MARKET COMMENTARY

Emerging Trends: Technology and Innovation

Technology-based financial services and cyber security are shaping the consumer experience.

12.23.2016 - Lawrence A. Sternkopf, CPA

Advances in technology permeate all aspects of our lives, including how we communicate with one another, how we transact and move money, and how we interact with financial institutions. President and Chief Operating Officer, Lawrence A. Sternkopf, discusses how preferences and expectations are being shaped by these trends.

Extreme connectivity and the rise of technology-based financial services The number of objects being computerized and connected to networks is reaching atmospheric heights. Dubbed the “internet-ofthings,” it is the proliferation of everyday items—from watches, cars and appliances to industrial machinery, airplanes and roads— that are equipped with software to capture and transmit vast amounts of digital information. Gartner, Inc. has estimated that 6.4 billion connected things were in use worldwide in 2016, up 30% from 2015, and will reach 20.8 billion by 2020.1

In the financial world, this connectivity, along with high consumer acceptance of online financial transactions, has led to a rise in technologies that have dramatically changed how consumers interact with their money. This shift has also paved the way for new technology-based business models. Advances that marry such technology with financial solutions, often collectively referred to as Fintech, are creating efficiencies and increasing ease and access for consumers.

Many Fintech business models are designed to provide cost-effective investment solutions to the masses that have been ignored by most investment managers. However, these technologies are opening the doors to many new and different ways of meeting consumers’ financial services needs, across all wealth levels. Such technologies include dynamic financial planning that uses artificial intelligence to adjust plans based on a consumer’s savings and spending patterns. Other examples are platforms that simplify and improve the gathering of client goals, and account aggregation tools that can provide real-time consolidation of client wealth across multiple financial institutions.

Meeting a Higher Bar
At Fiduciary Trust, innovation has always been a common thread in our business planning efforts. We were one of the first wealth management firms to embrace international investing, and to develop a multi-manager advisory platform. Most recently, in our newly renovated headquarters, we have created a technology-enabled, innovative workspace to foster collaboration and creativity.

Technology is an essential component of all innovation, and we are actively working on several key initiatives to capitalize on the Fintech movement. With the assistance of industry experts, we have organized a digital strategy initiative to prioritize our technology investments on those efforts that will deliver the greatest impact to our clients’ experience.

We anticipate gaining access to these new technologies through both strategic partnerships and direct investment in innovative firms.

The Increasing Need for Cyber-Security
With high online usage and connectivity comes an increased risk to information security. The internetof-things means significant amounts of data are being collected about people and their lives. This means a rise in potentially insecure interfaces and heightened risk of unauthorized access. Many of us have experienced some form of email hacking or identity theft, or at least know of someone else who has. Rarely does a week go by without reading about a private or government enterprise that has experienced a computer hack. A focus on the security of computer systems has never been more important.

Our Defensive Mechanisms
As we increase our technology-driven capabilities, ensuring the right safeguards are in place to prevent cyber threats continues to be our first priority. Being part of Franklin Templeton gives us access to tremendous global information security resources, including comprehensive protective and detective controls against cyber threats. These controls are monitored 24 hours a day and 365 days a year. We also regularly perform intrusion tests and ethical hacks (engaging industry experts to attempt to hack our systems) to identify potential areas of weakness.

The security of our systems and our client information is not just the responsibility of our technology professionals. Every employee at Fiduciary Trust receives annual training on corporate policies and procedures for handling, transmitting and storing sensitive data, including use of industry-standard technology to encrypt the information flowing between your computer and our servers. Encryption works by scrambling words and numbers before they travel across the internet so they can’t be read or altered. We also employ a firewall, a combination of hardware and software, to control the information that can pass from the internet into our internal systems and servers. Firewalls enforce a set of rules intended to bar intruders and viruses from gaining entry.

While the security of our computer systems is absolutely essential, we have also developed robust policies, procedures and training programs to identify when our clients’ computers or online identities have been compromised. We have multiple programs in place to validate client identity and instructions prior to executing transactions. These safeguards identify dozens of unauthorized instructions each year.

A Clear Focus
While we constantly strive to innovate and evolve, we hold firmly to a core set of beliefs. In the year ahead, our focus centers on evolving the services we provide to our clients, including broadening our investment platform and enhancing our client experience. Technology advances, alongside a continued focus on information safety, are key elements of this strategy. 

1. Gartner Press Release, Gartner Says 6.4 Billion Connected “Things” Will Be in Use in 2016, Up 30 Percent From 2015, November 10, 2015.

This communication is intended solely to provide general information. The information and opinions stated may change without notice. The information and opinions do not represent a complete analysis of every material fact. Statements of fact have been obtained from sources deemed reliable, but no representation is made as to their completeness or accuracy. The opinions expressed are not intended as individual investment, tax or estate planning advice or as a recommendation of any particular security, strategy or investment product. Please consult your personal advisor to determine whether this information may be appropriate for you. This information is provided solely for insight into our general management philosophy and process. Historical performance does not guarantee future results and results may differ over future time periods.

 




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