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Editorial - January 2016

Hans-Jürgen BretzkeHans-Jürgen Bretzke
CEO of FinanzAdmin  GmbH

Some of the myths surrounding fintech companies
(German version available here)

“I would go so far as to say that any broker armed with an average customer base and network is better placed than a fintech company on the strength of his or her client contacts alone.”

In this guest contribution, Hans-Jürgen Bretzke, a member of the Board of Directors of the broker pool Fondskonzept, blows away some of the myths surrounding fintech companies.

Fintech companies are currently riding a wave of enthusiasm, but Bretzke remains to be convinced. He believes that these start-ups offer neither innovative technology solutions nor a superior business model. In this guest contribution he argues: “It’s wrong to assume that because people are accustomed to accessing digital content via social media they are equally at home with online financial applications.” His conclusion? Traditional advisers are still in demand, and they need have no fear of fintechs.


Fintech: it’s a term that trips off the tongue with an ease out of all proportion to the alarm it seems to be creating across the sector. Pessimists warn that the apparently unstoppable rise of the fintechs – financial technology companies – is threatening the very survival of traditional financial advisers with their established modus operandi of face-to-face client meetings. That is almost certainly an exaggeration, but what advantage do fintechs really have over more familiar models of financial advice? What, if anything, can traditional advisers learn from them? And are there areas where the traditional adviser wins out? It’s time to blow away the myths and establish a few facts.

Are fintechs offering new products? No. In fact, the opposite is true: fintech companies restrict their offering to a small range of standardised products that do not require a lot of adviser input. So are fintechs cheaper? Again, no, or at least only at first glance. Their preferred option is online contact rather than face-to-face meetings and they work overwhelmingly with passive ETFs. Do fintechs have a bigger client base than traditional financial services advisers, then? Or do their clients offer greater potential? No again. Compared with banks and independent financial advisers, fintechs have tiny client bases – at least at the moment – and they generally appeal to traditional high-volume clients with small profit margins. Are fintechs good at marketing? Definitely: they tap into the zeitgeist by focussing relentlessly on the all-important area of digitisation and by putting costs and service at the heart of their marketing strategy.

So do fintechs actually provide better advice? No, they don’t. Nobody would argue that in purely qualitative terms, an online advice session can ever compete with a face-to-face meeting with an expert adviser. Whether it’s an efficient use of time and cost-effective for every client and adviser to meet face-to-face to discuss every financial product is another matter, and brokers with an intelligent approach will use a combination of online advice and face-to-face meetings. The key elements of the online presence that initially makes the fintech companies look innovative are, in fact, ready and waiting to be used, including electronic signatures, online financial reviews, online completion tools, and comparative instruments.

Copy and adapt

I would go so far as to say that any broker armed with an average customer base and network is better placed than a fintech company on the strength of his or her client contacts alone. Ultimately, what the fintech companies do best is appeal to a clientele that is app-savvy and wants a modern product offering. It’s a competitive advantage that other companies can copy and adapt – and not just other fintechs but established financial service providers as well. The key aspect here is networking and making target group-oriented use of the various marketing channels. Conventional brokers do well to systematically highlight and develop their own strengths and combine them with new approaches to advising clients and managing customer relationships. In practical terms, this means every broker first doing their homework and optimising their business model in line with individual strengths, weaknesses and customer potential, while making full use of the new opportunities offered by technology. First and foremost, the key to success lies in knowing our own clients and tailoring our approach to them.

A number of studies show that the average German is still not happy dealing with financial issues, whether online or offline. It is, therefore, wrong to assume that because people are accustomed to accessing digital content via social media they are equally at home with online financial applications. The existence and use of the relevant app does not improve people’s underlying financial literacy. In fact, there is a risk that over-simplification of complex contexts can result in clients making the wrong decisions. And this is where traditional advisers come into their own: they can use their knowledge and expertise to help their clients make best use of online applications. With their own online presence providing a platform for maintaining visibility, acquiring clients and using innovative online tools, brokers can easily level the playing field compared to fintech companies – or even gain an advantage – at little extra cost.

To sum up, there is no reason to be scared of the fintechs. With the right strategy and the right service providers, independent brokers can now build their own intelligent online platforms and set the stage for their own sustained success in the marketplace.

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