Interview

Turning risk assessment into an engaging experience for digital natives

Monday 21 May 2018 11:27 CET | Interview

Risk assessment can be turned into an engaging experience for financial institutions. Gino Wirthensohn, Riskifier, tells us about risk profiling, MiFID II regulations, and investments.

Who is Riskifier for those who do not know it yet? Could you name some of your business partners, services and industries of the target audience?

Riskifier offers investor risk profiling solutions to financial institutions allowing them to address the needs of the digital natives by turning mandatory risk assessment into engaging experience while offering a more efficient process. Our solution combines social media data points with a unique and gamified behavioural finance approach to deliver a bias-free assessment, matching customers with the best suitable products and empower them to make better investment decisions. Our target customers are financial institutions who are offering investment advice or portfolio management to retail investors.

We are a Swiss based Regulatory Technology (regtech) startup. The original idea was created on a hackathon held in 2017, before we joined the F10 accelerator & incubator in Zurich. We completed the program in December 2017, during which we created the prototype of our solution. In addition, we have qualified for two additional short accelerator programs in Frankfurt and Beijing and have been included into the list of top 100 world’s most innovative regtech companies by FINTECH GLOBAL. The core team consists of two co-founders, with a professional background in banking, supported by both internal and external technical experts.

What is risk profiling and why is it an important topic for 2018?

Investment companies providing investment advice or portfolio management have to provide suitable personal recommendations to their clients or have to make suitable investment decisions on behalf of their clients. Such companies are required to understand the risks their customers are willing and able to take. The assessment of suitability is one of the most important obligations for investor protection. The European Securities and Markets Authority (ESMA) is currently working on new guidelines on certain aspects of the suitability requirements under the Markets in Financial Instruments Directive (MiFID II) and has recently closed a consultation session. The final report is being expected in Q2/2018 and investment companies are required to review and update the risk profiling process.

Current risk profiling processes tend to be a lengthy process with biased-self assessment and lacking an engaging user experience. Retail investors can benefit from a state-of-the art profiling processes with a more accurate result empowering better investment decision.

Since there are already several risk profiling companies on the market enabling companies to comply with MiFID II/GDPR, why should a financial institution consider choosing Riskifier’s services and what are the advantages it would bring?

Our main competitor is the existing process which is already in use by investment companies. The Riskifier solution offers additional behavioural and social insights. While you can find other companies offering solutions based on behavioural finance, we help unleashing what really matters the most to the clients by turning likes and preferences into the thematic investment opportunities. This allows tailored theme/impact investment recommendations for the mass market which is currently offered rather to more affluent banking customers. Moreover, we have focused on a user centric solution while regular questionnaires are not offering an engaging user experience.

Are there any specific regulatory rules or policies that cause barriers to innovation or adoption of regtech for financial services? What are some examples of rules or policies having stifled development/adoption and what was the impact (e.g. delay, abandonment of project, economic impact)?

Regulators in various jurisdictions have started to create a more regtech friendly regulatory environment, for example they have started accepting the identification of customers by electronic means. Our experience is that regulations itself are not a blocker for regtech but rather the cautiousness of regulated entities to use innovative technology. It’s always easier to blame a natural personal such as a Compliance Officer or a Relationship Manager for an incident than accepting a systemic failure based on a technology solution. Another challenge for regtech startups is also that regulated companies prefer established businesses with a longer track record as service providers, as failures in regulatory compliance might lead to serious consequences.

Which existing regulatory compliance or regulatory reporting requirements do you feel would most benefit from regtech?

In general, all regulatory required actions which are data driven and manually performed are ideal possibilities for regtech solutions. Reducing human errors, as well as creating opportunities for time and cost saving, are strong drivers to use technology. MiFID II imposes several reporting obligations also towards clients, therefore regtech solutions in these areas are very beneficial for regulated institutions.

Congratulations for your startup pitch at the MoneyLive event in March 2018! Could you please share with our readers what this experience meant for your company, business wise? What advice would you give novice regtech startups who want to make a successful pitch?

Such pitching opportunities are very important events for startups. It’s the perfect opportunity to get connected with the right people in banks and extend the network. One of the biggest challenges is to find in big organisations the person in charge for the decision whether the product of startup might be needed. For regtech it might be not only Compliance or Risk Management but also Innovation Manager or Front Units if the bank customer has a direct touch point with the regtech solution (e.g. risk profiling or certain reports). Making personal contacts helps very much to get further connected with the decision makers. Hence, it is important for a startup to be present on relevant industry events and create such personal contacts. After the pitch we have been approached by representatives of several banks who are keen to know more about our solution and we are now following-up on these opportunities.

Successful pitch is all about making it resonate with the audience - being able to outline and articulate the real pain point of the banks in clear and simple way as well as offer solution to that is a great deal. The attendees must recognise that the described pain point is also a big issue in their own bank, which needs to be fixed. Once you have achieved that, results will not make you wait long.

About Gino Wirthensohn

Gino Wirthensohn is a lawyer who is specialised in Regulatory & Compliance with first-hand experience in the banking industry. Prior founding a regtech startup Gino has worked both for a consulting and audit company as well as directly for banks in different functions in Legal, Compliance and Risk Management.

 


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Keywords: risk profiling, MiFID II regulations, investments, banks, financial institutions, Gino Wirthensohn, Riskifier, regtech, machine learning, artificial intelligence, AI
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