The tipping point is here. High tech business intelligence tools with built-in machine learning algorithms and big data inputs were once reserved for the Fortune 500. Now, the FinTech fad has shifted from early stage adopter to mainstream money manager and former technophobes are starting to digitize their businesses from end to end. New low cost, user-friendly self-service tools that can produce rapid-fire insights and on-demand customer service are finally within reach and can provide family wealth managers the brain power they need without the additional headache. Synaptik, True Interaction's "Plug, Play, Predict" machine platform is already serving companies in the space, providing value more quickly than industry norms.
Reuters white paper on the digitization of wealth management identified three drivers behind the mainstream movement towards FinTech:
- New tools for investment research, risk management, trade processing, compliance, and reporting
- New business models offering better, faster, cheaper variants of existing services in investment management and brokerage
- New marketplaces, new managers, and new financial products that are changing the way capital and risk are allocated
In this blog post, we’ll explore disruptive technologies traditional firms with limited IT expertise can use to beat the market, improve existing services and stay on top of an increasingly complex regulatory environment. By leveraging cloud, open source, big data, Artificial Intelligence, API and Chatbots, companies can create robust digital ecosystems that will win younger clients and increase profits across the board. Companies that continue to resist digital transformation run the risk of becoming less competitive while those that embrace the opportunity will benefit from supplementing talented human capital with technological know-how.
Courtesy of PWC
Beat the Market
Big name hedge funds and investment firms deploy AI to comb through the internet for new investment opportunities. The elusive “super-algo” can swallow huge amounts of information from news reports, databanks and social media platforms and quickly optimize portfolios to profit from microscopic ripples and seismic shifts in the market. While private family wealth managers have relied on traditional methods and experience to pinpoint good investment opportunities, machine learning can provide the edge they need to compete in a volatile world. Now, building data ecosystems that provide real-time information and time series data on company performance and consumer trends no longer requires a Ph.D. in data analytics or computer science.
When considering investment management software, companies should look for some key features including scenario simulation, modeling, portfolio rebalancing, performance metrics, yield curve analysis and risk analytics. Your software should also be flexible, adaptable and able to ingest structured and unstructured data. The costs of professional investment programs range from $1300 to $8000 but as the market matures costs are likely to go down.
Money Management on Demand
Wealth management firms have relied on traditional relationship-driven business models for decades. But the personal touch that keeps more senior clients happy may repel the next generation. To attract younger clientele, companies need to invest in on-demand, low-touch digital customer service models that provide better transparency and more autonomy to their clients. Creating a flexible digital strategy that allows different client segments to engage with their portfolio independently and with their advisor as little or as often as they want is key to success. EY’s report “Advice goes virtual” looks at the range of innovative wealth management models that are now available and highlights firms that have struck the perfect balance between automation and human capital. Companies like Personal Capital, Future Advisor and LearnVest provide digital platforms with phone-based financial advisor services to meet the needs of busy millennials and satisfy the clients that prefer a dedicated human that knows the future they want to make for themselves. EY’s chart on innovations in wealth management sums up the range of digital opportunities that clients are gravitating towards.
Courtesy of EY
Since the financial crisis, the cost of compliance has risen steeply. Tech Crunch reports that “the global cost of compliance is an estimated $100 billion per year. For many financial firms, compliance is 20% of their operational budget.” Innovations in RegTech, an offspring of FinTech, can automate certain components of the compliance process and have the potential to dramatically reduce the cost of doing business. The Institute for International Finance (IIF) defines “RegTech” as “the use of new technologies to solve regulatory and compliance requirements more effectively and efficiently.”
Since 2008, the increasing speed of regulatory change has kept wealth management firms in a state of paralysis. Companies are constantly playing catch up and readjusting procedures to meet new requirements. In the not so distant future, integrated RegTech solutions will connect directly with regulatory systems and automatically update formulae, allowing wealth management firms to refocus their resources on revenue generating activities.
Instead of producing lengthy paper reports for regulators, new RegTech solutions can generate and communicate required reports automatically. Instead of scouring hundreds of documents and spreadsheets on a quarterly basis, RegTech solutions will alert compliance managers to risks in real-time so they can be eliminated immediately. The possibilities are endless and the cumbersome and costly task of navigating the increasingly complex regulatory environment will continue to generate more innovations in this field. While RegTech is still in its infancy, small family wealth management firms should start investigating this growing subsector and use this disruptive technology to their advantage.
Traditional wealth management firms that continue to resist the digital revolution will begin to look antiquated, even to their most senior clientele. True Interaction specializes in building and executing digital transformation strategies for companies that don't have IT expertise. Synaptik, True Interaction's CMS for data, is already providing firms in the FinTech, RegTech and AdTech spaces with easy-to-use data management, visualization, and deep learning insights. Our experts are providing free consultations to help them assess their needs and start planning their digital future. Schedule your custom consultation here.