PART I: Interview with Kim Y. Muehl about Bionic Wealth
December 15, 2021
Even in the financial sector, known to be traditional and conservative, technology plays a key role in its innovation. Our partner, but also Germany's first ambassador for purposeful work and meaningful digitization, Kim Y. Muehl has recently published his book “Bionic Wealth”. Discover what the financial industry can learn from nature and how we can transfer that knowledge to the digital age.
In your latest publication, “Bionic Wealth”, you examine the application of bionics in the financial sector. What is bionic wealth about? And how can it improve the financial industry?
Bionic-related research deals with the transfer of natural phenomena to the technical, technological, and organizational challenges of our time. The focus is on observing, deciphering, and transferring biological concepts to engineering and technology as well as to processes and organizational forms.
Most people probably have heard of implants and prostheses or water-repellent clothing regarding “bionics”. However, the field is much older and wide, dating back all the way to the first tools created by humanity.
"It's high time we asked ourselves: What can the financial industry learn from nature and how can we transfer this knowledge to the digital age?"
In Bionic Wealth, I argue that bionics has arrived in finance, enabling us to create superior financial services and portfolios with the help of technology and evolutionary algorithms, among other things. In this regard, Bionic wealth is used as an umbrella term for a variety of possibilities that the interdisciplinary research field of bionics, has to offer for the financial industry: Bionic Advisory, Bionic Portfolio Management, Bionic Leadership and Bionic Innovation:
1. Bionic Advisory combines personalized advice with automated background processes. In simple terms, Bionic Advisors act as intermediaries and interpreters between investors and Asset Management/Robo Advisors: Together with their clients, they translate the clients financial goals, values and fitness factors (asset class preferences, desired return, risk tolerance/volatility, Sharpe Ratio, switching preferences, etc.) into parameters that are then translated into investment strategies by state-of-the-art technologies. In this sense, Bionic Advisors succeed in using digital technologies and data-driven customer relationship management systems (CRM) to fully focus on the interpersonal client relationship, while in the background a smart digital machinery ensures holistic client support.
The focus is always on the personal interpersonal relationship. It represents the basis of trust for cooperation and can take place both analogously and digitally. Enhanced by technology, human service is thus able to support customers in all financial decisions quickly, flexibly and individually, but also personally and empathically. This fundamentally changes the usually linear advisory process: Instead of developing financial products and investment strategies in a quiet closet and then "pushing" them, Bionic Advisors enter into a partnership with their customers based on dialog, interaction, transparency and trust.
2. Bionic Portfolio Management facilitates the perks of big data analytics tools, artificial intelligence and evolutionary algorithms in an open and highly interconnected ecosystem to master the increasing complexity in the market and develop superior portfolio management methods and strategies.
3. Bionic Leadership builds up on the idea of modeling natural organizational models and (self-)leadership principles, in order to organize teams’ spheres of influence in an agile, empathetic, flexible, and appreciative manner, while each member can unleash their full potential and achieve better results in less time.
Bionic Innovation Management applies bionic innovation approaches to develop innovative products and disruptive business models.
What led you to write a book on this topic?
I am fascinated by the implications and changes brought about by the digital transformation. At the same time, I felt that many professionals in the financial industry fear for their jobs as automation proceeds.
However, fear is almost never a good driver for change. From my former work at an international FinTech service provider for NextGen private banking solutions, I know firsthand the challenges, trends, and opportunities in the global financial sector. In my research, I noticed a large gap between easily digestible literature and highly specialized content on the digital (r)evolution of finance. I sincerely felt that many people in the industry could profit from the literature that explains the most important terms, technologies, and developments in a holistic yet easy-to-understand manner. Hence, the idea for my study series was born.
As to why I chose to write about bionic wealth / bionic advisory is an entirely different story: During my research on the future of private banking, asset, and wealth management I concluded that traditional wealth management discriminates against large segments of society based on the amount of their freely available capital. While fully digital robo-advisors grant comparatively more people affordable access to capital markets, they sacrifice important interpersonal values in return. This is because while digital advisory processes can win sympathy points, empathy, and trust (in terms of client relationships) become the biggest challenge of digital advisory.
So, the trade-off here is automation and scalability versus empathy and trust. Both approaches have their justification and target group on the market. But between "digital-first" and "old school concierge finance" lies a whole spectrum of approaches that, in my opinion, enable more holistic asset management and more relevant customer interactions.
Kim Y. Muehl is Germany's first ambassador for purposeful work and meaningful digitization. The former Head of Research & Business Development Europe of a globally operating FinTech-provider is actively involved with the digital transformation and shares his expertise as an author, consultant, and coach. In 2020/21 he published a series of meta-studies on the digital (r)evolution in the German financial sector.