Maximizing Efficiency and Cost Management in Regulatory Compliance

Wealth management is under intense regulatory scrutiny. The industry is seeing mounting efforts by regulators to improve competition and investor protection, strengthen firm’s governance and accountability, and enhance sustainability reporting and disclosures.

However, regulation can be a significant roadblock for expansion in wealth management. It puts enormous pressure on overhead costs when scaling a business across multiple geographies.

Leveraging technology is the only way to effectively manage the complexity and cost of regulation while maintaining competitive performance.

Regulatory Obligations Proliferate

Regulators continue to strengthen frameworks and requirements related to investor protection and choice, governance and accountability of advisors, and reporting and disclosures related to environmental, social and governance (ESG) investing and company sustainability efforts.

Though jurisdictions are at different stages of implementation, most regulators are focusing their attention on the increasingly digital nature of distribution, the quality of outcomes and value for money for investors, and product governance for the target market of end clients and related distribution strategies. But at the same time, regulators are increasingly promoting their jurisdictions as asset management domiciles. This widens choice for clients, especially sophisticated or semi-professional investors, and creates new opportunities for wealth managers.

Recent years have seen regulators step up accountability arrangements related to the resources, capabilities and expertise of wealth management technology firms. For example, they are implementing mandates for combating financial crime, sanctions compliance, operational and cyber resilience, and achieving diversity and inclusion targets.

There has been a whirlwind of regulation about sustainable finance, some of which is particularly complex. This encompasses a myriad of topics with limited common definitions related to the breadth and depth of disclosures. Additionally, sustainability regulation is not harmonised across jurisdictions. For example, mandatory reporting requirements for climate change in different jurisdictions are progressing along different trajectories, especially with regard to implementation timeframes and the sizes and types of companies impacted. It’s increasingly difficult and costly for wealth managers to gather the data they need regarding their investments for the purposes of their own disclosures.

Wealth Management Technology Solutions for Effective Regulatory Compliance

Staying on top of regulation, and implementing effective compliance processes, can be a significant challenge. Wealth platforms are spending more time than ever on regulatory compliance, as regulatory obligations continue to increase across all jurisdictions.

Advisors must implement effective processes that ensure adherence to regulations for anti-money laundering, know-your-customer and data privacy. This requires staying current with regulatory changes, conducting regular compliance reviews, and implementing robust data security measures.

The solution lies in implementing strong, integrated and scalable operational workflows for regulatory compliance. The workflow must be able to manage quality checks, for both clients and investments, and provide the flexibility to accommodate for changing regulatory agendas and requirements across jurisdictions.

Because regulation touches all parts of wealth management, the solution should be embedded throughout the wealth platform across front, middle and back office operations. It should be built to ensure risk monitoring and compliance management functionality, including customer suitability and investment risk analysis, customisable pre- and post- trade rules, regulatory reporting for different regimes, provision of audit trails, and client classification and risk categorisation.

As regulatory pressures continue to rise, leveraging wealth management technology and digitising workflows is the only way to ensure robust regulatory compliance while managing costs in an appropriate way.

No matter their size, wealth platforms should be implementing wealth management technology solutions to enhance regulatory compliance, improve operational efficiency, and future proof their business.

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 solutions for an uberized customer experience.

The New Wealth Management Strategy: How to Serve Evolving Investor Demand

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. 

As digital transformation accelerates, virtual reality may be the next frontier of digital engagement after mobiles. Firms that fully commit to creating a superior digital experience are better positioned to explore future opportunities for client engagement using virtual reality (VR) and augmented reality (AR).

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.

The Data Management Advantage for Wealth Managers

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.

Demystifying Investment Software: Wealth Tech Drivers of 2023

The pandemic stimulated a big shift towards digital banking and wealth management turning 2022 into the wealth management industry’s disastrous year amid a major war in Europe, rolling lockdowns in China, double-digit inflation, high rise in interest rates around the world, etc. Wealth management is becoming more consumer-friendly, affordable, and accessible than ever before. As the serviceable demographic of the wealth management industry changes to millenials who are coming of age in terms of their investing prime, there is a need to shift the methods and technologies in the space to accommodate their tastes and preferences.

Tech-savvy millennial customers have come to expect on-demand access to their portfolio data as well as 24X7 monitoring and customer support. Forward-looking wealth management firms are adopting Data science, Robo advisory, and Portfolio analytics solutions to power their management and operations strategy in order to tailor them to suit this customer demographic.

