Introduction
Wealth-Tech aids companies in delivering a more convenient, hassle-free and engaging experience to clients at a relatively low cost.
The adoption of new-age technologies such as Big Data analytics, Artificial Intelligence (AI), and Machine Learning (ML) are helping wealth management companies stay ahead of the curve in the new age of investing.
While the adoption of advanced technologies has been underway for quite some time, the pandemic has rapidly increased the pace of the adoption of technology.
New age investors and the young population are using technology in a big way. This is evident from the fact that the total digital transactions have grown manyfold in FY’21.
According to a report released by ACI Worldwide Globally, more than 70.3 billion real-time transactions were processed in the year 2020, with India at the top spot with more than 25 billion real-time payment transactions.
Moving from experimental to exponential
As many financial services and capital markets firms pivot their respective businesses toward the higher, stable returns of advice, competitive pressure to retain and win clients in the wealth management industry has never been greater. Wealth customers are requiring highly digitized experiences and, at the same time, demanding more for less. It’s becoming increasingly difficult for wealth managers to stand out in a crowded space, and the required investment to compete is negatively impacting profitability.
digital and technology executives across a range of North American wealth management firms to separate “signal from noise” when it comes to Artificial Intelligence (AI) and wealth management. Results demonstrate most wealth managers see a real opportunity to move the financial needle by adopting AI over the next two to three years. However, more than 80% of firms are stuck in the proof of concept stage today, with efforts narrowly siloed within a department or team. This inability to scale is a significant barrier to unleashing the greatest benefits from AI and strengthening competitive position.
The AI strategic imperative
There is approximately $78 trillion of assets in motion for wealth managers to capture, underpinned by the global expansion of the affluent middle class, women with wealth, and the wealth created by entrepreneurs and business ownership. Seizing this opportunity requires a significant shift in strategy and approach, as wealth managers recognize how the digital agenda of the past has quickly become the digital imperative of the future.
Simply put, there is tremendous opportunity to capture more value from AI. With proven use cases as a starting point, the AI journey can be accelerated - allowing wealth managers to seamlessly move from theory to execution and capture benefits realized from scale. A rapid evolution from today’s world of targeted application to a future of embedded innovation, making it clear why AI should be part of Wealth-Tech’s near-term execution strategy.
Financial advice reimagined
AI is not a one-time event, but rather an ongoing and iterative process as the data landscape and underlying technologies evolve. Leaders have recognized executive sponsorship is not enough, and effective scaling calls for embedding multi-disciplinary teams throughout the organization. The better the blend of skills, the more sustainable the result, re-enforcing a constant commitment to business value.
Today: Proving the value and building a foundation
Wealth management and AI come together at five primary points along the value chain: client engagement, product and pricing, client experience, productivity and operational efficiency. According to Gartner, by the end of 2024, three-quarters of enterprises will have shifted from piloting to operationalizing AI. In the wealth management industry, early AI adopters focused largely on risk and compliance functions. More recently, attention has shifted to marketing and service. Our survey results indicated up to 80% of respondents reported they’re either deploying or scaling both client- and advisor-facing AI-powered technology. By keeping the client at the heart of every interaction, powered by cutting-edge AI-driven analytics and delivered with increased personalization, advisors can better understand and anticipate clients’ needs.
Wealth management is poised to capture potential from AI to the benefit of both the top and bottom line. AI helping players of all types, sizes and strategies launch their AI journey with measurable results.
The future: A digital platform mindset
Looking ahead, we can envision a path where AI moves beyond current use cases, adding sophistication that fundamentally allows for new ways to interact with clients and transform advisor and firm productivity. Focus may shift to intelligent product creation, hyper-personalized and omni-channel client experiences, and paraplanner automation to increase advisor time on portfolio and relationship management. Stretching beyond five years, there will be new ways of wealth management innovation not yet imagined, in response to disruptive forces as well as how AI itself will continue to evolve.
Few AI interventions in today’s Wealth-Tech
Client Meetings and Interactions
In the old days, wealth managers would physically meet the investors to discuss their wealth management requirements. However, recently we see that a lot of investors are demanding more digital touchpoints which offer more convenience.
Video calling and shared desktop features have been rapidly adopted by both investors and wealth managers to provide a seamless experience.
24*7 digital touchpoints available
Technology has also enabled companies to provide cost-effective digital touchpoint solutions to clients that enable easier and faster access to portfolio updates, various reports such as capital gains reports, and holding statements and enable ease of doing transactions.
Features such as Chatbots and WhatsApp-enabled touchpoints are helping in delivering a high-end client experience in a quick turnaround time.
Portfolio analytics and reporting
Data analytics has not only augmented the way wealth managers analyse investors’ portfolios but have also reduced time spent by wealth managers on spreadsheets.
Wealth Tech also offers deeper insights into the portfolios which assist wealth managers in providing a more comprehensive and customized offering to investors which match their expectations and risk appetite.
Artificial Intelligence and Machine Learning technologies combined with big data analytics are disrupting wealth management space in a big way. Robo-advisory and quant-based product offerings are making strong headway into this space.
Ease of process and documentation
In the earlier days, documentation and KYC process used to be a bottleneck with processing time going into several days as well in some cases. Storage of documents is also challenging as this requires safe storage space and documents are prone to damage and/or being misplaced.
With the advancement in technologies, we are now moving towards a fully digital and/or ‘phy-gital’ mode of operations. While investing in some products like mutual funds the process is completely digital for other products like PMS, AIF, structures, etc. the processes are moving towards phy-gital mode.
The use of Aadhar based digital signature and video KYC have made it possible to reduce the overall processing time significantly!
Summing up:
A shift towards holistic offerings rather than product-based offering
The increasing young population is coming into the workforce and thereby creating a shift in focus towards new-age investors.
These new-age investors are not only tech-savvy and early adopters of technology but are also demanding more in terms of offerings.
With easy access to information and growing awareness, investors are looking for holistic offerings rather than merely product-based offerings which encompass all their wealth management needs.
Incumbents in the wealth management space should, if they haven’t already, incorporate technology as an integral part of their client offering to stay relevant.
For incumbents, it may prove to be cheaper and faster to get into the tie-ups, partnerships, or acquire new age technology companies to quickly come up the curve rather than building in-house technology solutions.
As the adage goes, the only constant in life is change; technology is a change for the wealth management domain that needs to be embraced!
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