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Trends in Wealth Management

To gain a distinctive view into the experiences of both customers and advisors as the wealth management industry faces change, Forbes Insights, in partnership with Temenos, surveyed more than 60 wealth managers all over the world and 35 High- Net Worth (HNW) clients about the evolving banking encounter —how they convey, their needs and the need for technology
One of the key findings:
• 42% of wealth managers believe that the mixture of offline and digital means of communication is perfect.
• 34% of HNW clients need either digital-only or a combination of offline and digital communication
• 62% of HNW customers say the digitization of wealth management services is good overall, but they nevertheless desire to meet regularly with the advisor.
• 17% of HNW customers say technology is not dispensable.
• 48% of HNW clients rate cyber threat and hacking as a top concern associated with the use of technology
• 45% of wealth managers believe comprehensive analysis of performance and financial results is the finest way to establish trust with clients.
The survey also affirms it is mainly a myth that young investors that are wealthy are entirely self sufficient and they convey mainly through virtual channels, with little or no interest in face-to-face relationships with advisors. True, they want to make their own decisions, and they are definitely at home in the digital world ; but they also need to work to validate their viewpoints, on the go, across any channel that is available and to get second alternatives.
Some other notable observations:
Investors over age 50 tend to be focused on the security of data when it comes to wealth management.
Understanding preferences and the feelings of clients on a deeply personal level is at the core of retention, the underpinning business object for the sector.
A substantial number (42%) of wealth managers surveyed consider that legacy systems are “somewhat of a difficulty. ”
Altering expectations of a younger generation of investors to wealth management will create opportunities. For example, it’s typical of Millennials, and also of some Xers and Boomers, to downplay expert guidance and believe in the ‘wisdom of their tribe.’ They also desire to engage in new ways: always and everywhere and through new combinations of digital and human -established channels. This has deep implications for every wealth management company. Additionally, the Xers and Millennials who command only about one-fifth of the states ’ retail assets today will command about half of them within the next 15 years. So the riches advisors who do business on their terms and can connect to young investors will have a leg up on future growth.
Innovation in wealth management will also come in the form of guidance that is holistic: consumers will search for advice beyond traditional portfolio allocation and performance standards into how you can achieve various life goals like healthcare, relocation, education, and leisure. This will necessitate access to broader bodies of knowledge and more comprehensive frameworks to incorporate advice across disparate targets.
We believe the Wealth Management sector is poised for significant innovation with regards to the use of analytics to support company objectives and better engage with consumers. In this respect, the sector is somewhat lagging behind other sectors (Retail, P&C) but will be catching up fast given considerable levels of investment being made in big data and sophisticated analytics capabilities.
Lastly, we see quite a few of startups dedicated to the democratizing of access to esoteric advantages categories (e.g., loans or choices) and institutional strategies or research tools. While some regulatory issues must be overcome (e.g., the definition of accredited investors), we expect to see continued innovation in this place.
The changing expectations of the younger investor will create growth opportunities.
What are some measures businesses can take to address these challenges?
This really is not meant as an exhaustive list but rather a listing of especially significant – yet challenging – steps wealth management firms can require.
Embrace change: The status quo is not possible anymore: too many sources of disruption (in the the rise of robo guidance to a fresh generation of investors, new competitions, new regulations, etc.) are coming together to profoundly reshape the wealth management business going forward on (see our related report).
Build a culture of innovation: Most wealth management firms that are established are not very good at this. It is also about driving adoption through substantial bodies of counselors and product staff and providing empowering technologies. It is increasingly about prototyping and testing quickly.
Construct new capabilities that’ll drive differentiation in the market place: Examples include digital client engagement; digital, slick onboarding process integrated with KYC; big data management and advanced analytics; and segmentation of advisers and clients. For many companies, this really is likely to require purchases or partnerships to construct capacities that are required quicker. Wealth management firms don’t have a very strong track record here.
Match them with front-line and fix to the evolving demographics of investors staff: This is crucial that you help businesses stay in tune with their customers’ tastes.
Anticipate and prepare the upcoming retirement tide by boomers: Boomers must consider their longevity demands and risks many years before retirement age. Their advisors have to find new methods to participate with them on this issue on. Gamification may be part of the solution in wealth management area.
Eventually, for large diversified banks or asset managers with several coexisting advisory models under exactly the same corporate umbrella (for instance a digital robo offering, a traditional full service brokerage, and retail banking wealth management model), transition from a referral and migration paradigm to a collaboration one. This will be truly challenging to many firms and will demand potentially new pricing and relationship management models. But wealthy customers are requiring access to several advisory models at once.
“If (wealth management advisors ) continue to work just how you have been, you may not maintain business in five years” – Business leader Joe Duran, 2015 TD Ameritrade Wealth Adviser Conference.
The wealth management segment is a possible high growth business for any financial institution. It’s the greatest customer touch section of banking and is fostered on long term and extremely successful advisory relationships. It’s also the ripest section for disruption due to a clear shift in expectations and client tastes for their financial future. This three-part series investigates the industry trends, business use cases mapped to technology and design and disruptive themes and strategies.
As it broadly refers to an aggregation of financial services there is no one universally accepted definition of wealth management. Included in these are financial advisory, personal investment management and planning disciplines directly for the advantage of high- net-worth (HNW) clients. But wealth management has also become a highly popular branding term that advisors of many different kinds increasingly embrace. So this term now refers to a broad range of business models and potential functions.
Trends associated with shifting customer demographics, evolving expectations from HNW customers regarding their needs (including driving societal impact), technology and tumultuous rivalry are converging. Paradigms and new challenges are afoot in the wealth management space, but on the other side of the coin, so is a lot of opportunity.
A wealth manager is a specialized financial advisor who advises on how exactly to prepare for present and future financial needs and helps a client construct an entire investment portfolio. The investment part of wealth management normally entails the selection of individual investments and also both asset allocation of a portfolio that is whole. The planning function of wealth management often incorporates estate planning for people as well as family estates as well as tax planning around the investment portfolio.