However, there’s a lot of ambiguity and misinformation out there on what these technologies can and cannot do. This is leading to fearmongering amongst the Wealth management community that Human Advisors are slowly being phased out in favor of their Robo/Tech counterparts. Here we’ve tried to clear the air on what Investment Technology is capable of and what lies outside its scope.

Robo Advisors:

Fiction: Robo advisors are here to replace human Wealth Advisors.
Fact: Robo advisors offer a customized investment strategy and recommendations based on data gathered on investor’s risk tolerance, objectives, time horizon, and other background demographics. Although Robo Advisors are an extremely powerful tool, they have their limitations, especially in the case of individuals with complicated investment goals such as estate planning, taking care of dependents, or saving for illnesses. Robo advisors can assist Wealth Managers or Investors as part of a holistic investment plan, however, they are not a one size fits all solution.

Wealth Management Platforms:

Fiction: Wealth Management platforms are not used by High Networth (HNI) Clients.
Fact: HNI Clients expect exceptional customer service and availability 24X7. Online wealth management platforms help them monitor their portfolios and finances on the go and help them have more insightful conversations with their wealth managers. HNI clients, in fact, prefer a ‘High touch’ approach, a blend of Human and Robo capabilities. Technology gives them instant access and insights into their finances and Wealth advisors can step in when they face a particularly complex problem or financial goal. This ‘High touch’ approach helps free up advisor time to cement client relationships and focus on strategy rather than daily operations.

Analytic Solutions :

Fiction: Portfolio analytics platforms make your decisions for you.
Fact: The portfolio analytics platforms of today crunch through Terabytes of data from international data sources such as Reuters, Bloomberg, and Moneycontrol among others. They provide recommendations based on your portfolio data and risk tolerance, however, the final decision is left to the Wealth Manager or Investor.

About Valuefy:

Valuefy is a premier investment technology lab with cutting-edge solutions serving the leading financial institutions across the globe. Its Wealth Management Solutions has been enabling Wealth Managers globally by providing productiongrade investment technology for an uberized customer experience. Reach out to us!

‘Mass Affluent’ Asians, the prime force shaping the Wealth Management Industry

2018 report by data firm Wealth X that analyzes the state of Ultra Wealthy Individuals ( $30m or more in net worth) brought to light that Asia posted the greatest jump in the number of Ultra HNIs at 18.5% while their net wealth grew by 26.7% almost twice the rate seen in the United States.

This rise in Asian affluence has captured the popular imagination, the chart-topping success of the Blockbuster Jon Chu film ‘Crazy Rich Asians’ depicting the ultra luxurious lives of Asian billionaire heirs and heiresses is a prime example.

However, amidst the hullabaloo raised by the Ultra HNI& HNI tycoons, a growing segment of ‘Mass Affluent’ Asians with comparatively modest incomes of US$100,000 to US$1,000,000 are the ones prompting a gold rush in the Wealth Management Industry.

What’s the market opportunity?

Asia holds the second largest concentration of private wealth in the world with $47.3 Trillion in private wealth compared to North America’s $50.8 Trillion. Over the next 5 years, this is projected to hit $70.7 Trillion speeding past North America to claim the number one spot.

What are the challenges?

Despite the growing wealth of the region, the Wealth Management industry has captured only 20% of the market. This is because traditional Wealth Management firms have focussed on the growth of Ultra HNIs at the cost of the ‘Mass Affluent’ the fastest growing wealth segment in Asia at a CAGR of 9.8%.

However, the conventional approaches used in Western markets are failing in Asia due to the unique Asian cultural milieu of tech savviness, inherent distrust of external advice and an unwillingness to pay for financial advice.

Hence a tailored strategy needs to be developed keeping the millennial ‘Mass Affluent’ Asian in mind to tackle this market effectively.

Wealth Management platforms can help capture this segment

The Asian Mass Affluent who have mostly made their money in the tech and finance industries are very tech savvy. Catering to them requires a tech-enabled high touch approach that blends the best of human talent with cutting edge technology. Using new age Wealth Management platforms and leveraging Artificial Intelligence and Robo advisory driven insights can help differentiate your wealth management practice in the eyes of the customer.

How can Wealth Management platforms drive value for tech-savvy clients?

  • Empower customers with 24×7 monitoring:

Clients who are tech savvy prefer to be on top of their portfolio and be more involved in active management. Delivering a custom app experience that allows them to monitor their portfolio and reach out to wealth managers instantly can help customers feel more empowered. Wealth Management platforms with Client and Advisor apps help both stakeholders stay on the same page at all time.

