Artificial Intelligence and Digitization as the main themes in the coming decade - Vitali Butbaev, Saxo Bank

Last year Saxo Bank celebrated another anniversary of its presence in Central and Eastern Europe. We talked about changes in the company and on the market in general as well as future challenges with Vitaliy Butbaev, president of Saxo Bank responsible for the Central and Eastern Europe market.

Check it out: Over 40 instruments in the Saxo Bank offer

How do you assess the last 10 years of Saxo Bank's operations in our region?

Vitali Butbaev: Our first step was to strengthen the brand and presence as the preferred choice among traders. We have successfully implemented this plan - starting from almost zero position, Saxo has become an attractive and successful bank. The scope of operations of the regional headquarters of Saxo Bank in Prague has also changed drastically - at first we focused only on the Czech and Slovak market; Currently, our activity covers the whole of Central and Eastern Europe, including various countries, languages, cultures and markets. The Saxo team in the Czech Republic has grown almost tenfold - from 6 employees we have reached 50 speaking 20 different languages.

In addition, over the past 10 years, traders and investors have become more sophisticated, both in terms of trading a variety of assets and in terms of their appetite for international stocks and funds. Thanks to over 40 products offered on our platform, we were able to cope with this evolution on the market.

You mentioned strengthening the brand in Central and Eastern Europe - was it also associated with building a specific investment market, given that the region was definitely lagging behind in relation to the West?

Yes, when we entered the market, the opportunity to invest through online platforms did not exist, and because traders were not used to it, they behaved skeptically, cautiously and did not understand the benefits of online transactions. However, we were consistent in educating customers and promoting the benefits associated with our platform, including greater transparency, more attractive prices, faster transactions and a higher level of security due to transactions through a bank regulated in many jurisdictions.

Another important aspect was the opportunity to invest on domestic and international markets and in various asset classes in one account. For the client, it was simply a better experience to facilitate asset management. Therefore, the Central and Eastern European market is much more mature today than it was 10 years ago and this change in general had a positive impact on investors.

What competitive advantage can you offer your clients?

In my opinion, this is not one aspect, but rather a whole package of possibilities. We created the first online trading platform in 1998, when many people were still skeptical about the novelty called "Internet". We made the right decision and today we have 20 years of experience in developing trading platforms, products and services. The ability to invest in more than 40 products - from listed funds, stocks, commodities to derivatives and currencies - via one platform is quite unique. In addition, you can trade with Saxo from any device as investment opportunities arise all the time and speed of execution is crucial, allowing clients to trade anytime and anywhere.

A competitive and transparent price is also a very important element. Too many investors pay too much for the poorer quality services offered by traditional banks. In our opinion, competitive prices and access to the best platforms and services on the market need not be mutually exclusive. Over the past 10 years we have proved that you can have both.

As far as we know, transparency and compliance with regulations is very important to Saxo. Perhaps the most important regulation was introduced by the European Securities and Markets Authority (ESMA) - how did it affect your business and the market?

We were one of the few financial institutions that welcomed ESMA regulations. In our opinion, the actions taken by ESMA were fair and proportionate, and consistent, harmonized regulations at European level are beneficial to customers and the industry as a whole.

Saxo Bank has already made a strategic decision not to compete with leverage, so we were in a good position to maintain and develop business in the new regulatory environment. The more leverage you use to invest, the more risk you take that can seriously harm the capital of non-professional traders. As I said, we think that both customers and the entire industry have benefited from the introduction of ESMA, and thus everyone is in a winning position.

Be sure to read: ESMA's intervention expired on August 1, 2019. What's next?

So you think that regulations directed at investors and traders, imposing certain restrictions, are beneficial, because some of them would be willing to take greater risks, what would they regret later?

Risk taking is still possible. This is an essential feature of transactions and investments. However, this should be associated with responsibility. Regulations are now much more sensible and make a distinction between retail and professional clients. if professional client is able to prove that he has the required knowledge and experience, can use leverage to a much greater extent and take greater risk than a retail client. This segmentation and approach to the market is beneficial to customers - and for us it simply means common sense. Unfortunately, I know from experience that many beginner traders are not quite able to manage risk. This leads to stressful situations and losses.

If we look at current financial markets, given the level of volatility and uncertainty, there are many opportunities for traders, but perhaps also investors should conclude transactions using a wide variety of assets? In your opinion, what are the most important market issues on which investors and traders should focus?