There is absolutely no trade certification for a wealth manager. Several titles are commonly used such as advisors, family office representatives, private bankers, etc. Many of these professionals are certified CFPs, CPAs and MBAs too. Authorized professionals are also sometimes seen augmenting their legal expertise with these certifications.
State of Global Wealth Management
Private banking services are delivered to high net worth individuals (HNWI). These are the wealthiest clients that demand the highest levels of service and more customized product offerings than are provided to frequent customers. Usually, wealth management is a subsidiary company of a larger investment or retail banking conglomerate. Private banking also includes other services like tax and estate planning planning as we shall see in several paragraphs
The World Wealth Report for 2015 was published jointly by Royal Bank of Scotland (RBS) and CapGemini. Notable highlights from the report include:
1. Nearly 1 million people in the world achieved millionaire standing in 2014
2. The collective investible assets of the world’s HNWI totaled $56 trillion
3. By 2017, the entire assets under management for worldwide HNWIs will climb beyond $70 trillion
4. Asia Pacific has the world’s highest number of millionaires with China and India posting the greatest rates of growth respectively
5. North America was a close second at 8.3%. Both regions surpassed for high net worth wealth
6. Equities were the favored investment vehicle for global HNWI with cash deposits, real estate and other alternative investments forming the remainder
7. The HNWI population is also tremendously credit favorable
This slower pace of increase now means that companies should move to a more relationship centric model, particularly among highly enviable segment : younger investors. The report stresses that now wealth managers are not able to serve different needs of HNW clients from both a mindset, business offering and technology ability perspective under the age of 45.
As depicted above, services are broadly provided by full-service wealth management companies in the following areas :
Investment Advisory
A wealth manager is a private financial advisor who helps a customer assemble an investment portfolio that helps prepare depending on time horizons and their respective danger desires.
Retirement Planning
Retirement planning is an obvious function of a customer ’s private financial journey. From a HNWI perspective, there is certainly a need to supply retirement services that are complicated while balancing taxes, income needs, estate prevention and so on.
Estate Planning
A key function of wealth management is always to help customers pass on their assets via inheritance. Wealth managers help construct wills that leverage trusts and kinds of insurance to help ease inheritance that is smooth.
Tax Preparation
The skill to reach the right mix of investments from a tax perspective is a capability that is key.
Full Service Investment Banking
For refined institutional customers, the ability to offer a raft of investment banking services is an incredibly appealing capability.
Insurance Management
A wealth manager needs to be well versed in the sorts of insurance bought by their HNWI customers so that the hedging services that are appropriate can be put in place.
Institutional Investments
Some wealth managers cater to institutional investors like pension funds and hedge funds and offer a number of back office functions.
It really is to be noted that the wealth manager is not always a professional in all these places but rather operates nicely with the various places of an investment firm from a preparation, tax and legal perspective to ensure that their clients can accomplish the results that are greatest.
Customer Preferences and Trends
There are not unclear changing preferences on behalf of the HNWI, including:
1. The wealth management community is mostly missing the younger customer ’s needs, while powerful satisfaction scores were given by elderly customers to their existing wealth supervisors.
2. Regulatory and price pressures are growing leading to commodification of services
3. Innovative automation and usage techniques of data assets among new entrants (aka the FinTechs) are leading to the rise of “roboadvisor” services which have already begun disrupting existing players in a massive manner in certain HNWI segments.
4. A need to offer holistic financial services tailored to the behavioral needs of the HNWI investors.
Technology Trends
There has been an understanding that other regions have been trailed by wealth management as a sub sector from a technology and digitization perspective. As with banking organizations that are wider, the wealth management company has been under considerable pressure from the perspective of technology and the astounding pace of innovation seen over the last few years from Big Data, a cloud and open source standpoint. Here are a couple trends to keep an eye on:
1. The dependence on the Digitized Wealth Office
The younger HNWI customers (defined as under 45) use cellular technology as an easy method of socializing with their counselors. A large proportion of applications are still individually managed with distinct user experiences which range from customer onboarding to trade management to servicing. There is a crying demand for IT infrastructure modernization ranging to Big Data to micro across the sector from cloud computing -services to agile customs boosting techniques such as for instance a DevOps approach.
2. The requirement for Open and Smart Data Architecture
Functions that were siloed have led to siloed data architectures working on custom built legacy applications. All of which positively impacts the client experience and inhibit the programs from using data in a fashion that always. There exists certainly a demand to do more with existing data assets and to have an integrated digital experience both internationally and regionally. Current players possess a huge first mover advantage as they offer exceptionally established financial products across their large (and largely loyal and tacky ) customer bases, a wide networks of physical locations, and rich troves of info that pertain to customer accounts and demographic info. … .. Nonetheless, it isn’t enough to just have the info. They must manage to drive change through heritage thinking and infrastructures as things change around the entire industry as it struggles to adapt into a major new section (millennial customers) who increasingly use mobile apparatus and require more contextual services and a seamless and highly analytic- driven, unified banking encounter —an experience similar to what consumers typically experience via the Internet on net properties like Facebook, Amazon, Google, Yahoo and so on. … ..
3. Thee need for more  automation
The need to invent a closer banker/client experience is not just driving demand around data silos and streams themselves. It’s driving players to move from paper based models to highly automated model, digital and a more seamless to rework countless existing rear and front office processes —the weakest link in the chain.
4. The Demand to “Right- size” or Change Existing Business Models predicated on Opinions and Customer Preferences
The clear continuing subject in the wealth management space is constant innovation. Firms have to ask themselves if they’ve been offering the appropriate products that cater to an increasingly affluent yet dynamic clientele.
The following post in this string will concentrate on the company lifecycle of wealth management. We’ll begin by describing granular use cases across the whole lifecycle from a company standpoint, and we’ll then examine the pivotal role of Big Data empowered architectures along with a fresh age reference design.
In the final and third post in this string, we round off the discussion using an examination of strategic business recommendations for wealth management firms —recommendations which I will consider will drive astounding business advantages by providing a first-class customer experience and finally innovative offerings.

