Robots Challenge Banks in Sweden's $524 Billion Savings Market

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(Bloomberg) -- After being challenged in the mortgage market, Sweden’s biggest banks are fending off a new wave of robots -- this time in investment advice and wealth management.

One of their new rivals is Optise AB, which last year began offering independent savings advice, fund data and tailor-made portfolios to retail investors via a mobile app. The company, which refers to itself as Opti, has branched into wealth management, after attracting interest from wealthier Swedes.

That could be problematic for Sweden’s major banks, because advisory services and private banking have emerged as increasingly important revenue streams in recent years. In Sweden’s fast-growing and profitable mortgage market, entrants such as Enkla and Stabelo are already pressuring prices with new business and funding models.

“There’s no doubt that the traditional banks are under attack on several fronts,” Opti co-Founder and Chief Executive Officer Jonas Hombert said in an interview at the company’s headquarters in Stockholm. “New companies tend to look at the profitable parts, such as asset management and mortgage loans, meaning that the margins of the banks are under attack.”

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Hombert puts the total Swedish market for direct private savings such as equities, occupational pensions and bank accounts at about 4.5 trillion kronor ($524 billion), of which 800 billion kronor is in funds. Opti has high ambitions, targeting a thousand-fold increase in total investments via its app within the next 10 years to 100 billion kronor, which would equal a market share of about 2 percent.

About 5 billion kronor in fund savings are currently monitored via Opti’s app, following about 20,000 downloads. Those will “absolutely at least double” this year, Hombert said.

Some of the biggest Nordic banks are moving into the digital space in tandem with new rivals. Nordea Bank AB launched robo-adviser Nora late last year and Denmark’s Danske Bank A/S has a similar service called June. But there are risks in this new field of business: Danske was recently rapped over the knuckles by the Danish regulator for failing to ensure that June was living up to investor-protection rules.

Bespoke Portfolio

When investing via Opti’s app, customers are asked a set of questions about their personal finances and preferences before being shown easy-to-understand examples of what would happen to three portfolio types in a market slump or a boom. The algorithm then provides a tailor-made suggested fund portfolio with an explanation about the choices it has made.

Opti charges a total of 0.82 percent a year on average, slightly more than the 0.6 percent to 0.7 percent average in the industry. That’s because Opti includes pricier assets in the portfolios to balance risks and it offers all the available Swedish funds, including more expensive ones. It’s independent, as it’s not paid by banks or fund companies, gets no kickbacks for its recommendations and provides no funds of its own.

Opti’s target customers are those who find it hard to get advice from their bank today, or who want a more understandable and more transparent way of choosing funds. One of those groups is women, which Hanna Raftell, chief client officer and head of wealth management, says are under-served by traditional banks despite research showing that women grow their wealth faster than men. Within wealth management, it caters to customers who want a simpler approach to saving.

“The customers I’ve met so far haven’t been very interested in linen table cloths and tickets to Wimbledon,” Raftell said. “They don’t want to pay for that. What they want is a really good product that is easy to use and where they can keep control.”

©2018 Bloomberg L.P.

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