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Dr. Raja Roy Choudhary, Director- Academic Affairs, Universal Business School, Mumbai: Need to face global challenges wisely

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Dr. Raja Roy Choudhary

The world is moving at a blistering pace with its ever-changing technologies surviving the global challenges that put pressure to create new ways of dealing the “normalcy”. The Asset and Wealth management industry is widely considered to be on the cusp of digital disruption. Technology has the potential to arrive at significant cost reductions through automation, transformed business models with digitally assisted advices and drive disproportionate market-share gains through servicing of clients more effectively.

The far-reaching humanitarian fallout of the COVID-19 crisis brings along with it the potential equally disruptive economic fallout. The roadmap ahead is hence a precarious one, driven by epidemiological uncertainty, the unique concoction of resulting shocks to both supply and demand given the macroeconomic conditions.

The wealth management industry can no-longer ignore the rise of FinTech. Over the past few years, FinTech has enjoyed a boom and wealth management clients have become increasingly accustomed to using the digital services. In the wake of COVID-19, “Social distancing” has compelled advisors to rethink on the channel of communication. Unlike prior periods of market volatility, COVID-19 has prevented customers who seek reassurance and financial guidance from meeting their financial advisors at a branch or at their house. To put things into perspective, Wealth management firms need to embrace digital servicing capabilities to better stay in touch with their clients.

Deploy world class practices to meet client concerns and lower the impulse to panic

1.Upskill RMs- Advisors/RMs must have a 360-degree view of the client holdings with crystal clear clarity on the portfolio with an ability to simulate and rebalance portfolios in real time to ensure safeguarding and sustainability of the client assets. Firms should fast-track deployment of portfolio-management intelligence tools and mechanisms to ensure RMs are updated in real time on client portfolios. Digitally enabled wealth managers will lead the clients to making strategic investments in an uncertain environment.

2.Automated Performance Reporting- Bringing On-Demand & Easy Access via dashboard and reports makes the lives of clients easier when they can glue to the figures on-the-fly. This can be backed with digital advisory systems that can further increase chances of taking the right investment moves. Fintech firms of today empower your advisors to make proactive decisions based on “Active Nudges & Alerts”. They also bring in analytics backed portfolio overview including simulations and performance attribution.

3.Digital Client On-Boarding – Gone are the days when clients need to physically visit the RMs to get on-boarding started. Times have made it relatively much easier with digital client on-boarding which comes as a boon for external asset managers, family offices, and private wealth managers. Earlier, it used to take weeks and months to onboard a client, but with fintech companies on the rise, the entire flow has been automated using a lot of maker checker processes and by using the OCR technologies, face recognition and Video KYC, followed by a FATCA questionnaire and risk profiling.

4.Data Aggregation- Much of the complexities for wealth managers stem from collation of reports from various sources viz. market data providers, brokers, trading partners, banks, etc. The FinTech solution providers integrate with multiple custodian partners and aggregate, normalize and reconcile the data, create an optimized layer and then make it ready for analytics to provide meaningful visualizations. Fintech firms take charge of multiple delta checks like data availability, receival of transaction reports from various transaction partners, custodian holding reports and reconciling them to understand whether all the trades have been considered in the holdings.

5.Hybrid Advisory- The digital platforms are also powered with hybrid advisory, wherein part of the advisory comes from the AI & ML based algorithms and the other part comes from the advisory team/RMs. This makes the investment advices more concretized in nature when you can have all the relevant visualizations with clear analysis of the portfolios.

6.Mobility – By using State of the Art technologies, most FinTech firms are keen on providing the investment figures real-time. This is ensured by giving ready access to RMs & their clients remotely from any part of the world. This creates a sticky factor for the clients as well. Efficiency in client management is the topmost priority, especially in trying times like COVID-19.

7.Due Diligence made easy- With such disruptive solutions, clients can never afford to miss any investment guideline breach. With nudges & alert-based systems in place, you’re up to date with what needs attention. Platforms which are modular and white-labelled can turn out to be scalable and flexible in the long run.