  • Drive trust with Analytics, and AI driven advisory:

The Asian cultural milieu values empirical evidence and scientific approaches especially towards investing. Wealth Management platforms that can back up investment recommendations with detailed analytics and AI driven insights will help create trust towards the Wealth Manager and temper tendencies to make erratic and irresponsible investing decisions.

  • Offer premium customer service:

Wealth platforms can help managers automate up to 60% of their daily operational tasks including Client on-boarding, Portfolio construction, Portfolio monitoring, and Rebalancing. This gives Wealth Managers the time to reach out, build relationships and maintain constant contact with demanding customers.

  • High value for money:

The Mass Affluent tend to be more frugal with their investments as they have mostly self-made fortunes. They tend to look for value when shopping for luxury goods or for services. Wealth Platforms can help bring down costs of serving each client and this benefit can partially be passed on to the customer to give them better value for their money.

A Roadmap to Digitize your Wealth Management Practice

Traditional Wealth Management firms can vastly benefit from partnering with new Fintech kids on the block to digitize their offerings. A well-implemented partnership can bring with it a host of benefits including uplift in the bottom line, saved time, saved costs and an increase in customer penetration.

As the wealth management landscape is undergoing a sea change, with people choosing to go the DIY route through Robo Advisors and Passive investing, it has become imperative for traditional firms to make the switch to digital. If you’re thinking of digitizing your practice here’s a quick 5 step guide to consider before placing your bets.

Clearly establish the goals of digitization:

What is the problem statement and what exactly are you looking to acheive. Are you looking to save time spent on operational tasks? Are you looking to increase efficiency and client loads per relationship manager? Are you looking to reduce costs? Are you looking at improving customer satisfaction with digital offerings? Benchmarking this data before and after the exercise will help you measure your degree of success.

Consider the ripple effects on people and processes:

For your digitization strategy to be successful, it must consider the impact of transformation on company culture and on people and process. Are your wealth managers ready to adopt technology? Are they willing to take time to unlearn existing practices? It’s essential that transformation doesn’t result in parallel processes due to a lack of trust or usability of the adopted tools.

Assess and prioritize:

Don’t bite off more than you can chew, prioritize your goals and identify short, medium, and long term milestones. Eg a 5% improvement in manager productivity in the first 6 months or a 3% reduction in costs in the first month. Proper prioritization by key stakeholders will trickle down to the rest of the team and reduce apprehensions about the transformation.

Develop a clear timeline:

Building up your digital capabilities isn’t a one-time thing. Allocating the resources, getting the organization on board, outlining the investments is a continuous process. It helps to have a clear horizon of when each step needs to be taken. Develop a high-level plan and define the key architecture of changes to be implemented. Some key questions should be answered in consensus to avoid miscommunications later on. Should you partner with a Fintech or develop an in-house solution?  Should the focus be on the web or on the app? Should there be a one time launch or an iterative process? Should you buy a readymade solution or develop a customized one?

Make the move:

Once you’ve made the decision to digitize your practice, developed a consensus and defined your roadmap, it is essential to act to get the ball rolling. Large organizations especially those in traditional sectors such as Wealth Management and Banking can be notoriously prone to inertia and resistant to change. Once you have your key stakeholders on board, make your first step soon to avoid digitization plans being shifted to the next quarter to accommodate immediate concerns and short term goals.

Fuelled by Data – Wealth Management’s Tech Transformation

Technologies like Big data and Artificial Intelligence are being adopted to create a high touch ecosystem in the Wealth Management space. Forward-looking wealth management firms are turning to Robo advisors to help churn massive amounts of unstructured data into recommendations, insights, and decisions to aid their Wealth Management Professionals.

Here are some of the key aspects being revolutionized by Artificial Intelligence.

  • Customer service

Wealth Management firms are slowly catching up to the advances in Artificial Intelligence and Big data as they become vital differentiators in the battle to provide exceptional value and customer service. Wealth Management platforms are now capable of automating Customer KYC, Multi-asset integration, Account aggregation and

Performance attribution to give the customer all the information they need in one place. The simplified user experience of these platforms is freeing up advisor time to focus on investment strategy and giving an engaging customer experience to clients.

  • Decision making and goal setting

Robo-advisors can now recommend tailor-made portfolio advice based on sophisticated portfolio intelligence and analytics. These data-driven insights help Wealth Managers chart the right course and temper instinct driven investing.

  • Accounting precision

Wealth manager can leverage Robo Advisors to get rid of tedious and repetitive tasks. The ability of Robo-advisors to crunch terabytes of portfolio data helps improve the reliability of predictions and helps minimize human error.

