Felix Niederer is founder and managing director of robo-advisory firm True Wealth. In this interview with moneyland.ch, Niederer shares his outlook on the future of digital wealth management.
Our world is becoming more and more digital. But the bulk of wealth is still managed by conventional wealth managers. Why is that the case, in your opinion?
Felix Niederer: Disruption is a process. Much like computing power tends to multiply as per Moore’s Law, the market for digital wealth management expected to double every 12 to 24 months. But this market started from scratch just a few years ago. Robo advisors have only been around for several years. Many people don’t even know about this option for investing.
How important is personal contact with customers, in your opinion? Will personal contact become less important in the future?
The better the user interaction experience with digital wealth management services becomes, the greater their appeal to customers will be. An increasing portion of investors prefer online solutions with constant access to their personal investment strategies and interactive performance reports.
In the event that investors have questions, we also provide a solid customer support service. However, we aim to make solutions intuitive and self-explanatory. We pass the cost advantage created by this streamlined process on to our customers, which results in a better investment experience over the long term.
How far is the Swiss wealth management sector in terms of digitization?
Switzerland has traditionally been the market leader in wealth management. It is surprising then, that many banks have only just begun to adopt digital wealth management solutions.
Implementing wealth management for a digital world in a simple and intuitive way is not as easy as it may seem. Many banks have already tried and failed. We believe that our focus on digital wealth management gives us an advantage.
What are the key benefits of digital solutions over conventional banking?
The primary benefits are scientifically-founded wealth management, the ability to access and modify investment strategies and interactive reporting. You can get an overview of your investments at any time, and also get detailed, transparent performance breakdowns.
The time saved by being able to create a personalized investment strategy on your own without a sales representative is a major benefit. But the lower costs also play an important role in long term satisfaction with investment results.
Can investors expect higher returns from digital solutions as opposed to conventional wealth management?
Returns before deducting costs are similar to those achieved by conventional wealth management, assuming both follow the same rules. But the lower costs of digital wealth management mean that it offers a clear advantage in terms of actual returns after deducting costs.
Thanks to the lower costs, digital wealth management has the potential to deliver higher performance over the long term because there is more remaining capital to reinvest.
Digitization has enabled foreign financial services providers like Revolut and TransferWise to compete directly for the Swiss market. Can we expect to see the same thing happen in the robo advisor market?
In my opinion, the Swiss market is a priority for foreign robo-advisory services. For one thing, it is a small market. Switzerland is also generally considered to be overbanked. But as a basic rule, competition is healthy and benefits consumers.
Security is the most important factor. For this reason, we hold customer assets in a Swiss custodian bank and only allowing withdrawals to bank accounts which are in the customer’s name.
There are now more than a dozen robo-advisory services available to Swiss investors. How does True Wealth stand out?
Our model provides a high level of personalization for individual investors while remaining clear and intuitive. Our customers appreciate that. Thanks to our scalable approach, we have the lowest costs of any Swiss robo advisor.
The Glarner Kantonalbank recently launched its robo advisor. How many service providers can the Swiss market support?
Consolidation is the norm in technology-driven environments. It probably does not make sense for each bank to build and maintain its own robo-advisory solution. The investment required to stay at the cutting edge technologically should not be underestimated.
For that reason, we offer our investment technology to other financial services providers. Banks like the BLKB and Regiobank Solothurn already use our robo-advisory solution.
In your opinion, how long will it be before digital wealth managers have a bigger market share than conventional wealth managers? Where do you see True Wealth in 5 years?
I do not own a crystal ball, but I would be amazed if the market does not catch on to the advantages of digital wealth management within the next 5 years. But even photography took several years to move from film to digital.
October 2019
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