How Wealth Management Technology Solutions Are Changing The Industry
Until recently, wealth, asset, and portfolio managers were reluctant to integrate tech into their practice. The reason behind this is simple – wealth managers have not felt the need to shift to tech. Traditionally, wealth managers relied on manual processes, brand legacies, and inter-personal interactions with their clients to run their practices. Moreover, the business of wealth management comes with heavy regulation, and wealth managers did not have the space for heavy technological innovation with a regulator constantly peering over their shoulders.
However, the wealth management industry has been compelled to give in to the disruptions of digitization in The COVID-19 pandemic has made professionals shift to remote working, and made the finance industry rely on digital solutions. Moreover, when every solution is faster, more flexible, and increasingly convenient in this new digital reality, wealth managers have begun to feel the pressure of a younger clientele that wants better customer experience, personalized services, and efficiency. Wealth Managers were also tasked with strengthening their operations and increasing their productivity amidst decreasing profits and rising regulations in the industry.
All these factors made the wealth management industry the latest industry to undergo a phase of digital transformation, which is giving new players enter the market with varied wealth management technology solutions.
Wealth management technology or WealthTech refers to the merger of technology like AI, Big Data, and SaaS, with financial assets like wealth, savings, and investments to create a digital financial ecosystem. When the term was coined in the early 2000s, it used to refer to technology that helped wealth managers and wealth management firms manage finances. Today, wealth management technology focuses more on improving the quality of wealth management services and the client experience.
Even though they have been put into force very recently, wealth management technology has seen its fair share of innovation – and is poised to advance further. Wealth management technology is offering wealth managers a myriad of tools that will help them make their operations more efficient and provide their clients with a better customer experience. Some of these innovations include:
- Investment Tools: Wealth management technology provides wealth managers with a suite of tools that monitor various investment portfolios, manage investment planning and automate investing, all in one place.
- Robo-Advisors: Robo-Advisors are digital tools that perform operations for clients using machine learning-based methods. Depending on the software, they can invest automatically across a variety of instruments. Their purpose is to enable wealth managers to make quick and informed investment decisions.
- Automation: In general, the Wealth Management Industry has been seeing a slow wave of digital transformation, particularly among younger wealth managers and newer wealth management firms. They’re using automation to make wealth analysis easier so they can focus on more critical areas of their business, such as creating strong customer relationships.
- RegTech: Compliance with regulatory requirements is becoming increasingly difficult for Wealth Managers, so they are employing the use of Regulatory Technology or RegTech. RegTech is a cloud-based solution that brings together AI, Machine Learning, and Human Expertise to form a concise Intelligence-as-a-Service to help Wealth Managers comply with regulatory guidelines.
With innovation at such a rapid scale, it would then be no surprise that wealth management technology is changing not only the way wealth managers and wealth management organizations operate – but also how the wealth management industry functions.
The most apparent change is the automation of processes. Be it onboarding new clients, wealth analytics, investment monitoring, or asset management, wealth management technology has facilitated the automation of various manual, rote, and time-consuming processes, removing the scope for human miscalculation. Moreover, digital identification methods like Aadhar e-KYC have allowed wealth management to move away from manual intervention and toward fully automated operations.
As all the back-end operations involved in investing and portfolio advisory and management are now handled by AI, the outcomes are highly impartial and unbiased. This adds more discipline to the process of wealth generation and management, allowing wealth managers to provide higher returns to their investors without being hampered by human bias. The use of technology has resulted in the rapid evolution of wealth management, as automation has enhanced everything from stock recommendations to tracking and monitoring a client’s investment portfolio.
It was previously impossible to evaluate wealth development ideas in the actual world, even though wealth managers and advising professionals were capable of doing so manually. As a result, the entire impact of such measures could not be properly assessed or predicted until they were put into action. Many solutions were effectively hit or miss as a result, putting clients’ assets at risk. Financial and wealth-building methods may now be properly tested under current market situations and surroundings, thanks to the evolution of wealth management. This capacity to back-test financial plans and strategies has allowed wealth managers to improve the accuracy of their decisions while also lowering the risk component.
Most importantly, wealth management technology is making helping wealth management firms serve a more diverse clientele that seeks more than just wealth management. There has been a growing interest in environmental, social, and government-based funds amongst the younger generations. With wealth managers becoming more precise and quicker, there has been a growing demand for advice on these securities. With wealth management technology, the clientele of wealth management solutions is not just limited to the “Baby Boomer” generation. Wealth management firms trying to attract clients from the younger generations – particularly from Generation Z.
The digital transformation of the wealth management industry is certainly a positive development, as the entire financial environment currently indicates that simpler answers to complex budgetary problems are on the horizon. Wealth managers can work in an atmosphere that allows them to take advantage of cutting-edge technology to manage their clients’ assets better.
Also Read: 5 Incredible Ways In Which Data Science Has Transformed Industries
Pranab Bhandari is an Editor of the Financial Blog “Financebuzz”. Apart from writing informative financial articles for his blog, he is a regular contributor to many national and international publications namely Tweak Your Biz, Growth Rocks ETC.
