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Technology and AI influencing the future of wealth management

Using technology to strengthen customer relationships.

In the digital world, customers have come to expect the 'Amazon experience'. That is the ability to access whatever they need, when and where they need it.

The financial services industry has not, however, always been that quick to deliver this. In wealth management in particular, the move towards digitisation has lagged.

"There has been an idea in wealth management that digitisation is not needed or is less important than in retail banking or other industries," says Jeremy Boot, senior product manager at enterprise software specialist Temenos. "The thinking was that traditional or very wealthy clients weren't interested or didn't need digitisation. That is a misconception."

This was confirmed in a recent report, AI and the Modern Wealth Manager, by Forbes Insights and Temenos. The survey found that 84% of high-net-worth individuals are accepting or highly accepting of technology in their investing experience.

A fundamental shift

In reality, customer expectations have shifted so fundamentally that a digital presence has become essential. Even in an industry like wealth management that is built on personal relationships, there is a spectrum of customer needs that have to be met.

This means making interactions personalised, relevant and accessible.

"Digitisation doesn't mean that wealth managers stop having to do things the traditional way," says Boot. "There will still be a demand for face-to-face meetings, and maybe even paper statements for older clients who have always done it that way. However we are now living through a global transfer of wealth to younger generations, meaning that the same client's grandchild might prefer to use WhatsApp to ask questions and trade online. It's about having the right channels in place to serve these different customer needs."

Most clients will, however, likely want an experience between these two extremes. They demand some of the efficiency and accessibility of digital platforms, but still value personal interactions with their relationship manager.

"In a world of democratised access to information, customers don't have to rely on their wealth manager for information on stock prices or market movements," says Boot. "That information is now all available on the internet. Wealth management is therefore no longer just about providing information, but about who can provide the best customer experience, the best value for money, and investment advice tailored to the client."

What wealth management businesses have to ensure is that they can provide a frictionless experience, regardless of how the client chooses to engage with them.

"Whether they are consulting portfolios online, receiving paper statements, or using a mobile app, it all needs to come from a single source of truth," Boot explains. "It is key for wealth managers to update their systems to avoid having separate silos for separate interaction points. There must be a single, digital core that allows them to drive that experience across any of these channels."

Hybrid models

The key trend in this industry is therefore towards hybrid business models. These sit between the adviser-led approach that may still be relevant for the ultra-rich, and fully-automated solutions like robo-advice that predominantly serve the mass market.

"Between these two extremes are models that combine the best of both worlds," says Boot. "They offer automation and digital tools that provide some kind of self-service capability, and combine these with access to an adviser as well."

Services along this spectrum can also be offered at different price points, depending on how much time the adviser needs to invest personally into engaging with the client. This opens up significant opportunities for wealth managers to grow their businesses, particularly in the mass affluent market.

"This is a segment that has largely been excluded until now because of affordability," Boot argues. "However, using digitisation and automation allows wealth managers to offer services at more accessible prices. That opens up a whole new revenue stream for them, which is especially important at a time when they are being squeezed by regulation, by changing customer attitudes, and by disruptors coming into the market."

Using artificial intelligence

Although its use is still in the early stages, artificial intelligence (AI) has the potential to be a significant enabler for these solutions, and its use is expected to increase significantly. The survey conducted by Forbes Insights and Temenos found that 34% of wealth managers currently use AI within their firms, but 99% said that that they plan to deploy AI within the next three years.

The survey respondents indicated that AI has already shown the ability to deliver results across a range of key areas in their practices. This includes delivering improvements in cybersecurity, portfolio returns, client communication, risk management and forecasting.

"Artificial intelligence can perform administrative tasks more quickly and efficiently than humans," says Boot. "For instance, it can profile customers and orient them directly to the best investment strategy according to their risk appetite and personal goals."

This has multiple advantages with regards to customer service, not least because it frees up more time for relationship managers to spend in front of their high value clients. It also offers the possibility of industrialising truly personalised offerings.

"Wealth managers need to be able to demonstrate personalised value to their affluent tiers," says Boot. "This is where artificial intelligence comes in, assessing rich customer data across their risk profile, tax situation, preferences and objectives to provide highly personalised recommendations."

First published on Moneyweb.co.za

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