicated above
Wealthfront and Betterment
stand out in these types of
services that create automated
low-cost portfolios based on
our profile by eliminating the
commissions of a managed
portfolio A model that prevails
in North America and is
coming to Europe In 2014
about 73000 customers
contracted such services in the
United States
Some trends that confirm that
the growth of startups
continues to increase In 2014
the assets of startups
dedicated to consulting in the
US reached $5 billion And
forecasts suggest that this
figure will have tripled to
exceed $15 billion by the end
of this year
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The rise of so-called robo-advisors is changing the
traditional financial management landscape in the US
and they are slowly being incorporated in Europe ( )
Could we haverobots instead of financial advisors
02
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Could a robot manage my
money Without a financial
advisor acting as an
intermediary Little by little so-
called robo-advisors are
changing the way money is
being moved in the US and
are beginning to reach
Europe This model means
customers do not need
financial advisors They just
have to turn on their
computer and fill out a
questionnaire Customers
report their risk tolerance
goals and investment and
their money is managed
automatically ( )
A model that according to the
consultant from GVC Gaesco
Albert Enguix has
experienced spectacular
growth of around 10 to 15
increase each year in the US
Around 73000 customers
have contracted these services
with a volume of 14 billion
euros in assets under
management at the end of
2014 This figure is expected
to rise further Enguix explains
that the model guarantees
absolute return investments
It sets controlling return and
risks as its goals Through
robo-advisors investment
portfolios of customers who
move amounts of between
$50000 to $100000 can be
controlled The money is
invested in EFTs (Exchange-
Traded Funds) and volatility is
controlled the goal is absolute
return This is about making
portfolios under the famous
VVMSQ - volatility-value-
momentum-size and quality of
the composition of the
holding explains Enguix
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
The rise of so-called robo-advisors is changing the
traditional financial management landscape in the US
and they are slowly being incorporated in Europe ( )
Could we haverobots instead of financial advisors
02
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Could a robot manage my
money Without a financial
advisor acting as an
intermediary Little by little so-
called robo-advisors are
changing the way money is
being moved in the US and
are beginning to reach
Europe This model means
customers do not need
financial advisors They just
have to turn on their
computer and fill out a
questionnaire Customers
report their risk tolerance
goals and investment and
their money is managed
automatically ( )
A model that according to the
consultant from GVC Gaesco
Albert Enguix has
experienced spectacular
growth of around 10 to 15
increase each year in the US
Around 73000 customers
have contracted these services
with a volume of 14 billion
euros in assets under
management at the end of
2014 This figure is expected
to rise further Enguix explains
that the model guarantees
absolute return investments
It sets controlling return and
risks as its goals Through
robo-advisors investment
portfolios of customers who
move amounts of between
$50000 to $100000 can be
controlled The money is
invested in EFTs (Exchange-
Traded Funds) and volatility is
controlled the goal is absolute
return This is about making
portfolios under the famous
VVMSQ - volatility-value-
momentum-size and quality of
the composition of the
holding explains Enguix
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
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The transformation towards digital
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models
Analysis of colombian
startups and entrepreneurs
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to promote development
Retain and attract customers
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Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Could a robot manage my
money Without a financial
advisor acting as an
intermediary Little by little so-
called robo-advisors are
changing the way money is
being moved in the US and
are beginning to reach
Europe This model means
customers do not need
financial advisors They just
have to turn on their
computer and fill out a
questionnaire Customers
report their risk tolerance
goals and investment and
their money is managed
automatically ( )
A model that according to the
consultant from GVC Gaesco
Albert Enguix has
experienced spectacular
growth of around 10 to 15
increase each year in the US
Around 73000 customers
have contracted these services
with a volume of 14 billion
euros in assets under
management at the end of
2014 This figure is expected
to rise further Enguix explains
that the model guarantees
absolute return investments
It sets controlling return and
risks as its goals Through
robo-advisors investment
portfolios of customers who
move amounts of between
$50000 to $100000 can be
controlled The money is
invested in EFTs (Exchange-
Traded Funds) and volatility is
controlled the goal is absolute
return This is about making
portfolios under the famous
VVMSQ - volatility-value-
momentum-size and quality of
the composition of the
holding explains Enguix
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Customer profile ( )
The profile of customers who
opt for this technology to move
their money is around 35 years
old and with a high purchasing
power Enguix explained The
millennial generation uses this
model the most The end
result is similar to what a
