Álvaro Morales, chief strategy officer and co-founder at Flanks, draws from decades in global private banking to reflect on the timeless role of traditional assets in portfolio construction.

He explains how equities, bonds, and cash continue to be at the core of wealth management despite innovation reshaping the instruments around them in a discussion that crosses the boundaries of technology and investment philosophy.

Amid the hype surrounding tokenisation and decentralised finance, Morales brings a more grounded perspective: traditional assets like equities, bonds, and cash still hold enduring value.

They remain, in his words, “the backbone of diversification in a typical modern portfolio and I don’t see this changing any time soon.”

Morales sees firsthand how technology is reshaping wealth management.

But even amid this digital transformation, he argues for a balanced perspective: “Global high-net-worth investors usually hold roughly one-fifth in equities, one-fifth in bonds, and one-fifth in cash,” he explains. The remaining 40% which now includes real estate, private equity, gold, and crypto adds an additional layer of diversification, but does not displace the core.

Tech Should Strengthen, Not Disrupt

The role of innovation, Morales believes, is not to replace these foundational elements but to improve how they are accessed, analysed, and managed.

“Innovation should enhance the core, not replace it,” he notes. He points to Europe’s 64 million open-banking users, a number that has quadrupled since 2020 as a sign of this transformation.

Flanks taps into this trend by enabling real-time access to balance sheet data across institutions. “Technology compresses back-office costs by roughly 30%, and managers can redeploy those savings to improve client returns,” Morales says.

In his view, this is where innovation creates real value, not in the invention of new asset classes, but in making existing ones more transparent, efficient, and actionable.

Rethinking Risk in Familiar Assets

Even traditional assets carry hidden risks. Morales points to 2022 as a wake-up call: “Treasuries fell 13% after a 200-basis-point rate spike their worst year on record yet many investors still do not grasp why their bond portfolios declined.” Duration risk, he emphasises, remains misunderstood.

Another emerging issue is concentration.

“Index funds now hold more than half of US long-term fund assets,” Morales warns. “Liquidity could evaporate, and a sudden exit could overwhelm the market.” In other words, simplicity has its own dangers.

Bonds Are Back But With Nuance

With interest rates rising after years of near-zero yields, fixed income is regaining its allure. “Carry has returned,” Morales says.

“A 10-year Treasury yielding about 4.5% provides enough coupon to cushion moderate rate moves.”

For today’s investor, the question is no longer whether to hold bonds, but where on the yield curve to position. He recommends tools like floating-rate notes and TIPS (Treasury Inflation-Protected Securities) to better manage interest-rate and inflation risk.

Lessons in Liquidity and Quality

The pandemic era served as a critical stress test for portfolio resilience.

Morales believes investors have learned three fundamental lessons: “Keep a liquid shock absorber, favour quality over leverage, and diversify by risk drivers, not just by names.”

In equities, this means blending resilient dividend payers with growth companies. In bonds, pairing short-duration investment-grade credit with inflation-linked or floating-rate paper.

“Hold some cash, T-bills, or gold – assets that can be tapped when liquidity evaporates and rebalance opportunistically around volatility spikes,” he advises.

Regulation as a Strategic Lever

Having worked across jurisdictions as diverse as the US, UK, and Latin America, Morales sees regulation not as a constraint but as a variable to manage strategically.

“Regulation shapes wrappers, not assets,” he says. “The same corporate bond ladder might be packaged as a UCITS ETF in Europe, a 40-Act fund in the US, or a Cayman note for Latin-American families.”

Firms that use technology to streamline compliance, he adds, gain a competitive edge. “Reducing onboarding time from weeks to days is a real advantage,” Morales notes.

The Evolution of Risk Management

As Chairman of the Risk and Audit Committees at Banesco USA, Morales underlines a disciplined approach to risk. “Effective risk management relies on the first, second, and third lines of defence,” he says. “After decades in banking, I respect risk even when it is not apparent. Risk never sleeps.”

Governance is key: “An empowered risk committee with veto power, strict rebalancing bands of ±5%, and quarterly scenario drills with external experts, those are the most important things to put in place.”

Global Clients, Local Preferences

Morales also reflects on his experience managing traditional asset strategies globally, including at Santander Private Banking. “Wrappers vary with tax regimes, but the underlying assets remain the same,” he says. “US investors gravitate toward domestic equities, UK clients pursue broad geographic diversification while retaining a home bias, and Latin-American investors prefer higher-yield sovereign and corporate bonds.”

Technology as a Differentiator

Private banks today may offer similar products, but Morales believes execution separates the best from the rest. “Service quality, execution speed, and after-tax alpha are decisive,” he states.

With data aggregation and workflow automation, firms can streamline manual tasks by up to 70% freeing advisers to focus on strategy. “That’s a big differentiator today, as the next generation of clients demands both personalisation and an ‘online banking like’ experience.”

By consolidating data across global institutions, the platform provides clients and advisers with a “unified 360° view” of assets and liabilities.

“This T+0 transparency allows cash drag, drift, and concentration to be flagged immediately,” Morales explains. “Discussions shift from post-mortem reviews to real-time actions.”

Enhancing Alpha with AI

Flanks is also harnessing AI to do more than automate reporting. “Our AI-powered data enrichment process gives advisors actionable insights that were previously impossible to gain when working with scattered Excel files,” says Morales.

The result: better, faster decisions and potentially enhanced client returns.

Morales offers pragmatic advice for future wealth managers: “Liquidity is never free; 2022 showed that even safe-haven assets can tumble. Markets do not always rise, and black swans are real.”

His approach favours process over prediction: “Trust disciplined processes and sound knowledge over a guru’s predictions. Design for the long term, execute in the short term, and monitor in real time.”

A Role That Endures

Looking to the next decade, Morales remains confident in the dominance of traditional assets.

“They are pillars of the capitalist system, and I expect them to remain at or above 60% of diversified portfolios through 2040,” he says. While tokenisation may reshape infrastructure, “equities and bonds will continue to provide the deepest, safest, and most regulated pools for income and growth.”

Even in a landscape transformed by algorithms and APIs, Morales reminds us that solid fundamentals combined with smart technology remain the bedrock of enduring investment success.