This expert piece was written by Wael Khattar, the Co-Founder of Anachron Technologies, a Fintech startup aiming to democratize Wealth Management by partnering with Banks & Financial Institutions. His previous experience includes several years in Investment Advisory & Wealth Management.
Wealth Management has always been an industry restricted to the wealthy, to the 1% of the population that could afford, and needed, a personalized wealth manager to handle their complex finances. The client – advisor relationship long cherished by the industry, and personal connections have always been the main driver of success. Inviting the customer to lunch, dinner and/or expensive events has always been the norm.
With the rise of technology and transfer of wealth to the new generation, could that old adage be on the brink of change?
The industry is on the verge of the biggest wealth transfer in its history, with the Baby Boomer generation passing their wealth onto the younger generation. This wealth transfer will cause ripples across the Wealth Management industry as these new clients have different tastes and expectations.
Today’s Investors demand transparency in a world where a lack of trust is ensuing. The new generation of investors is willing to trade personal information in return for more transparency and faster and cheaper investment advice.
The big question for the industry becomes one that is critical to the survival of their businesses: how do we offer clients what they want, at profitable margins, while industry margins decrease every year?
Offering better quality services at lower costs seems like every CEO’s dream, one that would never be realized. However, this has happened time and time again recently with the rise of technology as a catalyst for many businesses. And Wealth Management is no different.
The Wealth Management landscape is shifting, with many innovations in the field equipping Wealth Management firms with the tools to be competitive in a market that BigTech companies not specializing in financial services like Facebook, Google, and Amazon are looking to enter.
Wealth Management software solutions are increasing advisor efficiency, decreasing market analysis time, and building portfolios and services for the client; but, more importantly, the Fintech industry has adopted the need for regulation by automating the required reporting and the screening for clients, one of the major costs passed on from the regulators onto market players.
On the other hand, the world is experiencing a wave of Roboadvisors aiming to democratize the investment advisory experience. The newcomers are digitizing the client experience, creating simple and intuitive processes that personalize investment portfolios based on algorithmic asset allocation.
The rise of these independent Roboadvisors has grabbed the attention of incumbents, with many large banks and financial institutions either acquiring the newcomers, adopting the technology from service providers, or building the service internally if their scale allows them to.
So far, Roboadvisors have been designed to attract the attention of Mass Affluents, the client segment that could not previously access private banking service. However, they also managed to tempt High Net Worth Individuals looking to invest a portion of their wealth in automated solutions. They are forecasted to attract further assets away from traditional players. BI Intelligence projects that 10% of Global Assets under Management will be managed by automated financial advisors by 2020.
It is important to note that current technological advances are still unable to cover the full suite of services offered by the Wealth Management industry, as complex financial structures and balance sheet personalization are not technologically feasible yet. But with Roboadvisors becoming smarter every year and technological innovation sweeping through the industry, one thing is certain, Wealth Management is changing, and only those that are willing to change will survive.