7 Key Drivers: Uberized Client Experience in Wealth Management

Posted on January 2, 2023January 3, 2023 by Valuefy

Ask any investor what the predominant factor is in choosing a wealth management firm, they will be quick to respond with ‘investment performance’. It is undeniable that investment performance is key in the decision whether to continue with a wealth management firm, however, what is often overlooked is that Client Experience comes a close second.

Though, when we use a term as broad as Client Experience, it is very easy to get misled. We borrow on Deloitte’s pioneering framework on Client Experience in Wealth Management to power our insights on what the future holds for customers.

7 Key Drivers of Client Experience: How can Wealth Management Firms Power Advantage?

Reporting and Transparency:

The client must always have a clear picture of their finances. There must be no delay or turnaround in providing accurate information to the customer. Timeliness, accuracy, and accessibility of data are important to all customers. The way firms can drive better reporting and transparency is to onboard customers onto a digital wealth management platform with a customer-facing app or portal. This allows customers to get access to their portfolio data 24X7 at a moment’s notice. Any kind of errors in reporting or even delays in delivering reports can seriously erode the credibility of the firm. It is frustrating if the customer has to go to extraordinary lengths to retrieve their own data. It should be available at the click of a button and completely accurate.

Timeliness and Clarity in Communication:

The client is looking for wealth managers to provide data-driven insights quickly and briskly. There is no space for guesses. Portfolio data and investment strategy must be clear. Private wealth management software gives wealth managers the ability to identify opportunities in a timely fashion and convey it to their clients clearly. They follow the 5 keys to successful investment portfolio management. If the wealth manager is more forthcoming in communicating the exact expectations from the investment, it is less likely that the client feels duped or cheated.

Reducing Friction:

Whether it’s getting a customer on board or the speed and accuracy of data, the client expects customer experience to be top-notch. There is no time for any kind of sluggishness in the processes. Automation of the entire process from KYC to onboarding can prevent the risk of clerical errors/human errors that can hold up the entire process. When it comes to operations, clients don’t want any surprises; they just want it to work. The more predictable and automated it is, the better it is viewed to be.

Attentiveness:

It’s all about being quick and right in today’s world. Wealth managers must be available on demand and proactively share strategies with clients. Any data or information that is requested by the client must be quickly turned around. With the obsession towards exceptional customer service, only the most digitally savvy wealth manager can manage to meet client expectations. The automation of mundane tasks such as portfolio attribution, data integration, reporting, rebalancing, and more gives wealth managers the free time to focus on providing a stellar customer experience.

Long-Term Approach:

Rather than trying a short-term approach to client relationships, customers preferred a relationship where the wealth manager builds trust over time. An indiscriminate attempt to upsell to customers and strain relationships will not be appreciated by the customer and will breed mistrust. Wealth Management Firms that can identify the right offerings for the investor’s portfolio and back it up with strong data are the ones that retain clients in the long run.

Strong Understanding:

Only the wealth managers that demonstrated a keen understanding of the client’s needs, business, estate, and requirements were retained by HNI clients. Managers must be in tune with the client’s goals for their life, whether it is buying a car, a house, a second farmhouse, saving up for children’s education, or funding a vacation in the Bahamas. Nowadays, clients look at goal-based investing and unless this resonates with the investment manager, it’s difficult for the relationship to click. Private Wealth Management Software that allows wealth managers to input client goals and understand the right funds or strategies will help engender trust as there’s a lower risk of mis-spelling the wrong fund.

Partnership Approach:

Clients seek wealth managers that can manage their money but also those that take their inputs seriously. A wealth manager must be able to transfer their own knowledge to the client in the right way and also consider the concerns and ideas of the client. Clients are looking for someone who can work with them as a partner rather than dismiss all their ideas. They are looking for human beings with whom they can build an actual partnership based on shared goals. Wealth managers have technology as their best partner. For Example – AI has helped wealth managers save up to 20% of their time. The wealth manager is expected to use technology to build a custom investment management solution for the client if a suitable one does not exist in the market. Dealing with a manager who does not engage with the customer and offers cookie-cutter solutions can grow tiring very quickly.

About Valuefy:

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

Wealth Management in the Times of COVID 19: How Firms are Adapting to the New Normal

Posted on April 1, 2020October 20, 2023 by Valuefy

COVID 19 has hit the worldwide economy like a storm and it has had far-reaching implications on every industry. The Wealth Management industry has taken a major hit in the face of massive uncertainty, panic and negative market sentiment.

Wealth management firms face three major challenges in the COVID 19 landscape.

High Market Volatility
Increased Operational Risk
Increased Reliance on Digital Channels

Let’s look at how firms can better help their clients in these times of crisis and build trust when it is at an all-time low.