traditional consultant would do
for them but at a lower cost
The US consulting firm AT
Kearney said that these
services will become a trend
over a period of three to five
years according to this article
from Bloomberg In 2020
robo-advisors will control 56
of investment assets in the US
The figure is currently around
05
The advisor stressed that the
process is very simple You
access the platform from your
computer in the same way as
if you wanted to make a
transfer Analysts statisticians
and economists have created
financial strategy models
beforehand using thousands of
pieces of data Algorithms and
statistics to design programs
that manage your money
What are the risks The same
as in the traditional market
Machines cannot foresee a
financial crash They cannot
guess the psychological
component that can change
the entire financial picture of a
market in minutes just as
advisors are unable to do so
Its not an exact science
Enguix explained who added
that with this type of platform
companies save costs by not
having to hire financial
advisors
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
According to Adam Nash
CEO of Wealthfront a firm
that manages more than
$24 billion in assets rather
than the investment world
being a sprint it is like a
marathon and robots dont
need to sleep They can
make their calculations and
movements while analyzing
all markets whatever the
time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
A new model that also
confronts the collapse of
commission prices which is
stressed from Wealthfront
The firm is convinced that
future generations and
technology will revolutionize
the financial market The
preferences of younger
consumers have a huge
impact on financial services
and companies will have to
respond quickly to new
trendsrdquo
Arrival in EuropeIn Europe this model is
being incorporated extremely
slowly We are lagging
behind the US which is 10
years ahead on this type of
service says Enguix In
France Germany and
Switzerland some companies
such as the German firm
Vaamo or the French firm
Advize have launched in this
market Although there is
still a long way to go to reach
customers en mass in Spain
and Europe Many
professionals in the sector
have never even heard of
robo-advisors There is a long
road ahead says the
consultant from Gaesco
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Personalized advice is not going to disappear but the
competition from new models is ambitious and greatly
reduces the prices ( )
How should youmanage your fortune
03
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Two executives are having
lunch after a conference on
asset management They are
arguing over the recent
emergence of small digital
capital management
companies that focus
primarily on retail investors in
the emerging Business-to-
Consumer (B2C) market
which refers to the strategy
that commercial enterprises
are following to go directly to
the end customer or
consumer One of the
executives is not worried
about these new businesses
at all and does not see them
as a threat he argues that
investors always prefer direct
person-to-person relationships
with their financial advisors
The second strongly
disagrees and notes that all
traditional companies must
understand why these new
companies are emerging
what makes them attractive
to customers and what
capabilities must be
developed in response to this
threat This hypothetical
scenario relating the Deloitte
study Digital disruption
in Wealth Management
illustrates the real debate
taking place in the wealth
management industry on the
relevance of these new digital
companies and their potential
to successfully break into the
market Traditional
companies are trying to
decide whether it is worth
investing time money
and effort to better
understand these emerging
businesses
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
The story of the consultant is
fictional but the discussion it
narrates is increasingly real At
the recent Finance20
conference which was held in
Zurich and brings together
technology companies
specialized in finance it was
emphasized that automated
solutions are increasingly
attracting customers In
Switzerland a landmark for
traditional banking a startup
such as True Wealth and the
website Investomachch are
committed to automating their
advisory models with robo-
advisors The question buzzing
round the conference in Zurich
was whether customers would
pay for advice as if they use
automated methods costs are
minimal ndash in the case of robo-
advisors fees are between 30
and 70 bps (03 to 07)
per yearndash Felix Niederer
founder of True Wealth
emphasized that the costs
could decrease even more
And that its moving toward a
model where fortune is
managed completely free
although the most
sophisticated payment services
will remain
Returning to the Deloitte
study startups are definitely a
clear indicator of whats to
come The consultant
examined more than 50 new
digital wealth management
companies in the B2C market
most were founded in the last
ten years The study highlights
that these growth companies
attract retail investors in three
ways by helping them to
connect advising on financial
matters and helping them to
invest ( )
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
The keys for the consultant
are ( )
ConnectingAdding investor accounts
Consumers increasingly have
the need to connect different
accounts ndash often accounts
from multiple providers ndash in
order to create a holistic
picture of their wealth and
more easily manage their
finances In addition
investors want to be
connected together to learn
from their peers and to
connect with specialists and
advisors that meet their
needs The new companies
are providing integration of
all these accounts beyond
traditional boundaries
Retail investors are
increasingly frustrated by
