An award-winning Swiss company called Investment By Objectives (IBO) has developed the Performance Watcher (PW), by collecting data from those managing investment portfolios (private banks, independent financial advisors, asset managers, family offices etc). The objective is two-sided; on the one hand, to offer investors a simple way to analyze, monitor & compare portfolio performance, and on the other hand, to offer the professionals a benchmark and through a transparent process, improve the relationship with the clients and gain trust.
Many banks and asset managers are already on board the Performance Watcher network (see a list below) It is easy to participate and provide the necessary data (from discretionary or non-discretionary mandates). Financial providers simply enter the anonymous daily total asset value of the accounts and the total in and outflows. IBO ensures that there is no “cherry-picking” of the reported results. The data is secure and completely anonymous. IBO only stores statistical data and does not manage any money.
PW has made it easy and simple and is inviting individuals and institutions to join the transparency movement. Digitization brings transparency to every market that it touches, ending information asymmetries and putting the power to decide in the hands of customers. Digitization and transparency go together like horse and cart. That theory is easy, but it is a challenge with something as complex as wealth management. IBO has already done the hard work of gathering, analyzing and standardizing performance data from and for traditional Financial service providers.
Simplicity (derived from expertise – white hair, ex-bankers, traders) is IBO’s focus. Asset managers already measure performance and risk. IBO has developed a data normalization algorithm that makes it easy and visual to do comparisons through a Performance Score and a Risk Score.
By providing daily data to Performance Watcher, Robo Advisors could also gain insights into their performance in comparison to other Robo Advisors at the same Risk level and in comparison to the overall IBO index. These insights can be used to improve performance:
- For discretionary Robo Advisors, the results may lead to improvements through adjustments to the choice of ETFs or the algorithm parameters (e.g. re-balancing).
- For non-discretionary Robo Advisors, the results will offer an invaluable way of comparing the varying strategies employed.
For now, there are no robo-advisors participating in the Performance Watcher. Incumbent private banks, asset managers, and family offices, however, are already on board and reap the benefits. Just this week, there were articles in the press (Bilan) with a 2017 overview of the Performance Watcher results. Currently, there 10,000 portfolios, with numerous risk profiles from close to 300 asset managers that are contributing data towards the construction of three IBO indices. The total value of the assets used to create the indices is approaching 17billion CHF.
This shows that overall the Swiss portfolios did manage to capture the upwards trend of the markets. In each risk category, the Performance Watcher has reported the winner for 2017.
As we speak, the indices are improving as the assets participating are growing. 2017 was clearly a year with historically low volatility (roughly at half the average levels) and it seems reasonable to anticipate that this may not be the case in 2018.
Performance Watcher is growing and with their recent partnership with Avaloq, it will become a no-brainer for all Avaloq core-banking client to feed the anonymous data and use the dynamic transparency to improve services and interact more meaningfully with clients.
PWs client list currently includes:
Banque Cantonale Vaudoise (BCV) l Banque Les Fils Dreyfus & Cie SA l Banque Lombard Odier & Cie SA l Banque Pictet & Cie SA l Banque J. Safra Sarasin SA l EFG International l Gonet & Cie SA l Gonet Bank & Trust Limited l Graubündner Kantonalbank (GKB) l LGT Bank AG l LLB – Liechtensteinische Landesbank AG l Mirabaud & Cie SA l Pictet & Cie (Europe) SA – Luxembourg l Piguet Galland & Cie SA l St.Galler Kantonalbank (SGKB). Allocare AG, Avaloq AG, DAPM – Dynamic Assets & Performance Monitoring SA, Expersoft Systems AG, Finamic Services SA, Teamwork Management SA, Siroc SA, vwd group Switzerland AG
We envision Robo-advisors also taking the leap and participating in this transparency led initiative, to demonstrate to the market that they are not only delivering 5min seamless onboarding and low-cost fees but also risk-adjusted outperformance. If traditional asset managers, banks, and private banks are seeing the value and overcoming the first negative reaction around sharing data (which is anonymous, violates no privacy, and PW guides clients on secure ways of sharing), then why aren’t all the robo-services participating?
Several robo-advisors report on their websites their historical performance but naturally, this is not dynamic, it is a very small sampling of portfolios (maybe cherry-picked), and since it is not standardized it cant be easily compared to alternatives.
Swiss independent asset managers will also be looking to join as PW is offering favorable participation terms to the Swiss association of asset managers.
Efi Pylarinou is a Fintech thought-leader, consultant and investor.
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