The FinTech Edgein the era of uncertainty

1.Analytics Vs. MIS: Analytics & tools to add value and scale with quality.

• HD Reports

• Performance Attribution

• Investment Mandates

• Portfolio Rebalancing

2.Proactive Vs. Reactive: Pre-trade vs. Post-trade & Fetch Vs. Push for proactive intermediation.

• Proactive system alerts

• Push systems

• What-Ifs

• Chats

3.Real Time Vs. Batch/Ad-Hoc: Algorithms to handle Big Data and deliver real-time, on-the-fly response with minimal batch

• Advanced technological architecture with parallel processing to deliver peak loads

4.Synchronized Vs. Disparate: Optimized Architecture layers to provide the right experience to the customer.

• Back-end supporting Front-end innovations

Technology- An Enabler for More Inclusive, Professional and Open Wealth Management

1.Tech makes wealth management more inclusive- Technology aids in facilitating the accessibility of wealth management to “long-tail” clients, who are otherwise denied access to such services. On the supply side, technology bridges the gap created by a very limited supply of investment managers. On the demand side, technology helps reducing the service fees so that wealth management becomes affordable to a wide range of clients.

2.Tech makes wealth management more professional- Enhancing the efficiency of wealth management through automation of processes is one prime motive. Global ubiquity of the internet has made it accessible at any time anywhere in the world. Technology enables wealth management with utmost precision. Data mining and analytics allow wealth managers and financial advisors to better understand and predict client needs. Furthermore, advanced algorithms allow personalized professional investment advice to meet each client’s unique needs at lower costs. All of this contributes to a more professional wealth management.

3.Tech makes wealth management more open- Technology can foster a more open and competitive landscape for digital wealth management. In the future, wealth management firms must develop strong, integrated capabilities if they wish to sustain and not just exist!

Robo Advisory- Overview & Key Takeaways

• The leading FinTech firms in the wealth space provide goal based Robo Advisory services to the clients at the right time.

• They are usually driven by seamless on-boarding with minimum hassles and much lesser duration.

• Robo ensures mapping the customer journeys and drop off points, and target auto campaigns to activate and retain customers. It also helps create pre-login journeys to engage the new customers.

• It’s easy to configure bank specific profiling mechanisms and create segment wise profiling process.

• Hybrid-Robo-Advice is the most preferred model where asset managers use digital services for portfolio-rebalancing or asset allocation to optimize their quality of advisory services at shorter time. It can be seen as a clear trend towards classic advisory services.

• Wealth Managers will need to revisit their books and make Robo-Advisors an indispensable part of their modus operandi- be it to grow into the profitable segment of most affluent clients, to find an efficient way to engage more with the bottom 20% of their clients or to lead the industry to a next level altogether.

Key Takeaways: User engagement is enhanced; dormant customers are activated & acquisition of new customers is not a toll task anymore! It helps capture more wallet share and creates stickiness and loyalty with a differentiated value proposition.

Navigating the Impact of COVID-19 in Wealth Technology space

COVID-19 is undoubtedly the world’s major economic shock with significant short-term ramifications for markets. Whilst the near future may not be “business as usual”, many operational activities may remain unchanged despite the lingering doldrums. The long-term implications of the crisis look pragmatic. As uncertain as these times may seem, economy is sure to recover and emerge stronger than ever before. The following can be some of the key focus areas for asset and wealth managers to consider:

1.Re-Focus and Re-Strategize- Priorities will change for asset owners and with investor behavior taking time to normalize, there will be a need to consider appropriate diversification. Invest only on the right moves!

2.Transform the digital journey- Greater strains on a firm’s IT infrastructure will lead to creating more digital business models.

3.Enhance productivity and upskill- Wealth managers must ensure that they have the much-needed equipment, tools, working practices and technology in place which will “future-proof” their business.

4.Redefine purpose-World class business leaders have the ability to look beyond the crisis and take giant steps to build trust with asset owners, create positive social impact, whilst looking beyond just profits and be purpose driven. Now is an opportune time to rethink, re-strategize and reset priorities.

Co Author Chahat Mishra, Sales Analyst, Valuefy Solutions PVT LTD

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