Top 10 learnings from Silicon Valley

7 minutes  
Date: 04 August 2017
  • There are a number of technologies, including blockchain, that could alter the advice industry forever.
  • The trends such as blockchain, bitcoin and AI are inter-related and connect to create bigger opportunities.
  • How we use the data generated in our businesses and via social media, will inform our progress and success.

Fintech. There’s no doubt it will revolutionise many aspects of the financial services landscape, from both an adviser and client perspective.

However, with all the talk of developments and breakthroughs, how does one decipher the key pieces and discoveries that will shape the finance world of tomorrow?

In a Netwealth webinar titled ‘Top ten learnings from Silicon Valley’, Michelle Baltazar, Director of Media and Publisher of Financial Standard, presented ten key learnings she discovered in her recent tour of the epicenter of technology and major fintech players, Silicon Valley, and she shares them here.


1. Blockchain will alter the finance industry forever

Whilst not widely adopted in Australia to date, blockchain and bitcoin already constitute $20 billion of the $2 trillion global payments industry, and this number is growing.

Blockchain is essentially a digital ledger that can record transactions between two parties efficiently and in a verifiable and permanent way, and can provide benefits such as identity verification, data verification and smart contracts.

According to Baltazar, it works as a disrupter, eliminating the need for third party providers, thereby making transactions seamless and more time and cost efficient.

In Sweden, they are currently trialing how many third parties can be eliminated from the real estate purchase process, to make a more seamless experience for the buyer and seller.

This could see the elimination of the land titles office, real estate agent, the bank organizing the loan or the conveyancer.

“You can do that now through the blockchain technology and using Bitcoin as a currency.”


2. Bitcoin is more than just a digital currency

Bitcoin is an alternate payment infrastructure that sits on a blockchain.

It also enables international trading without the need for the cumbersome currency exchange process. Already we have examples of international currencies being exchanged in one hour compared to a handful of days, forever revolutionising the speed of trade, exchange and settlement.

"How would the world look like when currency exchange is no longer as cumbersome as it is today?"


3. Artificial Intelligence (AI) will get smarter

According to Baltazar, we are essentially at the very beginning of the AI journey and where it will take us and the impact it will have on investing is already quite phenomenal.

An example of a fund manager who has harnessed AI is Sanlam Global, which launched an AI-driven investment portfolio last year.

She said when the portfolio was back-tested, it would have returned 24% against its benchmark loss of 22% - a huge difference.

“In addition, this portfolio was back-tested for consistency over a 10-year period. Results indicated the AI-run portfolio returned 281% versus its benchmark's 74%, proving just how valuable AI-driven investing will one day be to the industry.”


4. Robo-advice will build a bridge to an integrated financial advice model

Robo-advice has potential far beyond servicing those with limited advice needs.

Technology trends in the US indicate robo-advice will have a facilitative role in the creation of readily accessible finance and analytics tools. These tools will help instill confidence in prospects and clients about the virtues of professional advice and move them closer to seeking financial advice.


5. Data versus knowledge versus wisdom

Big data analyser, Splunk CEO Snehal Antani focusses on the feedback loop or the information and data you have on your customers, their habits, likes, dislikes, that informs your service delivery.

As this information will become more available, new roles such as data journalists will appear. Their job will be to collect and interpret data and inform businesses on their findings. For financial advisers, big data will provide much more information on consumers than a straight risk profile assessment where they choose what to tell you about themselves.


6. Find the nomads and the hunters

Baltazar said there are a large proportion of Australians who are either switched on to technology and are using it (known as nomads in some surveys) or use a combination of traditional communication models with technology (known as hunters).

“That's actually a huge chunk of the population that are quite comfortable to be in the tech space,” said Baltazar.

Either way, these people are looking for information, wanting information – so there is a great opportunity here for advisers to use technology to feed the information appetites of both these markets.


7. Follow the digital breadcrumbs

Whilst advisers don’t have to be everywhere in social media, they do need to be present and relevant to the segment of people who do want to know more about financial planning, investments or wealth.

Just as integral when it comes to digital is knowing who the power users are of social media.

“Before I went to Silicon Valley I thought social media was just for millennials,” said Baltazar. “However, I discovered that sub 40 years of age, high net wealth (HNW) investors are the power users of social. Whilst this is based on U.S. statistics, I doubt we would be too far behind in five to ten years’ time.”


8. The next industry threat won’t come from within financial services

The biggest threat is currently being ignored: the tech giants.

“Our industry is so busy looking at what the big banks or fund managers are doing that we are not taking note of Snapchat or Amazon (or others),” said Baltazar. “And whilst we’re focusing on potential compliance-related issues of innovation, they are examining robo-advice and other methods of tapping into the market without the same consideration for regulation.”


9. Cyberspace ignorance is dangerous

“System protection and security need to be something that is considered an issue not just for the IT team, but for the practice overall,” said Baltazar.

She said while it is perhaps easy to dismiss the issue of cyberspace, more interconnectedness, more big data and the high appetites for information, needs to be balanced with safe technology procedures.


10. Technocracy is the new aristocracy

“There is no doubt that fintech will reshape the foundation of the financial services industry,” she said.

From new ways of investing, to digital communication, social media marketing, big data, new players and more, the financial landscape of tomorrow is set to be an evolution that will benefit advisers and clients.”


To watch the full webinar recording click here or if you would like to speak to a member of the Netwealth team please contact us.