9 minute read
Scaling investment heights with Robo-advisory
by meafinance
MEA Finance sits down with Bernd van Linder, CEO, Commercial Bank of Dubai, to talk about the CBD Investr app, the bank’s recently launched Robo-advisory investment solution, on how it is going to enhance customer experience and what differentiates it from other products already on the market
Given that Commercial Bank of Dubai is the first bank in the Gulf region to offer Roboadvisory, would you please tell us more about CBD Investr and what differentiates your newly launched investment solution from other products already on the market?
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What differentiates our investment solution from others is the active monitoring and optimization of your investment portfolio through smart algorithms. In comparison, most traditional advisory apps only offer static model portfolios.
We also believe that CBD Investr will hugely democratize investments. By offering easy access to global portfolios of stocks, bonds and other asset classes, at an entry-level investment of just $500, we expect a large number of customers to start investing and inculcate the habit of savings early to provide for greater wealth and financial freedom in the future.
CBD Investr offers complete transparency in pricing with no hidden fees and is very affordable with an annual management fee of just 1%. There are no lock-in periods and no contractual agreements for monthly or regular investments. Customers have the flexibility to withdraw funds partially or entirely at their convenience with no withdrawal fees.
Customers do not need any prior trading experience or to track and monitor the markets as the app will automatically optimize your portfolio to maximize returns and minimize risks.
We honestly believe CBD Investr will be a game-changer in the investment industry in the region.
– Bernd van Linder
Could you tell us more about your partnership with InvestSuite?
CBD has partnered with InvestSuite, a leading wealthtech company based in Belgium to develop this innovative investment solution. InvestSuite was founded by practitioners in wealth management and investment advisory, which has helped them to design a solution around investors’ requirements. Their team consists of seasoned experts who operate across AI/machine learning, design, human insights and wealth management. This combined expertise and experience has resulted in the design and development of a range of solutions to help financial institutions extend their product range with next-generation tools, in an agile, fast and cost-effective way.
To us, the partnership with InvestSuite is a great example of the synergies that originate when established financial institutions truly cooperate with fintechs. Jointly, we can design solutions that offer the best possible user experience.
What are the actual investment asset classes offered through CBD Investr and how easy is it for customers to start investing with CBD Investr?
CBD Investr offers customers convenient access to globally diversified and personalized portfolios of stocks, bonds and other asset classes using low-cost exchange-traded funds (ETFs). These portfolios are tailored based on a customer’s specific goals, risk appetite and investment time horizon and are actively monitored and optimized based on changing market conditions to deliver the best possible performance over the long term. In addition, since different financial objectives may have different time horizons and different risk appetites, for example, funding children’s education versus retirement planning, CBD Investr provides customers the option to create multiple portfolios based on their diverse needs.
Customers can start investing in a matter of minutes by simply downloading the CBD Investr app, registering using their Emirates ID and answering a few questions to assess their risk profile and create a personalized portfolio. Customers do not need a CBD bank account to fund their portfolios and can make a local transfer from any bank account in the UAE. The best part is that customers can start investing with just $500 and withdraw at any time, without any charges.
How does the Commercial Bank of Dubai plan to advance CBD Investr to enhance customers’ experience and maintain a competitive edge on the market?
As part of the planned enhancements in the next few weeks, the app will offer a virtual portfolio feature that will allow customers to create portfolios and monitor actual performance before investing money. In addition, the app will also introduce a self-investment solution for more experienced investors who want to buy and sell global stocks and ETFs on
Bernd van Linder, CEO, Commercial Bank of Dubai
From left to right: Mark Zanelli, General Manager, Treasury, Asset Management & Global Markets, Dr. Bernd van Linder, Chief Executive Officer, Amit Malhotra, General Manager, Personal Banking Group, Deepak Mehra, Head of Investment Solutions
their own. We will continue to enhance the CBD Investr app based on feedback from our customers to provide a worldclass investment solution backed by exceptional customer experience.
In light of the current economic conditions and the general market corrections, downturns, and crashes, how do you expect the Commercial Bank of Dubai and its customers to benefit from CBD Investr?