Benefits of robo advice

Benefits of Robo Advice according to ESMA

Robo advice has had a major impact on the wealth management industry. Several wealth managers have already started a robo advice alternative; others are or have a choice in development reviewing strategic options.
Measures for Wealth Managers
Wealth management companies assessing their choices associated with robo advice should assess five essential factors:
1. Alternatives will be developed in house,through a venture, or via theacquisition of a current supplier.
2 The robo advice will be placed—as a standalone offering, within a full service financial advisory program a hybrid vehicle of both.
3 Whether the company has the analytics customers and to get the tips and insights to work efficiently with them.
4 How the product will provide an intuitive and satisfactory customer expertise. That is usually reached through an iterative procedure involving prototypes, client laboratories and high-speed revisions and improvements.
5. Internal and external advertising management plans undertaken
We consider the effects that are most significant on the business, nevertheless, will come from capacities which haven’t yet. Which, although been released to the marketplace are legitimate extensions of robo advice abilities. As well as cognitive these comprise the add-on of investments besides ETFs, eventually, alternate investments such as property and hedge funds. The increase of robo adice matches up with that being indicated by business trends. More cooperation is being sought by investors and integration with their advisers. Rather than just being told how their cash is how it’s and invested performing, robo advisory gives investors a manner to connect to their advisers, raising their participation.

Benefits to financial institutions

Benefits relating to cost
Financial institutions incur fewer costs to deliver financial advice
It may be cheaper for financial institutions to provide advice through automated tools, for example because automated advice does not require the employment of human advisers, or because fewer costs are incurred from potential human errors. Although a period of initial investment is required, once the cost of system development has been met, the marginal cost of each new transaction may be relatively low, enabling financial institutions to benefit from economies of scale.
Benefits relating to the size of the potential client base 
Financial institutions have access to a wider range of consumers if they provide advice through automated tools
By providing advice through automated tools financial institutions may have access to a wider range of consumers, not only due to the relative ease of attracting a potential clients from across the EU via an online presence, but also because they can attract new categories of consumers that prefer to use online channels as opposed to face-to-face or telephone channels. Financial institutions can thus benefit from automated tools to increase their distribution platform to deliver advice.
Benefits relating to the quality of service
Financial institutions use automated tools to deliver a consistent consumer experience
Automated tools may be seen by financial institutions as a way to deliver a more standardised consumer experience by removing the potential for differences due to human interpretation.
An automated tool may also enhance the quality of the service provided to consumers by providing a direct link with current market or other relevant data. Automated tools can more rapidly process large quantities of evolving data and consequently update the advice output on a real-time and ongoing basis, if needed.
The provision of advice by financial institutions is more easily auditable because automated tools are more easily interrogated
Automated processes that are documented ex ante, for example in the logic of an algorithm or decision tress, can be easily reviewed and monitored by financial institutions (e.g. by Compliance, Risk or Audit functions).  It may be also be easier on an ex post basis to interrogate decisions made by an automated  tool, which performs tasks in a highly consistent manner than decisions that have been made by a human being.
As automated tools can generate an automatic record of the information that has been captured, the decisions made, and the output provided, it may also be easier for financial institutions to maintain records of the advice process, and to provide such records, for example in the event of a consumer complaint.

