Finding the appropriate balance is critical to the future of wealth management

The future of wealth management lies within two key aspects: right asset allocation strategy and seamless client experience.

Asset allocation can be defined as essentially an investment strategy which seeks to maximize risk adjusted returns by allocating money towards investment instruments as per investors financial goals, risk appetite and time horizon. Various asset classes have varying degree of risk and return profile. Every asset class may perform differently over time with varying correlation. A successful asset allocation thus requires finding a balance of reward with an acceptable level of risk.

For long-term investing and life stage planning asset allocation is very crucial as it can help to absorb the impact of market volatility and maintain a balance between risk and return. Appropriate asset allocation can help investors ride through the ups and downs of market performance. Historically also, no single asset class out-performs another consistently and there isn’t also any asset allocation strategy right for everyone. Once asset allocation strategy has been defined and implemented for an investor, a 3-6 monthly review/rebalancing is also essential to ascertain that investment strategy is aligned with the risk profile and financial goals.

With increasing young population coming into work force 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 expecting holistic offerings rather than merely product-based offerings which encompasses all their wealth management needs.

Technology is poised to change the nature and delivery of wealth management offerings significantly, just as it has transformed many other industries. Off late, several wealth-tech companies have emerged. These firms leverage technology to deliver customized financial plans and asset allocations using technology and complex algorithms in a bid to emphasize the shift from Relationship Manager led to technology-based, model-driven advice. This approach is especially attractive for the new age investors who are not only technology-savvy but also want greater control over their wealth and financial wellbeing —the re-wired Investors.

There are various areas where technology has had significant impact on client experience and offerings of wealth management companies.

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. With the help of technology, wealth management companies can offer greater portfolio insights and customized solutions to investors which match their expectations and risk appetite. New age technologies such as artificial intelligence and machine learning combined with big data analytics is disrupting wealth management space in a big way.

Client Meetings: Technology can aid in augmenting client interactions via multiple digital touchpoints, video calling and shared desktop features have been rapidly adopted by both investors and wealth managers to provide a seamless experience.

Digital Touchpoints: With the help of technology, wealth management firms can offer low-cost digital touchpoint solutions to their clients, enabling easier and faster access portfolio updates, various reports such as capital gains report and holding statement and ease of transacting online. Features such as Chat bots and WhatsApp enabled touchpoints are helping in delivering superior client experience with lesser turnaround time.

The future of wealth management lies in a hybrid model where technology augments the human led wealth management offerings to clients. A hybrid model combines elements of technology and human- based advice of right asset allocation strategies. The balance between the two would vary across the investor segments basis on investor’s financial needs, financial background, ability and willingness to pay etc. Wealth Management firms should aim to harness the power of technology to automate and outsource aspects like reporting and MIS among others and focus on the elements of advice where wealth managers can add value and differentiate themselves.



Views expressed above are the author’s own.


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