having to reconcile multiple
accounts through numerous
banks placements or for
example retirement
accounts They need to have
an accurate real-time view
and if possible an aggregate
of financial assets liabilities
and net worth across multiple
accounts and suppliers
One of the pioneers in this
market was Mintcom a free
online personal financing
service that allows users to see
all their balances and
transactions in one place
Launched in 2007 it currently
has over one million users
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Social networks
Since the financial crisis retail
investors have become
increasingly skeptical about the
advice they receive but have
also realized that they need
this advice more than ever
Investors want to know what
their peers think and how they
invest not only learn from
investment specialists They
also value interactions with
their peers beyond just
meeting their immediate
investment needs Forums
that began as chat groups and
online discussions have rapidly
evolved into fully-blown social
platforms that allow an open
exchange of ideas and the
ability to form groups
People amp Pick founded by
Zacks Investment Research is
an example of a company that
has created a social platform
and online community for
users to interact with each
other The platform allows
users to evaluate any piece of
stock as a purchasesale
Users can share ideas with
other users and track their
stocks
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
SERIE FINTECH middot AGOSTO 2015 middot wwwcentrodeinnovacionbbvacom
AdvisingFinancial planning New asset
management companies
have entered this market and
successfully attracted
financial planning customers
by creating digital showcases
that have a low learning
curve These companies can
form a complete picture of a
customers financial situation
by taking into account their
personal financial goals risk
tolerance diversification
andor trading strategies An
example is Personal Capital
offering a trading platform
with multiple choices from
investment monitoring and
analysis to financial services
(for investors with more than
$100000 in assets)
Accounts aggregation allows
users to control their finances
as part of a single integrated
control panel that shows the
asset allocation the potential
risks of the holding and how
various product commissions
could affect their goals
InvestingIn the current environment of
low-yield investment
investors are constantly
looking for better riskreturn
opportunities In response to
this new companies have
emerged that provide
customers with access to
sophisticated trading
strategies by copying the
business strategies of
professional management
services (PMS) and thus
allowing these companies to
offer private investors
services to which historically
only certain institutions or
large investors had access
An example of a startup that
offers non-traditional
placements is Covestor
which allows its members to
access view and study the
holdings of professional
management services
Going back to Switzerland a
survey by Axa IM notes that
90 of the Swiss still prefer
personal advice to move their
money It seems that things
are starting to change in the
rest of the planet
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Joseacute Diego Alarcoacuten is a partner of the Spanish
SME Serfiex which specializes in Financial Risk
Management software consulting and solutions
Along with a team of financial analysts
econometricians and IT specialists it has
developed a robo advisor with which the
company aims to approach small investors ( )
04INTERVIEW
ldquoRobo-advisorsdemocratize financialadvicerdquo
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
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What is the difference between
a robo advisor and a financial
advisor
One difference is that thanks
to the Internet a robo advisor
can advise many people while
an individual obviously does
not have the same capacity
What does a robo-advisor
contribute ( )
Our company has
fundamentally developed a
new approach to investing
The robo advisor is the tool
that automates this
methodology The important
thing is the methodology
behind the robo advisor It
must be very detailed very
objective nothing is left to
intuition it is a mathematical
procedure Our robo-advisor is
characterized by both things
On the one hand it builds an
initial portfolio with potential
losses The second feature
which is the most important or
most innovative is it
reconstructs the portfolio
periodically and in an
automated way ie it
rebalances it Each month it
compares the data analyzes
the expected profitability of the
initial portfolio with the real
profitability of the portfolio itself
and based on that difference
and the passage of time it
recomposes and optimizes that
portfolio Without asking the
customer for any new data
Is it better or worse than an
advisor
Its no better or worse
Everything is simplified with
the robo-advisor but it is no
better or worse As it is on the
Internet it can reach many
people and democratizes such
advisory services It may be
cheaper but the important
thing is the methodology
behind it
What logic have you followed
The process that we have
followed after many years in
this field has been to
synthesize it as far as possible
We seek to advise a person
with the smallest amount of
information possible We
create a flow chart and define
it following a methodology
Then the robo-advisor is the
tool that implements it in a
channel such as the Internet
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
What minimum information do
you ask the customer
The customer is only asked to
define hisher risk profile There
are two ways to do so One
which is longer is done with a
questionnaire where the
customer has to avoid getting
into a loop as many times
heshe thinks one thing writes