Benefits to consumers

Benefits relating to cost
Consumers pay less when they receive advice through automated tools
Automation in financial advice could decrease the costs of providing advice, which might make advice more affordable to a wider range of consumers. Most automated advisers market their offering as a low cost alternative to human advice.
Benefits relating to consumer access
A wider range of consumers has access to advice through automated tools
Consumers that may not normally contact a human advisor to obtain financial advice (e.g. because they feel that they are not wealthy enough to consult a financial advisor, or that the advisor is not objective enough) might feel more confident using robo advice tools. Increasing automation may therefore democratise access to financial advice.
Some categories of users  do not have experience in consulting a human financial advisor (for example, younger consumers, or less affluent consumers where the cost of financial advice may not be worth the benefit of the advice provided). These consumers might feel that robo advisory tools, which can also offer financial advice at a lower cost and with limited investment of time, are more accessible than advice provided by a person. This might give some investors greater motivation to act upon financial matters that they would not if they were using a human adviser.
Consumers have access to a wider range of service providers using robo advice tools 
As automated financial advice tools are usually available online they more readily facilitate cross-border transactions, compared to human advice. This makes it easier for consumers to access a wider range of advice providers, including from other jurisdictions.
Consumers obtain financial advice in a faster, easier and non-time-consuming way
Because robo advisory services are available online 24 hours a day, 7 days a week, and are aimed at reaching a wide range of consumers, consumers may feel that automated tools that provide advice are easier to use than a human adviser. For example, online automated tools may present information to users in a short and digestible way. It also usually takes only a few moments after an initial questionnaire is answered by the consumer before the advice is obtained as a result of the underlying algorithm.
Benefits relating to the quality of service
Consumers receive more consistent advice when they use automated tools 
A well-developed algorithm may be more consistently accurate than the human brain at complex repeatable regular processes, and in making predictions.  Robo advice tools could therefore reduce some elements of behavioural biases, human error or poor judgement that may exist when advice is provided by a human. A well-developed algorithm could ensure equal and similar advice to all investors with similar characteristics. This might improve the consistency of advice provided, regardless of the investors’ geographical residence or ability to identify and access a quality human adviser.
Robo advisory tools may also enable users to receive advice without feeling pressured or led as a result of personal relationships. Without the human interaction with an advisor, some consumers may feel they can take their decisions more freely and objectively.
Consumers obtain advice based on the most up-to-date market information when using an automated tool 
Because robo advisory software tools are able to rapidly process large volumes of complex data, it is possible for an automated tool to quickly assess and reassess the recommendations it makes against current data, on an ongoing basis. For example, robo advice tools can incorporate market changes continuously, to provide real-time, personalised feedback to consumers. Human advisors may find it more challenging to be as constantly up to date with relevant market developments.
Consumers find it easier to keep a record of the advisory process
The use of robo advice tools allows investors to easily receive and retain the details of their financial transactions online. For example, as robo software tools systematically record all the stages of the advisory process, they can easily provide a print out of the questions and answers which lead to the recommendation. This may help users in the future, for example if they have a query about the advice provided

Robo-advisers are systems that use algorithms to handle users’ investment platforms. And they may be threatening to upend the tremendous wealth management business that is international.

BI Intelligence predictions that robo-advisers will handle around 10% of overall worldwide assets under management (AUM) by 2020.

In a fresh report from BI Intelligence, we examine the marketplace for robo-advisory services, the motorists behind consumer adoption of robo- guiding the robo-adviser marketplace presents a chance to wealth management businesses that are conventional, and how startup robo-
As substantial legacy businesses start offering their own services counselors can triumph.

Big riches supervisors that are incumbent will not lose out to startups like Wealthfront and Betterment. Rather, they establishing their own products, which are scaling fast and are adopting the technology.
Consumers across all asset types are open to robo-advisers — such as the rich. 49% of the group would consider investing some of the assets using a robo advisor.
Many assets managed by robo advisers will come from those who have some investments.

Startups will have to identify their products to triumph, and are likely to find it hard to scale. They may be doing this by supplying riches managers with white label services, and more customized stand alone options.

Next steps for robo advice
We believe that robo-advice will, however, finally have an outsized impact on the wealth management business. The capabilities will, for instance, accelerate the process of fee compression which is already affecting the industry. The lower cost for robo-guidance services probably will put pressure. Wealth management companies must keep a close attention on methods to automate processes and transactions that are currently performed manually and on operating costs.
Robo advice may also give accessibility to a big new marketplace of millennials who are interested in amassing wealth, but have had only limited choices when it comes to investment management to wealth management firms. As these individuals develop and assemble assets (through their own efforts and through inheritance from their boomer parents and grandparents) they can represent an important growth opportunity for wealth management companies.
Ultimately, improvements in technology— particularly in cognitive computing and “smart machines” capable of complex reasoning and interaction with people — will transform the investing landscape in ways that are potentially disruptive. For wealth management firms, robo-guidance services can be a bet on the future — a method to get customers and financial advisors acclimated to working with machines that can enhance and expand human operation.
The time to think about this new FinTech wave, and prepare for it is now.

Empirica in the press – ‘The age of robots … ‘

On the first of July 2014 large polish economic magazine Puls Biznesu published an article “The age of robots comes to Warsaw Stock Exchange’. Article is quoting, among others, Empirica’s representatives speaking on the topic of the growth of algorithmic trading in Poland. Excerpts below.

