How AI is Changing the Face of Portfolio Management

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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Portfolio analytics is not just for Wall Street Bankers

Things are moving fast in the financial world as newer technologies surface and disrupt the investment ecosystem every few years. Blockchain and cryptocurrencies, although highly volatile, are having a considerable impact on the market and don’t seem to waver any time soon. This means that the demand for effective portfolio analytics will only become more acute as we move forward.

Analyzing an investment portfolio helps Fund managers understand the existing asset groups and help them in making decisions that provide the best returns. It also helps managers in understanding the risks and the required steps to minimize them.

So, what exactly is portfolio analytics?

In simple words, it’s the analysis of risks and returns in an investment portfolio. However, there’s a lot of complicated work involved, work that takes about a week (if not weeks) for a man to complete, for each client.

With comprehensive analytics, a fund manager can find both real-time and historical data saving time to focus on other equally important tasks like asset allocation. It gives you an advantage over your competitors and helps you close more clients in less time.

This need for comprehensive analytics demanded the creation of a technological solution that will ease some burden off the shoulders of Fund Managers. Valuefy’s team of engineers, prompted by this need, came with an effective solution in the form of ValueAT.

With Valuefy’s ValueAT, you can create better portfolios with ease and agility. It provides you with comprehensive analytics with a focus on attribution, performance benchmarking, and risk management. It also empowers you with style analysis, portfolio slice and dice, and limit monitoring. With ValueAT by your side, you would not only analyze the portfolios effectively but do so in seconds instead of weeks.

With it’s Zero Manual intervention, there are no more data hassles for you.

How does ValueAT work?

The data from the portfolio and market is fed into the ValueAT database via the ETL process with a maker checker in place to perform data quality checks. The portfolio data like Transactions, Holdings, NAV, and AUM are sourced from custodian feed files and internal data warehouse.

The market data like prices, Index constituents, Yield Curve Matrix, and Instrument masters are sourced from exchange files and data feed files. ValueAT can also source the market data from the external provider warehouse or Thomson Reuters market data system.

Once the data is fed into ValueAT, the Data Preparation engine manages the model portfolio while also creating synthetic and composite indices. It also creates carved-out/in portfolio as well.

Once all this heavy-lifting is done by ValueAT, you can study the visual interpretation of the data and point out the opportunities and risks to your clients. That’s why portfolio analytics is not just for the hotshot bankers on Wall Street, it’s important for all asset & fund managers, including you.

Is Robo-Advisor a good investment manager?

Are you thinking of integrating a robo advisory platform into your wealth management?

Maybe you have been considering a lot about it and want to know if it would be a worthy investment or maybe you have just heard about it and want to know more.

Well, in either of those cases, you have come to the right place.

Robo Advisors, without a doubt, do have a fair share of limitations which is why they are there to assist wealth managers and not replace them. Since a long-term investment plan needs proper planning, it is crucial that a financial advisor is in the equation rather than just a Robo Advisor.

Now, why am I starting with the limitations of the Robo Advisors?

Because I want you to understand that Robo Advisors, with all their benefits, still need you to make sense of the mechanical output that they generate. They still need a pair of human eyes to drive decisions from the data, not just to reduce risks but also to increase the returns of your customers.

With that said, here are a few advantages to integrating a Robo Advisory into your wealth management platform.

You could onboard more people with Robo Advisors

Now, from a strictly business perspective, you need more clients to scale. However, not all those who can afford to invest are interested in third-party wealth management solutions. Robo Advisors, being more pocket-friendly could be an introduction of sorts to the uninitiated.

Rebalancing portfolios is easier with Robo Advisors

Rebalancing is the realignment of weightings of a portfolio of assets and involves selling and buying of assets to maintain the desired risk. It can also improve returns. Robo Advisors could help wealth managers in rebalancing the portfolios. They can do it quickly which helps in doing it more often.

Robo Advisors help on portfolios with multiple accounts

Handling investments on hand could be a tedious task and it’s better if it’s handled by a Robo Advisor, especially if there are a lot of accounts on the portfolio.

Robo Advisors are time savers

Since Robo advisors are essentially automated, it gives the wealth managers the convenience to focus more on other things like asset allocation, relationship management etc. This helps in making the most of the time available for each client.

With all the advantages stated, let’s go back to our initial question, Is Robo Advisor a good investment manager?

Well, It’s a judgement call.

Robo Advisors are good investment managers only when there’s a wealth manager involved. It’s more like a team where the Robo Advisor takes care of the time-consuming data-driven tasks and the wealth manager takes care of the decision making based on the comprehensive analytics of the data.

Valuefy’s Wealthfy has a Robo Advisory platform that’s helping wealth managers by providing end to end advisory with real-time intelligence. It is embedded with a robust portfolio data engine and is capable of handling multi-asset and multi-currency portfolios with ease. It also has adaptable and flexible white labeling that allows you to interweave it into your existing legacy systems.

With Wealthfy, your clients will experience a simplified user experience with intuitive dashboards and data visualizations that turn complex data into concise insights.

Know more about how Wealthfy will transform your wealth management firm, here.