Before the pandemic, the days of the Swiss digital wealth manager seemed numbered. But this year's market gyrations haven't impacted them much, finews.com research shows.

«Investors are technologically agnostic in turbulent times», says Adriano Lucatelli, head of digital wealth manager Descartes Finance. «In highly volatile markets, it doesn't play much of a role if you have an analog mandate at a bank or an investment with a robo-adviser», the fintech pioneer and ex-banker maintains in an interview with finews.ch.

Robo-advisors have clear advantages with their rules-based, emotionless approach. «That can help investors remain on course and not make irrational decisions,» Lucatelli says, expecting that they will become now become increasingly trusted and accepted, particularly if robos achieve good performance as that will raise demand for them.

Completely Written Off

The market's current convulsions offer a real opportunity for a sector that had almost been completely written off in 2019 after several closures. The same thing happened to Swiss smartphone retail savings apps at the end of 2021 and the start of this year. But are this year's increasing interest rates and the Ukraine war really a turning point?

Christian Mathis, Co-founder of investment specialist Basel-based Viac indicated that the impact of Covid-19 has exposed financial markets to larger fluctuations. «After the initial correction in the first phase, we saw increased demand», says Mathis. Now he sees more restraint. «Demand has been slightly below average in this second phase.»

Mobilizing First-time Investors

Fintech Inyova, which focuses on impact investment, has not registered higher levels of portfolio closures since the start of the market correction. «We spend a great deal of time communicating with our impact investors and that pays off when the market fluctuates», says CEO and co-founder Tillmann Lang. All of its impact investors are invested in long-term strategies. «That is why it is important that they do not panic and sell whenever prices collapse.»

According to him, robo-advisors are becoming increasingly popular. «The investment approach can be digitalized and automated. That means that everyone gets a professional strategy without having to invest a large sum. Our digital strategies also mean that you do not need any expertise beforehand. When it comes to shares, over 80 percent of Inyova investors are first-time buyers.»

It is important to make differentiate robos from traditional providers when talking to clients. Viac tries to make the impact of lower costs perceptible through a fee calculator. The difference between a quarter and a half percent can be worth tens of thousands of US dollars when looking at a long-term investment horizon, Mathis indicates.

New Money in Troubled Times

While private banks such as Julius Baer are beginning to see the initial impact of the market declines on their accounts, robo pioneer True Wealth sees little. «We haven't noticed the recent market turbulence, at least not until now», says CEO Felix Niederer. «Portfolio closings are at extremely low levels and sign-ups are still at the levels they have been for the past few weeks and far higher than terminations.» That means that they are getting new money and clients even in these turbulent times.

Niederer says that one of the reasons behind the success is that their portfolios are well diversified across different asset classes and on the average client returns are still strongly positive.

Money Needs a Home

«Robo-advisors are still a niche in Switzerland» Lucatelli emphasizes. «The growth rate is high but it comes from a low base.» But he believes they will become increasingly accepted, particularly with younger clients, who find going to a bank branch «unthinkable».

Lucatelli sees banks only making small steps into the robo business. «They will start with products that can be easily digitalized, such as voluntary pension plans, simple progressive share buying accounts, and fractional trading models.» Private banking is still in the early stages of being digitalized and it is likely that a hybrid model will be the one that proves the most popular.

«It is important for invested money to have a home in the upper segment. Investors want to know who they are dealing with and who is managing their money.»

The Banking Network

Viac head Mathis thinks much the same. «Banks are positioning themselves by their closeness to clients and by optimally deploying their distribution network with client advisors and less by making them obsolete through automated investment.» Digitalization is only a useful instrument in all that. Advisory services should be supported by more efficient processes while offering clients a modern user experience. But if such projects are digitalized without being automated at all, they will stand out. According to the Viac head, they won't save any costs.

Little Innovation

«The financial sector is one of those industries that tries to keep to its business models and is slow to digitalize, although there are exceptions», Inyova says. The largest banks have the most difficulty in being agile, flexible and innovative. «Innovations mostly come from tech-heavy companies and start- or scale- ups», Lang indicates.