‘Popularization of algorithmic trading on conferences like this one is step in good direction, says Michal Rozanski CEO of Empirica, a company which delivers Algorithmic Trading Platform. Expert says that computers will never replace a human in all the tasks. First and the foremost machines are taking over the processes that human traders had to perform manually. ‘I am sure that the development of algorithmic trading will not change the soul of the markets. It will not change to the race of engineers. It is and always has been the race on new, better ideas.’ says Michal Rozanski. 

 In his opinion both small and big investors will benefit. ‘Appliance of algorithmic trading tools increases liquidity and descreases bid/ask spreads which in turn decreases transaction cost born by all investors’ adds expert.

Michal Rozanski stresses that appliance of algorithmic trading does not limit to transactions with shortt time horizon, e.g. counted in miliseconds. Each trader can designs algorithms adjusted for it’s own requirements. ‘Let’s imagine an investor who would like to open a large position on KGHM shares or futures on WIG20. To make it happen it’s best to divde the order to tens or hundreds of smaller orders, which allows to hide her intentions from other market participants. Investor remains anonymous and minimizes market impact of her large order.’ explains Michal Rozanski. 

‘I am convinced that development of algorithmic trading can be a breakthrough moment in the history of our market, as long as we will treat the matter seriously and deliberately. On Wall Street share of algorithms in total turnover is estimated at 50%, in Europe at 40%, and in Poland still at below 20%. ‘ says Adam Maciejewski, CEO of Warsaw Stock Exchange.

Link to article…


Artificial intelligence in FinTech

FinTech : It is just starting

FinTech sector is producing businesses with scalable products and has seen rapid growth over the past few years. Senior executives at banks are responding to the challenge these companies have started by setting their own incubators up to capture this high-speed initiation.

Technology was once centralised, with companies being run on big databases and transaction engines. Nowadays, it is massively distributed. New businesses have sprung up to take advantage of the chances this shift brings, while leading banks still operate using the old technology. The term “peer to peer” captures some of the phenomenon, in that it is now potential for financial transactions to take place on a platform without needing a bank or indeed any entity as an intermediary.

The financial services marketplace is all about information exchange that is reliable, secure and efficient. In many cases the new alternatives can be cheaper and quicker than traditional models. A broad variety of potential models exist, which explains the increasing number of new fintech startups that have entered the market.

Needless to say, fintech is not new and technology has consistently brought gains to consumers. Back in the day, however, development costs were high, while the technologies of today are more broadly available, affordable and, most importantly, worldwide scalable.

The huge banks are setting up their own initiation arms to investigate opportunities presented not only mobile but also by by P2P and micro-payments cryptocurrencies like Bitcoin,, and distributed ledgers for example blockchain.

But as progressive as traditional financial institutions strive to be, they will remain hampered by their legacy systems and processes. I see the banking landscape continuing to change quickly as fintech businesses with talented management, viable products and clever advertising using new and traditional media take market share. Moving fast, nimbly and economically to capitalise on opportunities is the key.

Artificial intelligence in FinTech

Since its inception in the 1950s, artificial intelligence (AI) has found at least two major boom cycles and long winters of disillusionment. While artificial intelligence endured through the recent disullusionment cycle in the 1990s to today, its easing and corollary technologies have flourished, and we’re now entering into a fresh boom in applictions of the technology.

Financial services have been revolutioned by the computational arms race of the last twenty-plus years, as technologies like big data analytics, expert systems, neural networks, evolutionary algorithms, machine learning and more have enabled computers to crunch much more varied, diverse, and deep data sets than ever before.

While most of the businesses built around machines making decisions are’t true AI, they may be using data-intensive technologies that will help technologies and firms continue to get closer to executing AI in commercial applications.

Despite the hype of intelligent machines, the first uses of AI are’t replacing humans and human intelligence but augmenting them. Text-based conversational chat was adopted by many startups as a way to deliver a personal assistant-like expertise in many industries, and in fintech we’ve seen the case of businesses like Kasisto utilising AI to scale the impact of people using technology. Instead of being bounded in customer support uses by humans reacting to users through chat windows, AI and related technologies are being implemented to deliver a human-like chat encounter without the need for nearly as many human helpers.

By using smart agents that can examine and crunch data about individual behaviour and compare to broader datasets, small and big businesses could have the ability to deliver personalized financial services as a scope and scale never possible before. Consumer banking, advisory services, retail financial planning, investment advice and wealth management, all of these services can be delivered using a conversational user interface with artifical intelligence software behind. The combination of technologies can empower firms to supply services to customers where they were unable to supply human service profitably (i.e. lower net worth sections of personal financial, investment and retirement advisory), but can now function using codified knowledge and AI-powered software.

In addition to new segments, they are able to be more personal, supplying guidance at the transactional level (i.e. every individual transaction). This is the story behind smart wallets like Picture having an assistant with you to allow you to assess, price, and consider every single thing you spend money on, at a granular level that you could not be assisted by any human helper with. Is a roboadvisor that offers rule based advice using only a couple of predefined parameters AI? Likely not, but newer technologies as time goes by which are based around learning and viewing about your behaviors at the individual level, could give guidance and outcomes which might be personalized in a way never possible formerly.

