Month: December 2019

What to Expect from Wealth Management Platform in 2020?

Posted on by Valuefy

2020 promises to be a year of fundamental shifts for the Wealth and Asset management industry. The evolving technology landscape and digital transformation of the industry will lead to a number of significant changes in the way that wealth managers operate. Here are some of our predictions for the coming year.

Costs to stay in Business will remain high, Platforms will find new Efficiency

The costs of complying with regulations in the wealth management space will remain high. The growing cost of doing business will put continued pressure on firms to drive up profits. However, competition pressures will lead to lowered fees and cannibalization of the market. In this scenario, wealth management firms will have to invest in technology such as wealth management platform and data to maximize alpha for customers and justify higher management fees.

Passives will become core Investment Channel, Platforms will help Wealth Managers compete

It is predicted that by 2020 close to 35% of assets under management will be pooled into passive investment products such as index funds. ETFs and Mutual Funds will also see steady growth. As investors increasingly invest in passive products, actively managed funds will be under pressure to show a higher alpha. This higher alpha can only be generated if investment decisions are made on hard data that helps wealth managers make quick and reliable judgment calls that can beat the market. The power of terabytes of historical data can be leveraged by wealth managers that use Robo-advisors. These Robo-advisors can give recommendations in real-time and can raise red flags when portfolios are not performing. This will help de-risk investment strategy and help increase the chances of creating value for clients.

Platforms will help Wealth Management Firms improve transparency and gain Client Trust

Clients of today expect transparency in investment decisions. They are no longer happy to rely on Wealth Manager’s decisions alone and need hard data backing up any investment strategy. Wealth Management platform gives wealth managers all the data they need at their fingertips. This means that the chances of making decisions purely on instinct are greatly reduced, this fosters greater trust in the clients. Clients can also use Wealth Management platform to check their portfolio performance at any time 24X7 and ask the Wealth Manager questions proactively instead of waiting for a monthly call or meeting.

Platforms will help meet higher expectations of On-demand Customer Service

Clients who have grown familiar with an ‘app economy’ expect service to be available to them 24X7. In such a scenario, wealth management platform that helps customers get visibility into their portfolio data will give an edge to ‘digitally enabled’ wealth management firms. These platforms also help in automating mundane front office and back-office tasks helping free up manager time to focus on strategy and servicing their customers. This is especially crucial in a climate where over 87% of HNI clients confirm that they switch wealth management firms for lack of satisfactory customer service experience.

Mobile Apps and Customer Portals will become par for the Course

Clients of today are increasingly tech-savvy and need access to their portfolio data on their fingertips. Wealth management platform can no longer be solely facing the wealth manager, they need to have a customer-facing presence both as a portal and as an app. These mobile apps must have key functionalities such as rebalancing, portfolio monitoring, withdrawals, etc so that customers are empowered to make their own decisions. Investing in online platforms and mobile apps should be a top priority for Wealth Management firms as less than 50% of HNWI reported being satisfied with their current online and mobile financial platforms

How AI is Changing the Face of Portfolio Management

Posted on by Valuefy

Over the past decade, the Wealth Management industry has undergone a sea change. There has been an exodus of customers with actively managed portfolios moving into passive funds and investment options. Wealth Management houses that charge a premium for active portfolio management suddenly felt immense pressure to justify their premium fees.

In the midst of this change in investor attitudes, technology has also taken the investing world by storm. Artificial Intelligence, Data, Analytics and more have given the industry an opportunity to create efficient solutions for investors and improve the efficiency of their wealth managers.  In a rush to contain costs to stem bleeding bottom lines, only the firms that adopt tech and undergo a digital transformation will emerge winners.

How does AI help in Portfolio Management?

  • Mode data more accuracy:

Earlier investing decisions were made purely on the basis of speculation on past performance. However, efficiently crunching the data and arriving at the right decision required hours of poring over company records. Now analyzing the fiscal health of a company can be done in minutes, wealth managers can create complex algorithms and weigh in a multitude of variables to support their investment thesis. From past performance, filing, financial reports, industry reports, press releases, social media buzz and more can all be factored in while making an investment decision, vastly improving the accuracy of the decision.

AI has also allowed a wide range of unstructured data to be accounted for in the investment thesis. Data such as digital footprints, credit card data, cookies, store circulation data and a range of other factors can now be quantified and added to investment models to predict the investment outcomes.

  • Automation of cumbersome Middle & Back office tasks:

Artificial intelligence although touted as the enemy of the workforce is far from it, in fact, AI will help complement Middle and Back office workers and help automate ‘minimal value add’ and process-intensive tasks such as trend analysis, report generation, writing macros and more. Tasks such as Customer KYC, background verifications and more can also be easily automated helping the workforce focus more on strategy and research to generate alpha for their clients.

  • Minimizes risks:

AI acts as a defense against fraud as it’s able to monitor transactions and cross-checks it against historical data in real-time. Algorithms can be set up to flag suspicious behaviors based on each Wealth Management firm’s standard operating procedures. Even if there are millions of transactions taking place on a day, AI will easily be able to sift through and flag the ones that need to be inspected.

  • Improves customer service:

Earlier if any client had to receive a report about their portfolio, this would require hours of manual work to compile and gain insights. Today’s advances in Natural Language Processing and pattern analysis means that reports and portfolio management commentary about investor portfolios can be down within seconds and mailed to the client. The best part is that there’s little to no waiting time and the investor can check the status of their investment in minutes.

  • On-demand support:

Customers of today are used to an on-demand economy. In the app-enabled world, everything that the savvy customer of today wants is within reach at the click of a button. This expectation of instantaneous service has seeped over into the wealth management space. However, human wealth managers who are already burdened with long work hours cannot be expected to be available to global clients 24X7. The next best thing, however, is AI, Machine Learning enabled chatbots are now able to respond to common investor queries and handle basic requests such as generating reporting or providing status updates. These chatbots can also be configured to collect as much information is necessary via support chat and email it to the wealth manager’s so that they can take an informed decision and not spend additional time trying to gather the facts from the investors

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