Top 5 Trends In Wealth Management

Individuals and companies have been changing the way they manage their finances through WealthTech or wealth management technology. A digital ecosystem of finances consisting of technologies such as AI, big data, and SaaS, is governing the global flow of money. The trends surrounding this set of technologies are transforming and being reimagined continuously to meet global changes in financial governance.

As and when the market presents opportunities, wealth management firms must capitalize on them. With market movements such as changing investor demographics, more millennials actively participating, and women running families, the wealth management paradigm must also adapt. While big data can help them gain massive insights into products and services, AI can drive the development of new applications. Understanding what works and what doesn't must be at the heart of WealthTech.

In this article, we will explore the latest trends being adopted by wealth management technology companies competing for the lion's share of the market. Let us first understand the concept of WealthTech and its significance.

Growing Significance Of Wealth Management Technology  

The term WealthTech was coined in the early 21st century to define a suite of technologies that enable personal and professional institutions to manage their finances. Meanwhile, the last decade has witnessed a shift in the applications of WealthTech towards improving consumer services. This way the impact of these technologies is being felt across a wide array of ancillary as well as core finance-related subsectors.

Today's businesses are leveraging big data, machine learning, and artificial intelligence in a big way to manage their finances accurately. Wealth Tech allows these businesses to manage their wealth in efficient and innovative ways that conventional financial institutions simply cannot manage to do. 

A major draw of wealth management technologies is the personalization of financial advice tailored to serve each individual need and financial makeup. Using details of an individual's income, savings, investment, and expenditure, a comprehensive plan is designed to safeguard against life's surprises. And technologies such as predictive analytics, neural networks, and deep learning help with these applications in more and more innovative ways every day.

Customer Success Story: Developing a mobile solution for one of America’s fast-growing wealth management platforms

Trends Shaping Wealth Management Technology

New standards are being introduced to the formerly static financial industry shaped by a new generation of investors. These investors have unprecedented expectations and preferences in terms of how advice and investment products are being delivered. A challenging investment environment and rising costs of risk are leading to some of the following emerging trends in wealth management today:

1) Debiasing Asset Management Decisions

It is becoming more difficult to retain clients who are opting for passive index funds instead of wealth management funds. Fund management institutions are, therefore, implementing the capabilities of machine learning to identify cognitive biases in investors. Based on insights generated by this approach, they are also suggesting corrective measures to retain wealth management clients.

A broad array of data showing the areas of investment driven by whims and emotions are being studied by machine learning models. The fund manager gets alerts about these trends and then gets to work. They come up with long-term winning strategies for investors rather than short-term wins based on intuition.

2)Agile Delivery Models For HNWs

High Net-Worth (HNW) individuals are responding in a skewed manner towards disruptive trends in wealth management startups. Transitioning a wealth management firm's service delivery model to one that is based on agile principles is one such attractive development for HNWs. Agile delivery models also enable faster development of new services and enhance work efficiencies. 

Agile delivery systems implement extensive automation to produce insightful solutions based upon vast amounts of data. A combination of historical and real-time information leads to financial advice for clients to help them make better decisions on asset allocation, investment preferences, valuations, and tax savings.

3)Curbing Compliance Expenditure

Compliance costs can be completely eliminated with the right application of solutions for the same. One of the most obvious methods involves cutting down on the volume of secondary reviews without compromising on the quality. A statistically valid percentage of the reviews is selected for a second review, therefore, reducing the cost of compliance while ensuring optimal quality standards.

Alerts and workflows related to compliance that are incorporated into a wealth management firm's system can be configured to minimize redundant monitoring. Additionally, routine administrative reviews can be assigned to middle-level employees to keep the upper management free to make big-picture decisions. Documentation can be automated with the right software dependencies incorporated into the wealth management workflow.

4)Virtual Advisory Tools

When the need for direct interactions with clients gets minimized, advisors do not have to allocate their resources to clients based on their assets. Virtual tools can help advisors to provide their clients with the necessary regular reports on the performance of their assets without having to maintain contact with these clients, physically or even otherwise.

Advisors can then focus their efforts on gaining new clients instead. The current cost pressure for wealth management firms comes down when client interactions are automated through the means of analytics reports. A widespread shift is being witnessed from pure Customer Relationship Management (CRM) systems to more proactive alternatives known as Customer Interaction Management (CIM) systems.

5)Implementing More Open APIs

Wealth management firms have had to look into alternative revenue streams owing to the growing trend of open banking. This is also a direct consequence of low-interest rates squeezing profit margins. Several of these firms are also exploring partnerships with companies or developer teams that can provide APIs for their in-house applications and systems.

Banking-as-a-Platform is a growing area of research that is attempting to combine wealth management and banking APIs with traditional client management paradigms. Wealth management firms will have immediate access to new APIs that they may need, making the speed of deployment for their software products far higher than ever.

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Emerging Trends Are Transforming Wealth Management Systems

Wealth management firms are navigating through a brand new set of challenges - a tough investment environment, increasing levels of risk, difficulty to ensure superior performance for clients. Some of the above trends can help bypass these difficulties in favor of disruptive business models for the wealth management sector in addition to new competitive patterns for the finance industry in general. To explore what Daffodil's FinTech Solutions can do for your financial software, you can book a free consultation with us.