AI can also power technologies that overlay humans to supply workers activities with an tracking and oversight mechanism, helping with compliance, security, and the observation of employee actions. Monitoring discrete, repetitive data entry tasks, computers could watch and learn as time passes to verify test and data entry for particular events, evaluate danger, and find fraud. Any segment of fintech that is regulated creates the chance for companies to install AI-powered employee and systems supervision.

AI technologies that allow computers to process information could augment underwriting and lending products and make decisions more easy and better than individuals alone. While it’s still to be determined how new data sets created by technologies like wearables and internet of things can be used for insurance and credit decisions, AI-based technologies make it more potential for businesses to use these new datasets in highly personal ways .

But AI is creating bigger opportunities to go beyond testing and fitting data to create trading systems and more “intelligent ” dealers, using robotraders to optimize and test predictions and trading rules. AI can help manage and augment rules and trading decisions, helping process the data and creating the algorithms managing trading rules.

Some investment firms have implemented trading algorithms based on sentiment and insights from social media and other public data sources for years, but technology companies like Dataminr are installing platforms for a larger set of businesses to use. Getting and utilizing large, heterogenous datasets is now potential for far more companies to use, so how will companies leverage and build on top of these datasets?

The future of AI in FinTech

While much of the investment in artificial intelligence has been into multi-purpose platforms which are figuring out their specific, high-value usecases, the chance in fintech is somewhat different. Fintech has a base of technological prowess in the technologies supporting AI and several immediate high value uses.

Initially, AI was used more in backend technology settings to power large scale decisioning in financial analysis , trading and lending, but now it is becoming a technology that expands how everybody interacts with financial services companies. A number of problems consumers are facing when using financial services are around the problems in getting to quality, personal service. And possibly it’s an artificially intelligent agent that helps deliver cheaper, private services that are better and faster.

Why Robo?

Why Robo?

With the advent of Automated Digital Wealth Management options (aka robo advisers), the conventional wealth management industry is facing perhaps its most tumultuous threat since low-cost online stock trading emerged in the mid 1990’s

  • The Millennial generation’s predisposition to “do-it-yourselfthrough-an-app”
  • Availability of highly credible digital wealth management options
  • Providing scalable advice
  • Suffering in the comparative shift in appetite towards ETFs the mutual fund business, and other passive investment vehicles in particular seems farther threatened since most of the solution providers by digital wealth management solutions use ETFs as their underlying investment vehicles
  • At the absolute minimum, all wealth supervisors should be highly focused on “digitizing” their businesses as consumers of all ages and demographics will expect an “Amazon and Uber – from all of their financial service providers like expertise that is ”
  • Fintech disruption in all areas of finance and investments (online banking, big data, AI, sentiment analysis)
  • New consumer brands are appearing in the digital wealth management sector (such as Betterment, Wealthfront and Personal Capital) while conventional companies are striking back by either offering their own in house options (including Charles Schwab and Vanguard) or partnering or getting to speed time to market


As a wealth advisory service, robo-advisors have already been growing in popularity for recent years. Low minimums, low fees and the guarantee of sound yields, attract new investors, particularly millennials.
Now while this kind of service created considerable asset increase at first, that increase has leveled off. Although the usage of robo-advisors continues, a tendency that is more comprehensive is replacing the service, with financial advisors using computer programs to help them in managing customer accounts and offering investment advice.
There stays a comparatively small section of investors for whom robo-advice and most of the demands can match with.
The truth is, the popularity of robo-advisers, and the lessons learned from their execution, point to online brokerages, a fresh manner advisors and other financial institutions can do business. These investment and advice suppliers obtain or can construct a platform offering much more than just advice that is digital. It can rather power an environment where a personalized investment software is successfully provided through call center, advisors and digital stations, determined by the route that is best, together with client setting.
Call it an automated advice platform—a package of applications that can direct investment choices and more, from tax-loss harvesting and rebalancing to predictive analytics and data mining, helping the adviser and business socialize with the customer through the route that is most suitable. This type of system drives cost savings and efficiencies, together with an increased customer experience.
You’ll find choices and many variables that businesses should consider when planning and installing these systems.


The financial advisory business was limited and included much more manual task by now’s standards, in and to whom.
advice delivery was ineffective and slow, along with exclusive (largely limited to rich or well-off investors). Eventually, it was not difficult for fiscal preparation to become disconnected from your real execution of the investment advice.
When technology increased rate and consumers needed immediate info delivered at their convenience and increased transparency these shortcomings became clear. Many financial advisors, working with insufficient and ageing applications, cannot fulfill with those requirements.