Saxo Bank offers beneficial solutions for both traders and investors. The first group - traders - usually uses more active trading strategies and prefers personal transactions, while investors may personally conclude certain transactions, but they tend to be solutions that are managed by someone else. Our investment portfolios, which are managed by experts such as BlackRock, Morningstar or Nasdaq, enjoy great interest of this group. Managed portfolios are digitally balanced to adapt to changing market conditions and constantly strive to generate the highest return in relation to the level of risk taken, so investors do not have to actively search for information on current investment issues.

Although volatility is very low in some markets, they still offer many opportunities for more active traders and investors. So you should watch these markets. Of course, this can be done in different ways. The section is becoming more and more popular on our platform "Market signals", using artificial intelligence to scan markets - in many asset classes - for new investment inspirations. Thanks to technical analysis tools, it is possible to scan markets and identify investment concepts along with suggested levels of minimizing losses and realizing profits.

Is any of these groups more important to Saxo?

No - I believe we have reached the stage where we can confidently say that we offer good solutions for both more active traders and investors - clients can choose how they want to use Saxo Bank's services, and our resources and experience are at their disposal.

Compared to the situation 10 years ago, the biggest difference is the popularity of cheap investments and listed funds. This is really a key issue for the investment market - thousands of customers are shifting their savings from private banking services in traditional banks to ETF portfolios, which they can manage in person or through our investment portfolios. More and more investors are beginning to realize that annual savings of 1-1,5%, obtained by moving away from outdated solutions, accumulate in the long term and generate significant additional capital.

This is the reason for the influx of clients using our investment portfolios. Compared to traditional wealth management solutions, the price is lower and the customer still has the experience of the world's largest and most reputable asset managers. In 2019, our low-risk defensive investment portfolio had a return of 10,2%, while our high-risk investment portfolio was 32,9%, net of costs.

A separate and very interesting trend is investing in companies that meet ESG standards (Environmental, Social, Governance - ratings including economic, social and corporate governance issues). More and more Europeans are paying attention to where their money is invested and they prefer ethical actors. This kind of choice doesn't have to come with a low return - our Ethical Choice investment portfolio generated a 2019% return in 19,1.

Can you tell me more about Saxo's investment portfolios and about the potential of this segment of automated platforms?

As I have already mentioned, our investment portfolios automatically adapt investments to clients depending on the occasions appearing on the market. Portfolios is an automated platform managed by experts, thus enabling customers to focus on other areas. Automation also allows us to significantly reduce costs for investors, and interest accumulates over the years, generating a perceptible benefit.

Each portfolio responds to the needs of a different risk appetite, from low to high, and implements an investment strategy tailored to the client's goals and profile. Together with leading asset managers, including BlackRock and Morningstar, we provide investors with long-term asset protection at minimal cost. At the same time, Saxo's investment portfolios also offer more aggressive strategies targeted at active traders.

As part of Saxo's investment portfolios, clients are guaranteed full transparency and control because they can monitor investments around the clock via the platform and withdraw funds at any time without incurring additional costs. Such flexibility is a huge advantage for investors, who often still have to bear the high costs of entering / exiting investments in the private banking sector.

How do you see the next 10 years of Saxo Bank's operations in our region and at the global level?

In the financial sector, artificial intelligence and digitization will definitely gain in importance. Many investors will benefit from these changes because of significantly lower investment costs, but also because the new technologies will allow greater flexibility in achieving their investment goals.

I am convinced that the next 10 years will be even better than the past decade. All relevant trends in the investment environment correspond to our position and as more and more people take control and play a greater role in managing their financial future, the demand for trusted platforms will only increase.

Vitali Butbaev, president of Saxo Bank responsible for the Central and Eastern Europe market

From 2001, he was associated with Saxo Bankwhere he held managerial positions, incl. in sales structures. He participated in establishing many branches of Saxo Bank. In 2016, he left Saxo Bank to focus on the implementation of other projects, including the Presidents Institute or his own start-up - Velstand Capital. In 2016, he obtained the MBA TRIUM title as part of a program co-created by New York University Stern School of Business, London School of Economics and HEC Paris. This program took second place in the "Financial Times" poll. In 2018, the CEO and founder of Saxo Bank invited him to return and continue cooperation on the development of the Bank's operations in Central and Eastern Europe. Passionate about investments and ETF-based portfolios. A travel enthusiast who loves to discover new countries and cultures.