Deutsche Bank Wealth Management intends to add a trading component to its digital offering for Asian and Swiss clients, among other initiatives for 2018.
Thomas Klemm, Frankfurt-based managing director and head of digital and client analytics, says other projects include opening a fintech lab in Singapore and upgrading the firm’s operations to handle paperless client interactions.
These are steps in a three- to four-year program to digitalize the private bank, which includes integrating it more with the retail asset-management business in Germany.
Indeed, technology is enabling the firm to blend services between its retail and its high-net-worth clientele, as well as among its Asian and Western businesses.
From data to digital
Klemm has been with Deutsche Bank for 13 years, serving in different strategy roles. In 2016 he joined the wealth-management arm to lead client analytics, using data to generate insights and service ideas. He reports to Fabrizio Campelli, global head of Deutsche Bank Wealth Management.
He evolved his role into a broader digital function, rather than a more traditional, siloed one within the wealth manager that was originally based around orthodox systems management. The job became one meant to harness ongoing business needs while ensuring the bank remains current in how it works with clients.
“The aim is not to make digital our unique selling proposition,” he told DigFin, “but to make it one of our selling propositions.”
Klemm’s since pursued three tasks: offering clients a good digital experience; integrating that with the daily work of the bank’s relationship managers; and revamping core banking systems to gradually support more digital initiatives.
“The three objectives move in parallel,” Klemm said, although not at the same pace: the e-banking platform, Deutsche Wealth Online, was introduced in Asia in 2017 and will go live in Switzerland this spring, with the U.S. meant to follow.
The bank’s German retail experience, where there is already such an online platform, enabled rapid deployment for the private bank. Now it is taking another page from the retail side to integrate it better with RMs, delivering relevant information and generating client feedback.
Asian client usage has exceeded Klemm’s expectations: “I was surprised by the uptake,” he said, although he declined to specify volumes. He says about 50% of German retail customers now bank online (a high ratio for conservative Germans, he says); Asia private banking isn’t at that level yet, because the service has only been active for eight months, but he predicts it will surpass 50%.
This year’s tech build will focus on going paperless, using the platform to support investment ideas, and to enable trading, starting with cash equities. The bank’s operations department will be busy supporting these initiatives, Klemm adds, which includes harmonizing the back ends the bank uses – vendor Avaloq for its private bank in Asia, Switzerland, Luxembourg and the U.K.; and other systems for the German retail bank and for the U.S. business.
The move to offer cash-equities trading is not just for client convenience: it is also a way to automate the most simple tasks, in order to cut costs.
Private banks are facing fee compression, and the threat of seeing more clients either move assets into passive solutions, or shift more assets away from banks to their family offices.
Tech is an important way for private banks to remain relevant, by customizing portfolios or adding alpha, by providing convenience, and by catering to special client needs. But tech also makes banking more transparent and clients expect it to reduce fees. “Technology reduces margins, so we also need it to cut costs,” he said.
A role for robo
When he began this role, he says the bank didn’t yet have a strategy. If it has one now, it’s to use tech to remain focused on the relationship manager. This includes what can broadly be termed robo-advisory work to support RMs.
“We’re doing a lot on the artificial intelligence side,” he said, such as using A.I. to reduce client attrition and develop suitable product ideas.
Clients like the idea of robo, and their demand spurred the firm, led by its global CIO, Christian Nolting, to review robo-advisory solutions. The retail bank launched one called Robin in December, using exchange-traded funds to invest.
Klemm says robo can play a role in private banking too. It helps with risk management in active mandates and internal portfolio construction. But he says the private bank is not going to replace RMs with a robo advisor. “Active management and active asset selection is superior [to passive via ETFs]. We have house views on sectors, on the big trends, and you can’t reconstruct these in an ETF model.”
“We’ll embrace robo technology,” he said, noting that in two or three years it could be used to provide risk or alpha at even the level of single securities, to help tailor a broader portfolio.
To support these initiatives, the private bank relies on its digital labs for ideas, including as an arena in which it engages with third-party fintechs.
For now, the bank has developed its digital features by itself, but the new online banking platform and the bank’s adoption of more design-led sprints into its strategy sessions mean the bank will be more open to collaboration.
“We’re preparing an open API infrastructure,” Klemm said, in a bid to work more innovatively with third-party fintechs or vendors. The firm intends to open a digital lab in Singapore this year, complementing ones in Berlin, London, Silicon Valley and New York. The Singapore office is also a recognition that Asia provides a higher portion of revenues in wealth management (around 25% of global revenues) than for Deutsche Bank as a whole.
The lab will have a role beyond just wealth management, however. Compliance and know-your-customer requirements are huge costs to all parts of Deutsche Bank that tech could mitigate.
Other initiatives the lab will tackle: development in cutting-edge technologies such as blockchain and A.I.; partnering with prestigious brands, to help the private bank generate client leads; leverage retail-facing tech across the organization; and foster collaboration between the private bank and Deutsche’s investment bankers, who work for wealthy people as company owners.