Robo-advisors arrive

Robo- prejudices that are behavioral could be eliminated by advisors and manage regular account maintenance while conserving prices—so the pitch went.
Some of the early robo-advisors came like Betterment and Wealthfront from pure play robo companies. Well-recognized product producers like Vanguard, BlackRock and Schwab got into the space, also. Conventional advisory companies, also as independent broker dealers and custodians, embraced automated investment technologies, looking to attract younger customers (nearly 40% of millennials are thinking about robo-advice) and smaller accounts, together with maintain their peers. Still nowadays, we see niche-oriented robo-companies like WorthFM coming to market, as businesses that are other add artificial intelligence with their platforms.
By investing in a automated platform that is advisory, companies can construct and power an omni-station surroundings—one where advice that is customized is delivered through digital versions, call center and adviser.


Growth rates have dropped, and average earnings per robo-advisors customer is decreasing, which doesn’t bode well for his or her long term prognosis.
If the portfolio is simply an apportionment of various ETFs that are passive, then it’s not more expensive to buy through a self directed account.
The robo-adviser also leaves no selection —once the asset allocation is discovered, it’s impossible to change investments. Other criticisms of pure robo-advisors are that they’ve yet to work during a long bear market or downturn (remaining invested is essential to the investing theory), and it’s not clear how they’ll manage occasions like post-retirement drawdowns. And, while many younger investors are wonderful with fiscal advice that is only digital, many others aren’t. Additionally, many facets of the fiscal advice relationship continue to demand human intervention, like tax strategies and estate planning.
Many of the notions that drove the adoption of robo-advisers in the first place stay sound, and advisers and companies have a prime chance to employ robo-advisory technology more generally across practices and their company. Really, robo- alternatives that are advisory will continue to develop to address these shortcomings, placing pressure that is on-going on advisory businesses that are conventional. By investing within an platform that is advisory that is automated, companies can construct and power an omni-station surroundings—one where advice that is customized is delivered through call center, advisors and digital versions.

By investing in a platform that is advisory that is automated, companies can assemble and power an omni-station surroundings—one where advice that is customized is delivered through digital versions, call center and adviser.
In this hyper-linked information age, a large proportion of investors, no matter account size want professional advice. The fiscal advisory businesses that can best provide this advice—in a sense which is still rewarding to the business, and in the quantity, frequency and format the customer needs —will function as ones that prosper and live. There are lots of newer “tumultuous” suppliers which are using innovative methods to deliver this advice that is professional, such as call centre and the only on-line -based advisory business Personal Capital. This places those conventional advisory companies that manage to completely comprehend their present and prospective customers at a clear edge and to develop their abilities. Companies must have the capacity to serve customers in just how they need. Technology is critical to provide the customer experience that is appropriate, fulfilling the customer’s needs consistently and economically. But, the real innovators are the ones that will push on their technology -advisory. With the proper preparation, they are able to set up an all-inclusive advice platform that is automated.

Advantages of an automated platform that is advisory

Companies which make an investment in applications and the hardware that enable an automated platform to run with omni-station advice stand to reap tremendous gains. Possibly the most noticeable is client satisfaction; customers who are receiving advice through their favorite channel and at their favorite frequency are substantially more likely to be met with the service they’re receiving and, therefore, are more likely to remain with advisors and the company. An automated advisory platform’s first job will be to identify customer needs and vector those customers into the advice delivery channel that is proper. But, that can not go considerably deeper than the platform. advisors can also use data mining to help them comprehend a customer’s obligations and total assets, much more precisely than before. The sophisticated platforms with artificial intelligence can examine behavioral profile is ’sed by a customer and call possible attrition and life events, then propose methods for the advisors to manage such occasions. The platform may have the capacity to identify possible areas for new product development centered on tasks and customer needs. The real innovators are the ones that will push on their technology -advisory. With the proper preparation, they are able to set up an all-inclusive advice platform that is automated.

Raising price efficiencies

Advisory platforms that are automated enable advisers and companies to be cost efficient in performance and their advice delivery, helping keep gains if fee income declines.

There are, needless to say, upfront prices to add applications and hardware, but automated platforms that are advisory enable advisers and companies to be more cost efficient in performance and their advice delivery, helping keep gains if fee income declines. These platforms also enable adviser and the company serve more customers of every size and kind and to scale up operations.
Past robo-advisory, technology may be a tremendous support in regards to routine account tasks, many of which are never seen by customers.
Likewise, regular coverage—quarterly, annual or as frequently as the customer needs—can be readily automated too.
Eventually, aside from the station, each interaction will be recorded by the finest automated platforms, together with any customer comments, both for to improve future interactions and regulatory functions.
Best interests: The Department of Labor’s fiduciary rule Regulations that are new are about to get stricter, especially in regards to advice on other retirement accounts and IRAs. Additionally, it sets strict rules on advisers becoming paid through commission.
With present adviser practices, the new rule WOn’t probably allow it to be rewarding for advisers to service accounts that are smaller. Nevertheless, technology— especially applications leveraging robo-adviser strategies—can empower companies to service these accounts that are smaller while still fulfilling with the fiduciary rule’s no- best-interest and commission mandates.
The fiduciary rule is more extensive than that, nevertheless, and technology will be critical to fulfilling with all its precepts. Any advice that’s given to some retirement customer must take the customer’s best interest, irrespective of how little or large the customer and no matter what station that advice is delivered through.
The appropriate technology can ensure that occurs, ensuring an adviser or an algorithm doesn’t advocate the investment merchandise that is incorrect, for instance, and making certain the advice is consistent across all stations. Technology also will keep an eye on what advice is given it is simple to demonstrate to regulators that the performance of that advice and the advice were in the customer’s best interest.
Advisory platforms that are automated enable advisers and companies to be cost efficient in performance and their advice delivery, helping keep gains if fee income declines.