We feel this is the perfect time to introduce such a product. Customers have begun to realize that taking a speculative approach in the stock market could lead to unfavorable outcomes, especially given the volatile nature of the market. Most customers, unfortunately, do not spend enough time or do not have the knowledge to realize sustained returns on short-term trades. It has been statistically proven that less than 5% of day traders make money. This is where our CBD Investr algorithms help you, as they have been extensively backtested using real market data over the past 10 years and have consistently outperformed market benchmarks over the same period.
It is also important for customers to understand that investments are a longterm proposition and not a ‘get-rich quick’ scheme. You need to stay invested and make sustained investments starting as early as possible to maximize returns. The younger you start, the bigger your nest egg is likely to be.
– Bernd van Linder
What advice would you give to especially the younger audience to help them achieve their financial goals?
The key to achieving one’s financial goals is to start young, add regularly, and remain invested. Sticking to this will ensure the highest level of certainty of meeting one’s future financial objectives. Unfortunately, many young people get caught up trying to keep up with the Joneses or spend on material objects and projecting a good life on social media rather than planning for the future. The ultimate goal for every individual should be to achieve financial freedom at the earliest and that can be achieved by regularly investing from an early age and letting time do its magic. By staying invested over a long period, you benefit from the concept of compounding returns – when your money starts working hard for you. Youngsters should follow the principle of ‘Pay yourself first” which essentially means that you diligently set aside a fixed amount to save and invest every month before you start spending, rather than spend first and save whatever remains. I would also urge youngsters to follow the 50/30/20 budget rule popularized by US Senator Elizabeth Warren, which recommends you allocate to 50% of your income to essential expenses such as housing, transportation and groceries; 30% of your income to wants or discretionary
spending; and 20% of your income to savings.
Can you tell us more about the back-testing of data?
CBD Investr algorithms have been extensively backtested using real market data over the past 10 years and have consistently outperformed market benchmarks over the same period. The High Growth portfolio, which allocates 100% of the investment to equities, has returned over 12% per annum on average over the past 10 years. The average annual performance of the four risk profiles between 2011-2020 are: conservative 4.9%, balanced 8.2%, growth 11.3%, high Growth –12.2%. These returns evidence a strong performance, which will help customers get maximum returns.
It is also important to highlight that if you look at the past data, even in the best performing years, markets crash at some point in time and eventually recover. Through the back-tested data, we have empirical evidence that when markets fall, the CBD Investr portfolios tend to fall less and when markets rise, the algorithms try to capitalize on the same and capture the full returns.
Over time, markets keep changing and what’s performing today, might not perform tomorrow. Hence CBD Investr portfolios are actively monitored daily, and the smart algorithms reallocate underlying assets, when required, to optimize performance. While the ups and downs of the market cannot be avoided when we seek marketlinked returns, the CBD Investr algorithm is programmed to minimize volatility, which in the long run ensures higher performance.
What is the Commercial Bank of Dubai’s current position in the market? And how do you expect CBD Investr to advance your asset management services and products?
CBD has taken the lead as the first bank in the region by launching this innovative Robo-advisory investment app. By providing customers with easy access to globally diversified and personalized portfolios of stocks, bonds and other asset classes, at a low investment entry-level, we feel we will attract a large number of new investment customers and significantly help grow the banks’ asset portfolio. Given the uniqueness of our offering and since CBD Investr is open to all UAE residents and customers do not need a CBD account to start investing, we are confident that we will attract new bank customers through CBD Investr. Subsequently, we will offer these new clients other products such as credit cards, loans, mortgages, etc.
– Bernd van Linder
What are your views on digital financial advisories solutions and the role they play in managing investment portfolios? Do you think Robo-advising is the next big thing in fintech? And how do you envision wealth management in the next decade?
Digital technology, in general, has taken the financial services industry by storm and continues to drive waves of disruption that have fundamentally changed how financial services, including investments, are provided and consumed.
While there is a wide range of technology trends impacting the financial industry from blockchain to artificial intelligence, I think Robo-advisory solutions will be one of the main drivers in this financial disruption. It is already a trillion-dollar industry in the West and is growing significantly and this trend will also take hold in the region.
COVID-19 has permanently changed many industries around the world and the wealth management industry is no exception. Firms that continue to improve their digital offerings will earn their place to compete in the market, whilst those who do not will be rendered obsolete. A client-centric, advice-oriented model will form the backbone of digitalization for wealth managers looking to thrive shortly. A hybrid strategy that combines automation with a human touch will ensure greater success and lead to enhanced customer satisfaction.
