Data and analytics represent one of the crucial ingredients of Wealth Management, not only in Switzerland. There is an increasing awareness that data is a key differentiate, Carmine Cammarota, Country Head Switzerland, Principal at Prometeia, writes. 

By Carmine Cammarota, Country Head Switzerland, Prometeia

It enables the improvement of client experience and the quality of financial advice allowing relationship managers to give well-founded investment recommendations about a wider range of products.

The key role of data - and risk analytics in particular – is put even more at the forefront by the new investor protection requirements: relationship managers need to rely on sound and high-quality data and analytics to measure, among other things, the risk, complexity and time horizon of investment products and communicate investment ideas efficiently to their clients.

Extensive Experience

However, although most Swiss Wealth Managers are developing advisor analytics capabilities, they are still struggling with internal and external obstacles. Most of the time existing data ecosystems are not efficient, and data procurement processes are far from optimal, at least in some of the economic, legal, organizational and technological respects. Also, budgeting and cost reduction policies tend to keep an eye on third-party spending, of which market data accounts for a significant part.

Prometeia, with its extensive experience in Wealth Risk Management and risk data provision, has been helping its clients to simplify and lower the costs of financial product analytics for over 20 years.

Variety of Risk Measures

These risk indicators are specifically designed to support investor protection models and, more generally, the whole advisory process. The data feed, catered to each client’s needs, can include raw and processed market data and analytics, product classifications, breakdowns and a variety of risk measures covering:

  • market risk (VaR, CVaR, volatility, etc.)
  • credit risk (Expected loss, Unexpected loss, probability of default, etc.) and
  • liquidity risk (Liquidity risk indicator, Minimum holding period)
  • aggregate indicators like the PRC (Product Risk Classification) and SRI (Synthetic Risk Indicator)

The data feed covers all types of instruments, from the simplest to the most complex, including structured products and derivatives with complex and non-linear payoffs; the underlying methodological approach relies on sound and cutting-edge methodologies that reflect the risk management best practices and leverage Prometeia’s 20+ year experience in supporting a great variety of financial intermediaries in the domestic and international markets.

Client's Knowledge

The measures that we have to adapt to the transition to the new framework and ensure full compliance with regulations are numerous and complex.

Wealth managers have to accurately consider the client's knowledge and experience, investment objectives, financial situation and risk tolerance and evaluate them against the characteristics of investment products not only as a stand-alone investment but also in the context of the client portfolio. Wealth managers have also to mitigate risks while dealing with prospects and clients who have domicile abroad.

Challenge as an Opportunity

This is not an easy job. If large and well-established financial institutions find it challenging to upgrade their advisory models to meet the new requirements, the task may turn out to be even harder for the mid and smaller-sized banks, external asset managers and independent advisors.

However, every challenge is an opportunity and this is especially true whenever there is a chance to build trust with clients. Implementing suitability checks ensures that recommendations are catered to the client-specific situation and needs and, therefore, represents an opportunity for Wealth Managers to demonstrate how they advocate for their customers. Clients that trust their advisors are likely to be very satisfied and recommend their advisor to someone else, thus helping increase the client base, reputation and, ultimately, revenues.

Unique Value Proposition

With its unique value proposition, Prometeia covers both the data procurement i.e. ensuring the availability of market data and financial analytics of investment products that are necessary to perform appropriateness and suitability checks – and technology – i.e. adopting digital tools to consistently perform those checks at scale. In addition, with the inclusion of cross-border suitability and tax optimization controls into the software, wealth managers have the technology in place and they can fully focus on delivering excellent service to their clients. It's a matter of consistency.

Environmental, Social and Governance. Non-financial factors like sustainability will increasingly influence investor’s allocation decisions and within the next 5 years, ESG assets in the world will reach 50 percent of total assets.

Expanded Offer

Prometeia has extended its offering to include ESG analytics, providing ESG score of manufacturers and investment products as a means to support the advisory process, especially with regard to:

  • product governance: inclusion of responsible investing as a driver to evaluate cost/benefit of recommendations
  • product catalog management: fine-tuning of commercial lists based on ESG criteria
  • client reporting

Both the risk indicators and the ESG scores are fully integrated within Prometeia’s Wealth Management PFTPro software platform; this allows Prometeia to offer a complete advisory process taking in consideration financial factors (risk) and non-financial factors (sustainability) into the client portfolio analysis and investment proposition.