another and then hisher
portfolio is not what heshe
wants has or can be Another
way which is what we use is
more direct we ask what
potential losses the customer
is uncomfortable with using a
certain probability The
customer has hisher risk
profile they say for example
they are uncomfortable with a
3 loss per year and we build
a portfolio from that
information
What customers are you
looking for ( )
We currently have large
customers pension plans
SICAVs etc The robo-advisor
aims to attract customers with
lower equity and who come
through the Internet
Is there interest in this service
In Spain a bank has been
interested in our software
development specifically the
calculation engine part Large
Spanish investors have also
approached us to ask about the
methodology and we are going
to present it in Mexico shortly Its
what were seeing right now
Do you have small customers
No currently only large
customers
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
What do you expect in the
future
In a few years I think all the
major banks will have a robo-
advisor for their young
customers who are
accustomed to the Internet and
want to make up their portfolio
People with low net worth that
makes no sense for them to go
to private banks I trust that
these large banks will contract
the software the calculation
engine and provide a service to
customers with low net worth
as is already happening in the
United States
Are wealthy customers not
interested in that model
Usually these people are older
and they do not trust a robo-
advisor Its an automatic
process and they prefer to
speak with people Whats
happening in the United States
for example is that the children
of those millionaires are
approaching robo-advisors and
obtaining higher returns Thats
causing their parents to
become interested in the
people who have designed this
robo-advisor they want to
know the methodology
Are there any disadvantages A
major danger is that its not the
same choosing between two
people than between two robo-
advisors You can talk to
people ask them questions
you may have friends who
have already placed their trust
in those advisors or you follow
your intuition whereas if you
go directly to a robo-advisor
and youre not an expert in
finance you dont know the
difference between a good and
a bad one You have no
judgment and you have to wait
quite a while to see the results
and find out whether you were
wrong or not You may find
that the algorithms are good
but the products they are
selling are very bad You can
have a good cook but if the raw
material is bad the result will
be terrible
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
These are the automatic machines that
offer financial advice and portfolio
management
05INFOGRAPHICHow they workRobo advisors
Share on Pinterest
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
The answers are analyzed and the
algorithms are processed thus
designing a tailored investment plan
Users can adjust their goal and risk
tolerance as they prefer
Thanks to automation an automated
robot can charge lower fees
How they workAssess a persons income and find out how much they can afford
how much they need to save study the best tax structure and
decide what investments should be made to realize those
objectives Intelligent algorithms can now do that
Investment Risk Goal Time
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
How things will change
Less volatile markets
Robots make investment
decisions based on
algorithms and not on their
emotions so it is more likely
that they will buy stocks that
will last
More rigorous markets
Robots process a large
amount of information design
a preset rule and start doing
the numbers non-stop until
they find the right
candidates for a portfolio
Fewer transactions
Programmed to accumulate
wealth over a decade or two
they simply buy a set amount
of stocks a year and ignore
short-term fluctuations
More global markets
Robots manage portfolios
and dont care whether a
company is European
American or Asian they just
look for returns
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
The future in figures
Active advisor robots in the United States (in trillions of dollars)
Switch from uninvested assets (1) Switch from invested assets (2)
2016
2017
2018
2019
2020 -11 -11
08 07
05 04
04 01
(0200) 03
05
09
15
-22
+68
Key factors for choosing an advisor robot
Price (low cost and transparency) is the crucial element of the advisor robots offer
Early adopters
Second adoptersr
36 25 23 16
35 24 24 15
Price Investment Simplicity Servicios
(1) Uninvested assets
include liquid funds (cash
and cash-equivalent
deposits)
(2) Invested funds include
credit market
instruments corporate
stocks and mutual funds
SERIE FINTECH middot AUGUST 2015 middot wwwcentrodeinnovacionbbvacomen
BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
share
LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
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BBVA Innovation Center
creates the Fintech Serie By
Innovation Edge to keep
informed about the financial
innovation trends with its
milestones analysis cases
studie interviews with experts
and infographics to display the
data that describe each of
these trends
FINTECHSERIE BY innovation edge
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LATEST ISSUES
The transformation towards digital
banking generates new business
models
Analysis of colombian
startups and entrepreneurs
Banking penetration an instrument
to promote development
Retain and attract customers
on social networks
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
Registerto keep up withthe lastest trends
centrodeinnovacionbbvacomen
centrodeinnovacionbbvacominnovation-edge
Follow us
BBVA is not responsible for the opinions expressed here in
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