  • Omnichannel monitoring

Wealth Management platforms of today are slowly beginning to cater to mobile first audiences. Major functionalities such as Portfolio construction, Monitoring, Reporting, Analytics, and Rebalancing can now easily be accessed on the go.

Looking to transform your Wealth Management practice? – Get in touch

AI is helping thinly spread Wealth Managers save up to 20% of their time

The Human Wealth Manager is a very precious resource, and often extremely expensive,  with median salaries of well over 100K (Census data collected by WSJ). In such a scenario private wealth management firms often tend to overwork and spread thin their accounts, in some firms, it was found that Wealth managers were juggling between 200 to 500 portfolios in a work week. This led to many wealth managers working well over 80 – 100 hour work weeks.

However pulling such long work hours often mean that Wealth Managers often become less efficient and often develop depression, anxiety, immune disorders that affect their quality of life, efficiency, and their decision-making capabilities.

How can Artificial Intelligence make a difference?

AI is helping Wealth Management firms optimize their Wealth Management process and reduce the strain on Human Wealth managers by automating a lot of the research, onboarding, goal setting, and operations that goes into wealth management.

Leading Investment technology firms such as Valuefy are creating sophisticated Wealth Management platforms and Robo advisory services that crunch through Terabytes of data in seconds compared to hours of manual research. Big data analysis is helping Wealth Management professionals create better models and strategies for their firms by factoring in more strategies and variables and thereby tempering the tendency to make biased decisions.

These platforms are also helping Human Managers organize their portfolio lifecycle better by leveraging real time insights. This helps Wealth Managers at large firms managing 200+ portfolios a day dedicate their attention to macro and micro trends and take corrective action or rebalancing if necessary.

Using these big data platforms can also help Wealth Managers have data driven and nuanced conversations with their clients. It can help clients feel at ease and assuaged to have hard data backing up their investment strategies. Overall it helps Wealth Managers to be proactive and respond to trends quickly, leaving customers feeling more valued.

The major benefit, however, is that it helps Wealth Managers free up their time by almost 20%. This translates to almost a whole day a week, which can be better utilised to reevaluate strategies, cement relationships, prospecting and more rather than day to day portfolio management operations.

To learn more about how AI can help your firm reach peak efficiency, set up a free consultation today – Set up a Demo

Can Robo-Advisors and Human wealth managers coexist?

Are human advisors being edged out by the Robo Advisory revolution? That is the question that’s troubling the wealth management industry moving into 2019. The future of wealth management seems to be in a state of flux, human advisors are apprehensive about the developments in Robo advisory, they aren’t sure whether Robo advisors are here to help them, supplement them or replace them entirely.

The answers aren’t clear at this point, however, Roboadvisory is forcing the industry to take notice and modernize to stay relevant. Roboadvisory is taking the wealth management space by storm, catering to millennials, these firms are mobile first, customer friendly, and transparent. They are a vast improvement on the opaque and inaccessible fashion in which traditional wealth management firms operate.

Millennial investors are curious about how their money is being invested, and Roboadvisory is helping them gain control and confidence over their finances. Investors are increasingly choosing Robo advisors as they are more accessible (Most platforms have web and mobile apps), more streamlined, and offer more value, especially to those with uncomplicated financial goals and needs.

What does this mean for traditional wealth management firms?

Traditional wealth management firms need to embrace the changes that are taking hold of the industry and adapt if they want to survive. Artificial Intelligence is helping temper the decision-making process, helping investors derisk their investment strategy in favour of a more holistic and data-driven approach. AI insights that are culled out from terabytes of data can help both professional advisors as well as laymen investors, make better decisions.

It may not be the solution for investors with complex needs and larger estates, but it can help those who cannot afford the high fees charged by traditional wealth management firms (around 1%-2% of AUM). Also, the low minimum asset requirements on Roboadvisory platforms (around $1000 – $10,000) as compared to high requirements of traditional firms ($100,000) make Robo platforms a lucrative option for beginners.

Robo-advisory in their current form is catering largely to DIY investors and supplementing traditional advisors, leading to a High Touch approach (Mix of tech and human advisory). Adaptable wealth management firms stand to benefit from this expansion of their customer universe, they can bolster their bottom line from being able to serve both small-scale investors as well as High Networth Individuals with complicated investment goals.

