Fintech is about empowering financial professionals in wealth, not replacing them.
In this Q&A, Woo Kwong, Co-Head of the Aladdin Wealth Tech business at BlackRock, talks about the evolution of Aladdin and financial technology over the past 20 years, and why it’s important to keep people at the center of asset and wealth management.
What does it mean to be a fintech company in asset and wealth management?
At its core, asset management and wealth management are about helping clients and investors achieve their financial outcomes. Successful firms do this well by making investment decisions based on disciplined and sophisticated analysis of their clients’ goals or liabilities, the market and investing environment, and their clients’ current portfolios and how they are positioned (or not) to achieve their goals. This was why we built Aladdin and ultimately brought it to firms in both the asset and wealth management industries — it’s a technology that helps BlackRock and our clients make better decisions by understanding and managing risks and, therefore, deliver more informed financial outcomes at scale. The mission of any fintech company in the asset or wealth management industry needs to be rooted in this fundamental goal, and I believe that is a key reason why Aladdin has experienced the amount of success it has over the past 20+ years.
What advice would you give to people in fintech just starting out?
FinTech needs to be viewed as a means to an end, and not as an end in of itself. What is the financial problem that the technology is trying to solve? For example, there is a strong psychological and emotional component in our part of the financial services industry that has so far proven to be too difficult and important for technology to completely replace. While services like payments or online trading have been heavily digitized and we’ve seen highly successful FinTechs in this space, we’ve seen many digital-only wealth and investing offerings fall short of expectations.
There is an important aspect of financial services that depends on human interactions and trust. It’s important for fintech companies to understand the psychological and behavioral elements involved and know which parts of the service model technology can help scale and automate, and which parts cannot be completely replaced. Successful fintech companies will let humans focus on what humans do best and let technology do what it does best.
Successful fintech companies will let humans focus on what humans do best and let technology do what it does best.
What is the difference in terms of career opportunities for someone in fintech now, and specifically at BlackRock, versus 20 years ago?
Starting a career in fintech today is much easier. There are so many more opportunities now than there were 20 years ago, in large part due to how much easier it is to take an idea to market today. The technological infrastructure, whether it’s the cloud or APIs, is much more sophisticated and the human and financial capital is more readily available than ever before. The other side of that, however, is how much more difficult it is today for companies to truly differentiate and achieve sustained success. Technology is changing rapidly, and new competitors are constantly entering the market.
This is no different at BlackRock. We are innovating constantly. For example, we brought a brand-new version of our investment management technology, Aladdin, to the wealth industry just four years ago — called Aladdin Wealth today. In order to maintain our edge with new competition entering the wealth space, we must constantly innovate to better serve our clients’ needs.
In the 20 years that Aladdin has been offered as a platform to our clients, what are the biggest changes and innovations you’ve seen? How were those changes driven by, or created in anticipation of client needs? What has remained the same throughout those 20 years?
As the business has grown over the past 20 years, one of the biggest areas of innovation has been in the way we’ve scaled the platform. But scale is not just about handling higher volume or more calculations. More recently, we’ve seen a lot of development around UX and design which has become more important for technology offerings since products like the iPhone came to market and user expectations have radically changed. Consumer technology has led the way over the past decade, but UX and design will be changing B2B enterprise technology significantly over the next 5 years.
In all of this time, however, the constant has been that BlackRock has been a user and a provider of Aladdin. As the largest user of Aladdin, the platform is designed to support and respond to the complexity of BlackRock’s own business. This holds us to a higher discipline, and we pass this benefit to the Aladdin community. We spend a great deal of time and resources ensuring that we have good, clean data as well as meaningful and actionable insights as part of the Aladdin service we offer to our clients.
How did Aladdin Wealth evolve from a hackathon idea to an Aladdin solution?
The idea for Aladdin Wealth came from a need we identified by talking to many clients of the firm in our retail and iShares business. Wealth management firms were asking for the same sophisticated and disciplined analysis and tools used by BlackRock and other institutional Aladdin users to make more informed investment decisions and provide deeper advice for their clients. And they needed the ability to do this at tremendous scale across their entire business. Through the use of new technologies in the Hackathon, BlackRock engineers solved that challenge and developed a working prototype to share with clients. Having something real and demonstrable was an important part of turning the idea into a market-ready offering. After months of feedback from clients, we were convinced of the commercial viability of Aladdin Wealth and officially launched it as a new business in 2016.
YOUR CAREER WITH ALADDIN
How has your career evolved along with the Aladdin platform?
As the breadth of Aladdin has evolved, so too has my understanding of the industry and markets. What began as a risk management tool for primarily domestic fixed income products now covers every major global asset class. My knowledge of these various investment products and global financial markets has greatly increased in that time, and the constant evolution of Aladdin requires that I am always learning more.
The same is true as we entered the wealth management space. My knowledge of this entirely different industry and the nuances that exist from country to country, has grown as we have grown the Aladdin Wealth business. It’s great to be able to see what is similar across global markets, but also what is unique and different. And because wealth is all about the individual investor, learning about each country’s cultures and history and foods/wines have also been a big part of that business and personal journey!
What do you like most about your work with Aladdin?
BlackRock’s purpose, to help more and more people experience financial well-being, is something that really resonates with me. In that context, I enjoy the constant challenges and problem solving that present themselves in this business. It offers a global perspective, and the ways people view investing are continuing to evolve around the world. Equally as enjoyable is working with so many great people throughout BlackRock to try and address these evolving needs.
What excites you most about the future of Aladdin?
I think Aladdin has more opportunity than ever before to help asset and wealth managers make more informed decisions and deliver greater value to their clients through our technology. The events of this year are a key reminder of the risks that exist in the markets, regardless of whether people choose to measure or know those risks, and the importance of technology like Aladdin in managing through those markets. There is still a lot of work to do, but I am very excited about the future of this business.
What are you most proud of in your career?
In addition to being able to execute on the vision of Aladdin Wealth, I am most proud of the work I’ve done to develop talent in my 25+ years at the firm. Fewer things make me prouder than seeing colleagues, including many who started out as analysts, grow into current leaders at the firm. And a lot of the time that hasn’t required me to actually do a lot, but just provide a little bit of perspective, advice, and support when someone is going through a small issue or difficult challenge.
How do you see fintech changing in the next 20 years?
As much as the financial services and fintech space has changed in the past 20 years, this change is only going to accelerate over the next two decades. We are going to see a lot of advancements in technology and business models across the world. We will have to be adaptive to these innovations and changes while staying true to the principles that have brought Aladdin to this point. Namely, our commitment to being a fiduciary to our clients, our constant innovation, a strong foundation of data and orientation to detail, and our business-first approach to technology as a means to an end rather than an end in of itself.