Adopt Digital Tools to Retain Trust and Transparency in the Face of Volatility :

The market sentiment right now is overwhelmingly bearish. Asian markets have seen a 15 -25% dip. India was not spared the carnage as the Sensex and Nifty hit three-year lows closing at 28,896 and 8,468 points respectively. The biggest challenge right now is to keep the trust of investors in the market and prevent panic selling. Digitally enabled firms are in better shape to keep the trust of their investors especially those with customer-facing apps and portals that help increase transparency. Wealth Management firms will need to adopt technology like Wealth Management platforms to adapt to the speed of the market and act quickly. Quick adoption of digital tools is of the essence as physical meeting and paperwork have come to a grinding halt.

Adopt Platforms that Help reduce Operational Risk:

Firms are expected to have business continuity plans in place to be able to shift employees to working remotely and have centralized access to data when requested by clients. They are also expected to provide for the eventuality if key personnel fall ill or need to be quarantined. Relationship managers should be able to address client needs wherever they are working from and digital wealth management platforms help them do just that. If clients are successfully digitally onboarded and all portfolio data is available at one click then RMs who step in as replacements can quickly get a picture of finances and offer the right advice. In the absence of portfolio data being available digitally, collating all the necessary data becomes a nightmare, especially without a detailed handover by the existing Relationship managers.

Switch Entire Customer Service onto Digital Channels:

Countries across the globe have entered into a lockdown. Government bodies have enforced social distancing to flatten the curve of the pandemic. In such a scenario where physical meetings have been banned, Wealth Management firms will find it increasingly difficult to acquire new customers or event retain existing ones. There is a need for regular engagement with clients to ensure that they do not panic. RMs need to switch to digital channels such as video calling or messaging to keep their clients in the loop. In such a scenario a shared platform or dashboard that can help offer an eagle eye view to both clients and RMs is extremely important. WM firms that have adopted Digital Platforms are able to continue services as RMs are equipped to serve clients efficiently even without the face time.

Upskill RMs to Deal with the Changes:

Relationship managers can no longer afford to be unsavvy about digital mediums. They need to be able to operate and act on Digital platforms on behalf of their investors. They must have a 360-degree view of portfolios to act quickly and mitigate risk. Wealth management firms must fastrack their training programs and teach their RMs to use the portfolio management tools available at their disposal.

Ensure Client data is not Compromised:

In a scenario when everyone is being asked to work from home, client security, especially in sensitive industries such as Wealth Management, becomes an issue. Employees need to be trained in best practices to ensure that client data is protected. The IT departments of Wealth Management firms need to ensure that people are sensitized to cybersecurity risks and provide the necessary tools and infrastructure necessary to ensure that data is not breached and is purely on a need to know basis. Collating information on a centralized server and restricting downloads of sensitive data onto personal systems is necessary to prevent untoward incidents in the long run.

Promote Digital Wealth Management or Roboadvisory:

In the increasingly uncertain scenario, Wealth Management firms are advised to transition in branch operations and sales to Digital platforms. The offerings that require minimal to little human or face to face interaction must be promoted at this time. Robo-advisory or AI-enabled wealth management is all set to boom as Wealth Management firms will suffer a crisis of talent and productivity at this difficult time. The more clients that can be offloaded to entirely digital offerings, the better they can be serviced even with limited staff and resources.

Active vs Passive Portfolio Management – The Key Differences

Posted on February 25, 2020October 20, 2023 by Valuefy

If you’re just getting into the world of investing, it can be a daunting task to navigate your way through the many options available. We’ve prepared a quick primer for beginners to explain the key differences in the two major ways of investing, active portfolio management v/s passive portfolio management.

What is Active Portfolio Management?

As the term suggests, when investors engage the help of fund managers or wealth managers to beat the benchmark index it is called active management. In simple terms, it involves a strategy that aims to maximize returns by beating the market and assets are actively traded at a higher frequency. There’s a lot more action and risk in an active portfolio versus a passive one.

Active funds are managed by experts who keep juggling your money based on the opportunities in the market. There’s a lot of in-depth research and forecasting that goes into the process and hence the team charges a fee for their services. An active fund may give you access to a portfolio management platform and portfolio analytics so that you can get a birds-eye view of what’s happening in your portfolio. The fund managers take into consideration a large number of factors such as politics, economics, global cues and market movement to gauge the right strategy to invest your money. The fees charged by the fund manager in an actively managed portfolio is called the expense ratio of the fund which is a certain percentage of your assets being managed.

What is Passive Portfolio Management?

Passive portfolio management is also known as an Index fund management is a type of fund where the objective is to make the same returns as the index it is benchmarked against. For example, if the Sensex gains 100 points in a year, the fund is designed to mimic the same performance.

