Traditionally, wealth management has been a human-based professional service that provides financial and investment advice to clients of high-net-worth and ultra-net-worth category. Since the wealth management industry is made lucrative due to its one set fee charged to clients; despite the implementation of innovative technology, investment advice is largely still available to the wealthy and closed off to others. However, assets available to the well-off are becoming more accessible to non-wealthy clients, too.
Wealth management meets technology
The entire financial services industry has been shaken by the technological revolution, which in turn, has shaped the world. Wealth management in 2020 is no exception to this trend. Fintech has reinvented the landscape of investment management by incorporating Big Data, Artificial Intelligence and machine learning to optimise portfolios, mitigate risks and evaluate investment opportunities.
Fintech companies have become adaptive and attentive to the needs of the new generation of investors. Millennials demand, on the whole, easy, precise and flexible access to information on all aspects of their lives. It’s been found that affluent millennials are becoming increasingly comfortable using technology to manage their money. Mobile apps, Robo-advisers and AI tools provide a greater degree of control than traditional financial management methods.
Technology in action: Managing investments with intelligence
The emergence of fintech has revolutionised, improved and automated the delivery of financial services. Global investments in financial technology businesses have surpassed $100 billion over the past decade.
The proliferation of artificial intelligence has transformed the way financial advisors interact with their clients. The industry has long since been anticipating the disruption of the financial advisor model. The 80s and 90s gave way to online trading and the 21st century brings us Robo-advisers – i.e. the computer-generated investment platform that provide augmented, algorithm-driven financial planning services with little human input. Global assets under management by Robo-investors as of 2020 were nearly $1.1 trillion – and are expected to grow at an annual rate of 25.6% (Statista).
Typically, a Robo-adviser collects financial data from individuals through some form of survey and uses the information to offer advice and automatically invest client assets. The best of these automated services offer easy account setups, goal planning, portfolio management, security features, and of course, low fees.
Wealth management apps
Mobile portfolio management apps can provide information and the necessary tools to manage your investments from workplace pensions to ISA’s and personal capital. Many apps can sync with your existing accounts – completely free.
ARQ, for example, uses AI to connect investments and generate data to provide users with actionable insights into how their portfolios are performing. They’re dedicated to transparency by providing scores on what’s actually considered to be a good annual performance and whether the fees their users are paying are too high. Unbiased analytics display a number of metrics to show the value of investments relative to others.
Wealthsimple, founded in 2017, offers an unambiguous three-tier investment strategy depending on a user’s ‘risk profile’- conservative, balanced or growth. The premise behind Wealthsimple is to invest your money across the entire stock market; as opposed to a sole company’s stock, to induce a long-term practical investment strategy.
Setting up your Wealthsimple account on the app is simple. Fill in the form, select your risk and add the amount you’d like to invest. The algorithm processes your data and you’ll be presented with a portfolio and personalised dashboard illustrating how stocks are performing in real-time.
For the more visual investor, Personal Capital is an app that lets you track your budget and investments by displaying graphs by asset class or investment account – making them easy to read, track and manage your portfolio. The interface is incredibly intuitive and the visuals reactive on laptop, tablet, desktop and mobile.
Whilst there is more to say about the budgeting functions of other apps, Personal Capital serves primarily as a financial aggregator – bringing together all of your accounts on a single platform. The tool starts by determining your risk tolerance, goals and timeframe and generates a portfolio by investing across multiple asset classes for diversification. It should be said that the high fees of 0.89% are offset by Personal Capitals close-to-human investment management service.
Wealth management firms embrace technology
The wealth management firms who actively embrace financial technology tools – whilst maintaining their human input in helping investors navigate the increasingly complex financial infrastructure – have been found to be more likely to grow.
45% of wealth managers said that financial information from technology and data analysis using AI help them refine the advice they give to clients (PwC). 36% agreed that their clients will be able to see their investments clearly with AI.
B2B platform Cred, embraces AI to change the way financial institutions acquire and engage clients in investment advisory. The Barclay-based company helps financial institutions increase conversion rates, engagement and Assets Under Management. Wealth management firms using Cred’s data platform helps them utilise their client data to build relationships and offer the right financial products at the right time – increasing efficiencies for the firm and individual clients.
AdviceRobo is a software developed to assist wealth managers by providing predictive risk services using AI to generate behavioural data.
They help financial institutions by providing psychographic credit scores measuring financial attitudes, motivations and behaviour of people through online interviews. Detailed reports give wealth managers deeper insight into their client’s financial health – allowing them to optimise their client’s portfolios.
The accumulation of Big Data means that the pool of client information available to wealth managers is constantly increasing – meaning there is always room for optimising advice.
Morgan Stanley Online allows client accounts to be accessed via CRM which can be seamlessly fed into multiple financial planning software – which can be viewed by advisors and clients alike.
Technology has warmly welcomed the evaluation of ‘what-if’ scenarios. High net worth individuals can easily use Morgan Stanley Online to see the direct impact of or feasibility of spending – without consultation. A user’s spending and investment decisions are connected to their advisor – who will be alerted when a client is making an inquiry.
8 out of 10 wealth management executives have regarded technology as a significant factor in gaining market share (Deloitte). The future of investment management is largely reliant on the development of technology. Innovations in fintech have freed advisors from mundane tasks so they can spend more time providing specific insights based on individual customers.
Technology clearly has a role to play in the communication processes between clients and advisers, the way investors manage and track their portfolios, as well as the way data, is both collected and used. All of which continues to shape the way we manage investments.