Author: Valuefy

Investor attitudes, behaviours, and expectations dramatically shifted during COVID-19 and transformed the wealth management landscape. But what are the most significant changes for wealth managers to address and how should they respond to ensure the continued success of their business?

Moving Deeper into Digital Wealth Management

Online business has become the norm since COVID-19, and wealth management clients increasingly expect digital engagement. No longer limited to younger investors in the retail market, the digital-first mindset is now commonplace, with older, wealthier investors now increasingly preferring digital engagement for their client onboarding, transaction, and advice needs.

While clients continue to expect a blend of personal and virtual contact with providers, the use of mobile apps, websites and virtual conferencing is overtaking non-digital channels, such as phone calls and in-person meetings. Mobile in particular has come to the fore with investors seeking a convenient, seamless, personalised – and ‘always-on’ – digital experience. 

The Search for Alpha

In their hunt for greater returns, investors are seeking alternative investments, such as hedge funds and private equity, and specialised products, including IPOs, tax-exempt investment, commodities, derivatives, and structured products. In addition, family offices are upping their allocations to direct investment management solutions.

While outsized returns are a focus for investors, so are investment risk mitigation and diversification. This will remain a key objective with persistent geopolitical tensions, continued concerns about climate change and supply chain resilience, ongoing inflationary pressure, growing uncertainty about the efficacy and viability of accommodative monetary policy, and a looming global recession.

Doing Well, and Doing Good

Environmental, Social and Governance (ESG) investing remains firmly on the radar for clients and their advisors. This reflects rising social, business, and investor awareness and activism, a trend that was accelerated by COVID-19.

Investors increasingly consider ESG factors alongside traditional financial metrics to better understand the sustainability risks of their investments. Depending on how closely investors want to align their financial objectives with their values, adopting ESG investing can range from mitigating ESG risks by employing exclusionary frameworks to actively investing in the potential opportunities that ESG can offer. Investors expect providers to be knowledgeable about ESG, incorporate it into their products, provide transparency and metrics to track its performance and embed it in their own wealth management strategy and operations as well.

More with Less

In evaluating their wealth management relationships, clients expect providers to prioritise integrity and ethics and to act in their best interests. This trend intensified during COVID-19 which truly crystallised the importance of enduring, valuable personal relationships with advisors. It’s also being accelerated by regulatory shifts that are driving greater competition and investor protection.

While providers are grappling with the growing expectations for quality in wealth management, they are also facing significant challenges due to price compression. A perfect storm of market and regulatory developments continues to squeeze margins. These developments include the market dislocations of the COVID-19 period – that saw heightened trading and competitive pricing from new entrants – as well as increased account aggregation, greater passive investment, the decline of fee minimums, and continued regulatory efforts to implement fiduciary rules.

With sustained pricing pressure and increasingly demanding clients, wealth managers today are tasked with delivering more with less.

The Future Wealth Manager

As wealth managers confront these new realities, they must assess how well they cater to shifting investor attitudes, behaviours, and expectations. Rising global wealth among affluent individuals and families ensures the sector as a whole is well-positioned for growth. But the success of individual firms depends on how well they serve the changing needs of investors. The most successful providers are reshaping their strategy and operations accordingly and leveraging advanced technology as a key enabler of this transformation. 

By implementing advanced technology, firms can deliver the smooth and intuitive digital wealth management experience that clients demand, provide a wide range of increasingly sophisticated products and services, enhance the efficiency and productivity of their operations, strengthen compliance, integrity and ethics across their organisation, and ultimately deliver better investment ideas with higher returns. 

For example, best-in-class providers are investing in enhanced data management to aggregate and standardise data. This is often across multiple data sets related to custodians, brokers, currencies, and products. They are enhancing the monitoring of portfolio insights for complex portfolios, creating holistic views of assets across these portfolios, and implementing advanced attribution and visualisation capabilities. Increasingly, multiple tasks related to investment policy statements, mandates, model portfolios, and portfolio rebalancing are being automated. Advanced technology is also being leveraged to scale and expand, using open APIs for upward and downward integrations. 

Given a volatile, ambiguous, and cost-constrained business environment, technology platforms can be deployed on the cloud to ensure cost-effectiveness and security, with compliance, built-in for multiple jurisdictions.