Since the idea is to replicate the index, there is no need for a dedicated team of experts to monitor the funds actively. Once the effort is made to purchase the securities, the portfolio will follow the fluctuations of the market and mimic it. There’s no additional juggling or effort on behalf of the fund manager.

As a result of the lower efforts on behalf of the fund managers, there’s little or no fee associated with it. Since these funds replicate the market movements, they are preferred as a low-risk investment and are recommended for conservative investors. These funds fall into 3 categories, unit investment trusts, mutual funds, and exchange-traded funds.

Which is better Active or Passive?

Active Management:

Advantages

Since the funds are actively managed by expert investors, there’s a higher chance of generating a market-beating return.
They come with great tax benefits as underperforming funds can be sold off quickly.
Since the funds are monitored regularly, any opportunities can be leveraged in real-time.

Disadvantages

There’s a higher risk associated as the frequency of market juggling is higher.
Since they require more effort, the expense ratio is higher and is borne by the investor.
Off late, active funds have been disappointing in terms of returns when compared to index funds.

Passive Management:

Advantages

Long term approach and does not require active monitoring by an investor or fund manager.
There’s higher transparency as it mimics the market movement, there are no surprises.
Lower risk and better for small investors as minimal fees are paid to fund managers.

Disadvantages

Limited options when it comes to investing.
No market-beating returns, no high alpha generated.

What is Right for You?

Based on Expectations

If you want high returns over a short or medium term, you can opt for an actively managed fund. However, if you are willing to be patient and are satisfied with risk-free long term returns that match the market, passive funds are best.

Based on Risk Appetite

If you want a high return on your investment and don’t mind a higher risk exposure then an active portfolio is the right bet. However, if you prefer a diversified fund that is lower in terms of concentrated risk exposure then passive funds are a better option.

Impact of Technology on Wealth Management over the Last Decade

Posted on February 25, 2020October 20, 2023 by Valuefy

Over the past decade, we’ve seen technology permeate and define each and every industry and wealth management is no different. As we close in on the decade, let’s recap how technology has affected the Wealth Management industry over the past 10 years, the milestones achieved and the challenges that are yet to be addressed.

Customers are Younger

One of the major shifts that have necessitated technology adoption is the fact that the new breed of HNWIs are tech-savvy and favor a ‘high-touch’ experience. This means that firms are exploring the use of Artificial Intelligence to deliver better client experiences that can satisfy demanding HNIs.

Data is the New Gold

Organizations are increasingly implementing technologies for storing and managing data. There has been the evolution of wealth management platforms and investment management technologies that can track every data point once a customer has been digitally onboarded.

AI is Automating New Processes

Other than conventional processes such as KYC and onboarding, AI is increasingly being used to enhance the client experience. Robo-advisory services that automate the entire wealth management process are on the rise. The customer now has the option to opt for a completely digital solution where AI recommends the entire investment strategy for the customer based on their risk appetite and investment horizon.

AI is Driving Investment Insights

Real-time analytics is being used to drive the investment strategy. Nowadays Wealth Management platforms are now able to crunch through terabytes of data to arrive at investment decisions in no time. AI is able to run projections based on several variables in seconds rather than hours.

Front Office & Back Office are Melding

Earlier most of the technological innovation happening in the Fintech sector was limited to the back office. Front office wealth managers stayed at odds saying that AI-generated ideas were not meeting the needs of the clients. However, nowadays, the front office is increasingly being involved in the process of innovation. They are being incentivized to collect more and more data so that algorithms become more efficient and drive higher returns for their clients.

Regulation Remains a Challenge

In an increasingly digitized environment, the regulation of these newly evolved paradigms is becoming a challenge. Cybersecurity remains one of the biggest concerns with so much sensitive data being collected. Regulators and Wealth management firms need to constantly engage with each other to develop robust security best practices and data privacy policies to protect the customer.

Manipulation is a New Threat

Like every other evolving technology, AI is a double-edged sword. In the wrong hands, AI could be used to wreak havoc on the markets. Using bots to manipulate trading trends, malicious elements can influence the market. They may be able to mislead investors into buying or selling a certain stock or asset. However, the silver bullet for AI is AI itself. Advanced pattern recognition using AI can be used to monitor such trends in the market and raise a red flag to regulators.

Humans Remain Indispensable

Despite the evolution of Robo advisory platforms, Investment Management Solutions, Investment Platforms, and Portfolio Management Platforms, the role of the human advisor is still crucial. While AI takes care of many of the monotonous tasks in wealth management, humans still must devise the algorithms and the logic that better these technologies. Also, despite Robo advisors evolving over time, there’s nothing like the presence of a human advisor to understand a client and put them at ease. While technology is making strides in automation, human advisors remain at the core of the wealth management industry.

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