In 10-15 yrs, we will invest as how we handle music or binge watch a series

Bálint Fischer, Head of Banking Innovation at Dorsum, spoke of the future of the investment markets and the technological novelties to be expected within:

• Even though regulations, such as Mifid II and GDPR posed some challenges, the investment sphere was relatively safe from disruption while the transportation and booking markets were revolutionized by companies like Uber or AirBnB. This status quo will change in the upcoming 5-10 years; in three years, investech companies may appear in Hungary as well.
• Amazon will launch its ETF marketplace in the third quarter of 2018, first in the United States, then in other markets as well. As of today, two thirds of all American households have Amazon Prime, which means they pay a monthly fee of 13 dollars to access the company’s services in a quicker, easier manner. Amazon’s revenue is bigger than the Hungarian GDP.
• Facebook may soon start off in the banking sector, while AirBnB may soon offer insurance products. These companies have an extensive and loyal customer base, whom these tech-companies know better than banks. Thanks to these facts, tech companies may easily steer these clients towards financial products.
• Fintech startups that seemed to pose a minimal threat seem to grow very rapidly, some (like Revolut, Transferwise and CoinBase) are even profitable. RobinHood has 3 million clients only in the U.S. and may expand into Europe this year, while CoinBase has 15 million. The main advantage of these companies is that they can easily, transparently and stylishly offer complex financial services.
• In 10-15 years, we will handle our investments much akin to how we handle our music or how we binge watch a series. We will be able to choose a product that fits us best from a large universe and we also form an emotional attachment. Netflix and Spotify may offer us models, which could also be adapted to services in the investment market.
• While clients like to make their own investment decisions, they like to get help for such. There are hybrid solutions (Dorsum is working on such products as well), which combine the simplicity of technology with investment advice: for example, you can access your financial advisor with the press of a button, while another app offers you robots to prepare your decision making, by creating real time analytics.
• A large amount of people like to learn via games, almost everyone plays something on their mobile devices. There are applications in finance that educate users via gamification, for example, there is an app which models the financial decisions that you have to make if you want to reach a certain goal. At the end, you get an evaluation about the decisions you have made.

István Al-Hilal, Associate Sales Director of Fidelity International shared a research the asset manager conducted among its analysts. The experts that took part in the survey expect the following notable developments in the next 12 months:

• Fidelity’s analysts have a generally positive outlook on the markets, despite the volatility and the fact that asset prices were at record levels a few months earlier. In comparison to earlier years, the analysts are much more bullish on developed markets and the CEE region as well. They have the most positive outlook on the energy sector and the consumer goods sector and the most negative outlook on the utility sector.
• The return on assets will increase in the next 12 months, which will assist the increase of asset prices. Growth will be healthy and supported by consumption instead of cost cutting.
• Dividends will increase or keep their current level.
• Capital expenditure will increase.
• The 2/3 of analysts expect inflationary pressure and modest / strong increase in wages, profitability will not be a problem.
• According to 60% of Fidelity’s analysts, the markets show characteristics that signal a late cycle, but this will not pose a problem in the near future There is no need to worry about recession so far, since balance sheets are healthy, financing will continue to be cheap and the number of defaults will not increase, while leverage will not skyrocket.
• Compared to last year’s survey, analysts noted far fewer risks. Among them, the most dangerous is Brexit (which might be localized in Europe) and the potential instability of the Chinese economy.

Following the presentations, experts shared their thoughts on technology, the generational change in private banking and the stock markets in a roundtable:

• Róbert Farkas, CEO of Magyar Takarékszövetkezeti Bank’s stock markets and treasury directorate believes that liquidity is running out from the world’s stock markets, even though investors are still used to the “drug" that is central banks’ cheap liquidity. American companies are taking their money back home due to the tax cuts. Volatility has artificially been kept at bay. Returns are low, therefore, a lot of companies are buying back shares: from the Fortune 500, 484 companies have bought back shares. Liquidity is nigh nonexistent if we remove ETFs and robots, with that in mind, the exchange volume is much lower than two decades ago. Due to the buybacks, the number of shares in circulation fell to 1994 levels. In such an environment, a smaller shock, like the unexpected rise of rates or a rise of leverage can cause a huge chaos in the markets. The economy may remain stable, but there is a huge storm coming to the stock markets, whether it will arrive in an hour or in a year still remains to be seen - the expert believes.
• László Somlai, CEO of Erste’s private banking division says he still believes in stock markets, since stocks are the only asset class which generate some return to investors. While stocks are not cheap, they are not extremely expensive either; corporate profits are rising, which support the price increases nicely. Volatility is normal, it is simply that we got used to not having to deal with it in the past few years. Somlai also told the audience that their private bank is experiencing a shift in clients’ generations, whose average age is 70. Most of them, who acquired their wealth during the early ‘90s, intend to transfer their companies to their descendants or sell their shares. Younger clients still are not interested in fintech apps, they entrust their wealth to private banks and try services like Revolut with a minimal amount of cash.
• Bálint Fischer, Head of Banking Innovation at Dorsum, believes there is hardly any room for further price increases in the stock markets, investors are still overly bullish. Volatility is here to stay, some shocks might occur, but he hopes that there is no need to fear a larger collapse. Fischer also sees fantasy in blockchain-products, but whether these can generate value for businesses is a question that still remains to be answered.
• Gabriella Csanak, Senior Banking Advisor of T-Sysems also experienced a shift in generations in the field of private banking. The newest generation not only is tech-savvy, but their mindset is also different: millennials are more demanding and less patient, they are also hungry for information. While this generation is assumed to be lenient and disloyal, the fact is that they make decisions based on a large amount of information and use assistants, such as comparison portals for decision making. When it comes to using tools: this generation relies much more on mobile devices; they intend to solve every process with a click or two, independent of how complex these are. However, robots will not be able to rebalance portfolios or create assessments of their performance, while they can be of assistance in conducting simple buy and sell orders, so that private bankers may have more time to devote to their wealthier clients. Csanak also thinks that blockchain may help certain industries, however we are at a very early stage of development, where most people can hardly even differentiate between blockchain and bitcoin.

• Tags:
• erste,
• t-systems,
• companies,
• dorsum,
• fidelity international,
• bálint fischer,
• istván al-hilal,
• gabriella csanak,
• lászló somlai