This technology-backed, data-driven approach drives differentiation, performance, and success in today’s market. It enables firms to quickly and accurately generate analytics for their key client and stakeholder audiences – including investors, consultants, internal teams, and regulators. Crucially, it delivers improved insights for decision-making to professionals across investment, risk, and relationship management functions. This enhances investment and risk outcomes for clients and competitive advantage and business performance for wealth managers.

Rather than just weathering the storm of change in the industry, ambitious wealth managers can harness it to build a better approach for the future. By leveraging advanced technology, they can deliver better digital client experience, greater operational efficiency and productivity, improved investment decision-making, and superior investment performance.

About Valuefy:

Valuefy is a premier investment technology lab with cutting-edge solutions serving leading financial institutions across the globe. Its Wealth Management Solutions has enabled Wealth Managers globally by providing production-grade investment technology for an uberized customer experience.

Reach out to us today and get a solution that best suits your needs.

Data management is under the spotlight for wealth managers, as clients expect increasingly personalised, digital, and data-driven services. Advisors who master data management can drive value right across their business and achieve a competitive advantage over their rivals. But what are the key challenges in data management and how can wealth managers excel in this area?

Data Management is a Journey in Wealth Management

Wealth management lags behind other sectors, both within financial services and beyond, in its progress along the data management journey.

The journey normally begins when an advisor recognises the essential role of data management in digitising operations and generating insights for organisational and investment decision-making. So the business embarks on a process of improving the value, fidelity, and timeliness of its data.

The process typically progresses from data aggregation and consolidation – where advisors need to connect to data sources, custodians, and other solution providers – to analytics and insights, where they can deliver powerful reporting and investment performance analytics using their data. It culminates when data is fully embedded in business processes and the entire business model is predicated on analytical models.

Challenges Along the Wealth Management Way

Progress along the data management journey can be costly and slow for wealth managers, EAMs, and family offices alike, if not managed correctly. Data used in the investment management solutions must be accurate, complete, and consistent in order to make informed decisions. But complex and fragmented data often straddle a wide range of internal and external sources and span different formats or systems. This can make it difficult to ensure data quality and integrate data into a single, comprehensive view.

Additionally, wealth managers must implement robust data security measures, such as encryption, firewalls, and data backup systems, to protect against cyber-attacks and data breaches and comply with regulations. Data management policies and procedures must be in place to govern who has access to data, how it is stored and used, and how it is protected against theft or misuse. This is essential for maintaining trust and accountability in investment management solutions and ensuring that data is used in an ethical and responsible manner.

Taking the Right Steps

Typically, wealth managers will connect to banks to perform the extract, transform and load (ETL) data integration process – either by connecting directly to the custodian or doing so via a data aggregator. But they need to deploy the right technology and tools to be effective.

At the extract stage, data is gathered from a variety of sources, including internal databases, external providers and client information. This is achieved by using data extraction tools such as APIs or database queries.

Extracted data is then cleaned, formatted, and transformed so it’s consistent and usable for investment analysis and portfolio management. This may involve removing duplicates, dealing with missing or incorrect values, and converting data into a common format. Data transformation tools, including scripting languages, data quality tools, and data mapping tools, can be deployed to accomplish this.

The transformed data is then loaded into a central repository, such as a data warehouse or data lake, for easy access and investment analysis. This part of the process can be managed using data-loading tools like database management systems, cloud-based storage solutions, and data integration platforms.

The end goal is to empower wealth managers to make critical investment and business decisions based on data. It also enables them to reduce time spent on manual tasks, increase client-facing time and improve the overall client experience. In addition, robust data management can help advisors streamline their KYC process, ensure smooth onboarding, and deploy advanced CRM and workplace collaboration tools.

Differentiation through Data Management

Managing data as an asset is now a crucial aspect of operating strategy for advisors. It enables them to drive global expansion, improve marketing and sales enablement, offer an exceptional digital experience to clients and leverage high-quality data for better investment decision-making. Faced with growing compliance mandates, advisors are also actively seeking ways to improve data transparency for client and regulatory reporting. 

With the right technology and tools for data management, advisors can boost their business performance and competitive advantage in the market and deliver enhanced digital services and superior investment outcomes for clients.

About Valuefy:

Valuefy is a premier investment technology lab with cutting-edge solutions serving leading financial institutions across the globe. Its Wealth Management Solutions has enabled Wealth Managers globally by providing production-grade investment technology for an uberized customer experience.