The best automated advisory platform will do much more than simply offer investment merchandise suggestions and rebalancing and tax- lost harvest

While the notion of a robo-adviser is not useless, the current use of the technology does not go far enough. This creates an opportunity for forward-thinking financial institutions and advisers reap benefits and to expand the notion significantly, including cementing long-lasting and rewarding client relationships.

The greatest automated advisory platform will do much more than just offer rebalancing and investment merchandise ideas and tax-loss harvesting. The platform also must be incorporated with client relationship management (CRM) programs, so that the adviser can get up to the minute info on an account, regardless of that customer’s main advice delivery channel.

Many of these items can be handled digitally. Others will need call center advice as well as face-to-face meetings between customer and the advisor. Pivoting between channels completely understands each client’s settings and WOn’t be an issue for the company or advisors that has put in place the technology that is correct.

The finest automated advisory platform will do far more than just offer investment product suggestions and rebalancing and tax-lost harvest.

Six steps for delivering automated advisory To construct and produce this vision of a robust, technologyenabled platform, it’s essential the platform be thought out before any changes are made. We have identified six important steps that any automated advisory platform must support while particular functions will differ depending on a firm’s own settings, capabilities, client roster and plans for growth.

Step one – Client vectoring: This critical first step involves getting to know new clients, their assets and their investment aims, and then slotting them into the proper investment and servicing software. Clients can be sifted into groups for example mass market, mass affluent and high net worth, and the platform can devise investment plans for each class (e.g., UMAs for the rich and wrapping accounts for mass market investors) and based on how each client will probably prefer to be served. This assessment must be nimble enough to account for personal tastes.

Measure two – Preparation and product selection: This is the phase that perhaps most resembles now’s robo-adviser. Using information collected through questionnaires and other customer interactions, the algorithm advocates underlying securities which might be suitable to each customer and an asset allocation. The difference is the platform can also help train the client on these options—via online or call center, for example—and may also make adjustments to the recommendations based on how complicated each client’s portfolio and individual financial situation is.

Step three – Implementation: The application or the financial advisor subsequently clarifies the rationale behind the proposed investment program and makes any corrections predicated on client interaction.

Step four – Monitoring: After the automated advisory platform makes an investment, the algorithms continuously track how that investment is performing. The action could be as easy as monitoring rebalancing and drift as needed. The activity also could be more sophisticated, for example tax-loss harvesting, transaction cost optimization, or flagging an issue for additional actions by adviser or the call center.

Step five – Performance and servicing: Here we see the complete advantages of the omni-channel servicing version that an automated platform that is advisory supports. How account statements, investment reports, funding requests and other regular customer messages are best delivered depends on customer setting and adviser commitments, also as on the content of the communications themselves.

Measure six – Event-driven reinvention: Client scenarios continuously change (e.g., new job, inheritance, health complications, retirement). These life events may necessitate significant changes. Many will demand the intervention of a human adviser, although a few of these changes can be managed automatically by the platform. The platform and advisors, working in tandem, can come up with the best solution, such as a brand new investment product, changing to a new service station, or going into an UMA or UMH.

Concerns when choosing provider and a platform

Transforming a current IT system can be expensive, complex and uncertain, but this is offset by the many clear advantages of transitioning to an automated advisory strategy. Questions to consider when looking to purchase and deploy an automated advice platform comprise the following:

• What attributes does the platform The platform also needs to work within a business’s present IT infrastructure, or the business will have to upgrade its systems. Likewise, can the new platform integrate readily with a firm’s present software and with the workflow that’s already in place among its advisers, call center representatives and other professionals?

Scalable have to be addressed? Are there gaps in a firm’s existing data collection systems? Is the company’s online security robust and up up to now? The type of upgrades or changes will be needed to advisers ’ backgrounds and dashboards? What about the call center?

• What are the integration challenges? offer? As we’ve seen, there is certainly a broad range of attributes that are possible a platform will offer. Companies will want to decide how complicated and thorough they desire their first platform to be. In addition they will want to make certain it can be expanded to feature new products and services without an excessive amount of trouble as the business’s needs change.

• What other challenges is the platform? As the company’s novel of business grows firms must ensure the platform can grow with regards to the variety of advisors and clients it can support.


It must not be a question of “if” but instead “when” a company will set up an automated advisory platform. The future of the financial advisory industry will tend heavily on technology, and those companies that lag behind are bound to miss out on the advantages to advisors, customers and the firm overall.

Top companies will put in place platforms that consider the needs of advisors and clients, ensuring that advisers develop a strong instrument that helps them serve their clients more economically and effectively. The robo-adviser tendencies in recent years gave rise to fears that technology would casts aside advisors. But, it is now clear that advisers are as important as ever. An automated advisory platform can augment advisers’ expertise, ensuring that customers receive the best advice—no matter what channel they prefer.