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Why digital channels may be the way forward in providing wealth management services

Advisory firms today are deploying cutting-edge technology to offer convenience to customers on personal financial management

January 06, 2021 / 09:46 AM IST

The COVID-19 pandemic has left an indelible mark on the modern world. As we all try to move towards normalcy, individuals and businesses alike are leveraging their experience from this pandemic to future-proof their tomorrow.

We need to rethink various aspects of our life, including how we manage money and investments. Imagine how difficult it would have been to cope with the lockdown if we did not have access to digital payment services, e-wallets or avenues to invest online and monitor portfolios. The surge in interactions via digital channels is here to stay and financial service providers are working hard to develop efficient digital operating models that are easy to use, independent of physical interactions and deliver superior value to customers.

The emergence of Wealth Tech

The wealth management world is evolving. High-quality wealth management services are now available to a large number of customers at a much lower investible surplus. Added benefits include asset allocation, curated solutions, risk management and mitigation and personalised recommendations, resulting in process-based financial well-being for investors.

Advisory firms today are deploying cutting-edge technology to offer convenience to customers on personal financial management (PFM) with a products and services bouquet ranging from financial services software, online investing tools to digital broking and robo-advisory. Customers can benefit from the application of Artificial Intelligence (AI) and analytics that have transformed traditional investment and wealth management from cookie-cutter services to bespoke, near-real-time PFM.

Close

Here are some of the changes that will redefine wealth management in the near future.

Data-driven on-boarding

A strong advisor-client relationship has been the cornerstone of financial management services. While the traditional meet-and-greet mode may not happen in the future, thanks to Machine Learning (ML) and Big Data, advisory firms are able to infuse more data in the digital account opening and onboarding process.

A simple set of questionnaires help the system perform behaviour-based customer segmentation, and evaluate your interests, risk appetite and portfolio goals. It can gauge a customer’s investment style beyond the basic conservative, aggressive or balanced portfolio allocation, and recommend relevant automated wealth management products, suggest portfolio allocation and present an overview of investment outcomes.

The actual process of onboarding itself has become a lot swifter and streamlined with the use of tech-based automation, due to the emergence of WealthTech. A one-time Know-Your-Customer (KYC) process via WealthTech aggregators can give you access to thousands of financial products across the board.  Simultaneously, the platform performs real-time Anti-Money Laundering (AML) and KYC checks in the background by drawing data from both internal and external sources, thereby not just fulfilling compliance needs, but also mitigating fraud risks.

Investment advice basis predictive and prescriptive analytics 

Consumers’ sentiment has shifted from wanting to make their money ‘grow’ to wanting their money to help them achieve different goals. The application of AI and ML in WealthTech is making this possible at a granular level with needs-based hybrid advisory solutions that are designed around life goals and personal values. Not only is technology bringing in greater personalisation, but also widening the scope of predictions and prescriptions the advisory can offer.

In a few clicks, you can create several investment buckets with different asset classes and risk parameters. A safe bucket for your retirement corpus in a Principal Protection and Growth Plan will operate separately from, say, a short-term liquid bucket for a down payment on a new car.

Throughout your investment journey, the digital advisory can provide next best actionable advice at different life stages and leverage predictive lead scoring to identify the best prospects for new and relevant investment products.

Improved service quality

As a customer, the digital platform provides you with a secure direct-access dashboard. Robotic Process Automation (RPA) has emerged as a new solution for streamlining data management and reporting. In conjunction with ML capabilities, it allows the advisory to offer on-demand custom performance reporting rather than waiting for an RM to make contact or to revert.

It is now possible to simulate real-time effects of different investments in your portfolio, compare performances and take simple click-and-switch actions across asset classes ranging from debt, mutual funds, commodities, private equity to real estate, and even art.

Some aggregators may also offer bundled financial services such as intuitive tax-filing along with suggestions on optimising investments for tax-saving, or using sophisticated underwriting models to assess credit worthiness for loan disbursement.

The dashboard also offers fully automated chatbots that provide efficient and time-bound resolution to queries, along with access to an investor community and investment specialists for knowledge sharing.

In closing

Wealth management is increasingly becoming tech-driven. From social media support and gamification of UI to a 360-degree integration by crowdsourcing economic, demographic and alternative financial data for bespoke financial solutions are some of the many advancements already visible in the WealthTech space.

Not only does adopting digital channels offer increased customisation of wealth management services, it also allows you to pivot quickly in the event of internal/ external changes. Additionally, it is significantly cheaper on account of reduced human capital, brokerage/ fees and lower operational costs.

The year 2020 has thrown a lot of challenges, but also given opportunities to learn, evolve and adapt. This is the time to rethink how we manage money in a post-pandemic world, and rebuild on a stronger foundation for a financially secure tomorrow. The future of wealth management is digital. It is time to embrace the change.
Prateek Mehta is Co-founder, Scripbox
first published: Jan 6, 2021 09:46 am

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