Digital Transformation | OTC Derivatives | Structured Products

LPA: robo-advisory is the missing piece of the puzzle to grow the pie

Written by Christopher Garner
Oct 24, 2019

Following Lucht Probst Associates’ (LPA) recent acquisition of Tel Aviv based Modelity Technologies in a strategic move to bolster its capabilities, SRP spoke to Stefan Lucht (pictured), founder and director of the German captech firm, about the plans for the structured products platform, the importance of offering capital markets knowledge alongside automation, and the opportunities arising from the Mifid 2 framework.

“To be able to deliver technology-led innovations and expand the business of one’s clients while ensuring compliance, you need three core components,” says Lucht.

Firstly, to understand the possibilities of technology and the very special and complex world of capital markets. Secondly, you need to hire the smartest guys, who understand and love technology and/or the capital markets. Thirdly, you need to offer your employees a vibrant and global culture, a workplace that allows your business, your team and yourself to thrive.“That’s the reason why we have always been paying attention to Modelity,” he says, adding, “in many ways, they are complementary to what we are doing”.

Lucht notes that when it comes to access to talent, “in Tel Aviv, the situation is completely different to the one in Germany”.

“Tel Aviv, in my opinion, is the new, powerful, vibrant and innovative tech hotspot,” he says. “With this acquisition, we are able to offer technical solutions that enrich our captech Suite even more than we could do ourselves.”

But more importantly, the capital market knowledge the team at Modelity has “is phenomenal”. “These guys do business at eye level with us at the LPA group, and that’s absolutely great – I consider ourselves the market leader in this respect,” says Lucht. “The addition of Modelity to our LPA family is going to turn us into a global player in this area, with full Captech, from bank to bank – our aim is to transform the business of the banks and solve an even bigger problem: the lack of automation. With one single system we are able to offer clients just as much as five to 10 providers combined [can offer].”

Crystal-clear path

The LPA group has defined “a crystal-clear path for its journey”, which has been planned by the management teams of LPA, Motive Partners, Modelity and EffCom for months now.“

We want to expand globally and open more offices – we opened five offices in major financial centers this year,” says Lucht. “But, first of all, we want to create an atmosphere of growth as well as a great workplace people feel comfortable to work in. These are some of the top priorities of our leadership team.”

When it comes group’s product suite, LPA will invest in product development to complete and deploy the latest technology and to capitalize on all new tech trends.“

We aim to become a global player and a pure tech company,” he says. “That’s why Modelity was such a great acquisition, and so was EffCom, which created a great tech solution and enabled us to expand our product portfolio to meet our clients’ needs.”

In a space increasingly crowded, the combination of capabilities and functions is what will differentiate the offering of platforms. “We think that our solution is different,” says Lucht. “I don’t know any platform out there that delivers as many functionalities and tools as ours, but maybe we are not as perceptible on the market as others yet. Our target market is similar to the one of our competitors but the difference is that most of them are tech-only providers, whereas LPA also invests in its capital markets capabilities and knowledge.”

LPA, says Lucht, have a team of 100 consultants, advising banks on products and regulation.“

We’re moving beyond automation,” he says. “The capital markets industry is complex, which is why you have to combine both aspects – software and the human, tech and advisory. What makes us special is that we don’t just offer a technology hub or application.”


Lucht notes that over the last few months regulation is no longer monopolising the market’s agenda, and the “conversations and the focus have shifted towards growth, both at a company level but also at a market level”.

“The bigger the pie gets the better for market participants,” says Lucht. “The market has done its homework to be compliant with new regulations but market players are now anxious to bring down costs and grow their business.”

Lucht sees the challenges that Mifid 2 is bringing to the market as opportunities to find and adapt solutions that are working already to grow the market such as digital advisory tools or robo-advisors.

“It is only natural that, as tools are improved and the market evolves, these tools will also be available to investors in structured products,” says Lucht. “These tools are being integrated within the banks and distributors because of Mifid 2 requirements. There is no reason why these tools cannot be put in the hands of end investors to invest in structured products. This is happening already with advisers and we want to go a step further and develop the same kind of tool for investors.”

Suitability is not a problem as the market is ready to move on to the next stage and there is a business case for robo advisors to include structured products in their allocation/recommendations.

“We have done over 50 Mifid 2-based projects for market players and we know what the regulatory requirements and limitations are with regard to investor protection,” says Lucht. As long as it’s done properly it is a no-brainer. This could also help grow the market, which is what everybody wants. For us, Modelity is adding a piece to the puzzle that was missing and it will put us at the center of the market.”

LPA is creating several tech hubs as a hotspot for its developers to accelerate the development of its product line, and has already been testing and working on using “the power of global tech trends to serve our clients”.

“We are currently running several AI and Deep Search projects,” concludes Lucht. “You will hear about us soon.”

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