Integrating Roboadvisory into their roster of services is helping banks and wealth management firms free up valuable advisor time. Advisor portals and apps are helping clients gain more transparency on the state of their portfolios, in turn helping clients and human advisors have more insightful conversations about financial goals and strategies.

An ecosystem where Roboadvisory platforms and Human advisors coexist will inspire an ecosystem of trust and collaboration by reducing information asymmetry that plagues traditional investing. Investors across the board will benefit from being able to monitor and assess the state of their own finances in real time.

The human touch can never be eliminated as algorithms cannot assuage investor’s fears or offer solutions for complex needs such as succession/estate planning, elder care, tax and healthcare planning. However, technology can help automate and streamline a large portion of conventional financial planning, helping human advisors focus on complex, unique challenges posed by individual portfolios and leaving the humdrum of financial planning to Robo-advisors.

Robo advisory is fostering a revolution in DIY investing

As the adage goes, the best time to start investing is yesterday, the second best time is now. Millennials want to invest their money, however, a major roadblock that stops them is that they often consider their earnings too paltry to start investing. This feeling may often last till their late 30s or 40s until they start making reasonable incomes, the kind that the baby boomers were making in their early 20s.

Most traditional advisors have minimum asset requirements which are quite steep such as assets of $500,000 or more which puts them out of reach for the average Millennial. Traditional advisors also charge sizeable commissions, on average of 1% to 2% of assets under management. In such a scenario, Millennials are wary of traditional advisors as they have to beat the market by a large margin to even cover the high cost of commision and create any value.

Added to this, millennials also tend to have a heightened mistrust of financial institutions. This is due to the fact that most millennials grew up and had their most formative years during the great depression. The combination of these factors makes millennials hesitant to adhere to ‘status quo’ investment patterns, instead, they prefer to put their trust in tech-driven or DIY solutions.

The paradigm shift: from trusting people to trusting Artificial Intelligence

The biggest challenge in DIY investing is often getting started, what information to consume, what to disregard, and what to act on. The entire process gets a bit overwhelming as there’s information overload on the internet which tends to cripple modern-day investors.

Established news sites like Moneycontrol, Bloomberg, Economic Times, Financial times are all fine sources for investment advice, however, for a beginner investor, it can be a nightmare to track and monitor the news constantly and connect the right dots. Gathering the right inferences from a glut of data is what makes DIY investing so challenging.

Artificial intelligence based solutions offered by Robo advisors can help solve this problem, by creating curated and actionable advice according to goals set by investors. AI can churn through Terabytes of data, study market trends, make analyses and projections and give out predictions that minimize risks involved in DIY investing. The technology may seem complicated, but the end user benefits as they only have to act on ‘actionable advice’ while all the complicated algorithms do the number crunching for them.

Robo-advisors chart the best course of action by analyzing goals, risk tolerance, and investment preferences. Investors can monitor the entire process through simplified dashboards that offer different levels of granularity. Most Robo-advisors are clear and transparent and often intuitive to modern day users who use apps for everything from ordering food, getting around town, and even dating.

Why Robo-advisors? – Convenient, low fees and DIY

The interest in Robo-advisors as an ideal solution for millennial investors is being spurred by increased transparency, accessibility, low fees and best in class customer experience offered by them as opposed to traditional advisors. The ability to invest via apps on their phone or on the web has led to another spurt in the growth the category.

Most Robo-advisors charge up to 0.50% of total assets under management with most advisors offering free services until $5000 or $10,000, depending on their target audience. They also hold off on charging account-opening fees, withdrawal or account-closing fees, trading/commission fees, or account transfer fees and stick to clear and simple management fees to appeal to millennials.

Is a Robo advisor the right fit for you?

If you are just getting started in investing and want to dabble in the markets yourself while still minimizing risks, Robo-advisors are your best bet. Their simplified user experience can help you monitor your finances on the go, eventually developing a taste for investments. Robo-advisors can help you temper your instincts and make better decisions, all without incurring the costs and inconveniences that come with a traditional human advisor. Even experienced investors are choosing to go the Robo route and transition from expensive actively managed accounts to low-cost automated alternatives.

Robo advisory, however, is not a one size fits all solution. There needs to be careful consideration of one’s financial goals before settling on one. If you have a large and complicated estate, or you’re invested into many different types of assets a human touch may be necessary. They may also not be the right fit if you have specific needs that don’t fit traditional models such as succession planning, multi-currency portfolios etc.

However, these aren’t really the target audience for Roboadvisors. If you have a fairly simple and more straightforward portfolio and you just want to get started, then Robo-advisors are the perfect starting point for your investing journey.

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