With everyone working from home, the COVID-19 pandemic may well be the ‘digital-first’ tipping point for private bankers and the broader wealth management industry to change the way they do things. Combining the inevitable acceptance and adoption of videochat technologies like Zoom, Microsoft Teams and Webex, and an evolving convergence of technologies like Data Science, Natural Language Programming (NLP) and robo-trading automation – structural change is already underway in this traditionally human facing space.

Developing systems that learn, adapt and respond autonomously rather than simply execute predefined instructions will be the battleground for fintech challengers throughout the 2020s, but more so over the next 12 months as many attempt to take advantage of the situation today and leapfrog competitors. Those who wish to be successful in the post COVID-19 era will not only require deep domain expertise and understand the nitty gritty of underlying traditional processes, but will need the technical capability to deliver ‘digital’ tools and design thinking – a combination of skills that is hard to come by.

“Developing systems that learn, adapt and respond autonomously rather than simply execute predefined instructions will be the battleground for fintech challengers throughout the 2020s”

When considering the automation opportunities readily offered through cloud AI tools and API’s, few banks will argue against the onboarding and KYC process as a key priority area. Traditionally a paper intensive, and FTE heavy operation, the customer acquisition process is often the first impression a new customer gets of its asset manager or financial advisor, and as organizations look to enable remote working it is imperative that they have the digital tools that can accommodate this. New advancements in integrating OCR and NLP, now enable banks to deliver a more frictionless experience by allowing customers to easily upload documents and extract the needed information to fully-automate their KYC or risk processes. Add to that the mainstream acceptance of digital signature platforms like DocuSign or PandaDocs, and the end-to-end process is almost human-free.

Several leading consultancies and market analysts have forecast an increased demand for wealth management services, and with document management costs forming a huge part of acquisition cost, any increase in straight through processing of these documents will reduce the burden on the industry as a whole and help transform the customer experience. The potential for FTE cost savings and reduced turnaround time for near-instant fulfillment of new account opening are incentives too hard to ignore, and wealth management firms will need to invest heavily in the ability to read and automate structured, semi-structured and unstructured documents. Coupled with the combination of more affordable and extensive processing power, general availability of algorithms through algo ‘marketplaces’, and colossal data sets to feed the algorithms has unleashed a new era of RPA.

With the proliferation of ETFs and fintech wealth challengers like eToro, Betterment and Wealth Front, traditional wealth and asset management firms need to start developing and launching their own hybrid robo-advisory services and real-time client collaboration services to differentiate. There are many variations and perceptions of what exactly a robo-advisor does. Simply put, a robo-advisor is a tool or solution that uses a variety of methods and algorithms to automate the asset allocation of investments for an individual’s unique persona. Furthermore, a ‘hybrid’ robo-advisor includes facilities to foster engagement and one-to-one interaction with human financial advisors – typically for more complex services and advice such as taxes, retirement or estate planning. Incumbent wealth managers and private bankers are all too aware that the future of their business will be about the successful use of this technology.

Unfortunately, the historical problem with trying to get a Financial Investment Advisor, was that many insist on a large, minimum sum of money to invest which has been beyond the reach of most individuals particularly those who are younger, or have a lower net worth. For the most part robo-advisors like Wealthfront and Betterment now solve this problem, and can help inexperienced individuals with goal setting and simple asset allocation — particularly when they have little idea where to start. While the investment advice of these robo-advisors may not be fully personalized, it is far superior to what most inexperienced individuals have — which is usually an assortment of investments with no asset allocation, actively managed funds, high annual fees, and whatever “investment du jour” their friends have recommended.

In a post COVID-19 era you can expect the industry to continue to launch a range of new robo advisory services. Some will have a simple focus on the end-goal and are ideal for individuals who don’t care or want to learn about the in’s and out’s of investing. For these individuals, the annual fee of 0.25%, or less, is well worth good financial advice that they wouldn’t otherwise have had.

For more mature and astute investors, the services of a hybrid robo-advisor are needed because some financial advisors add tremendous value through the guidance of asset allocation based upon unquantifiable factors, which automated algorithms cannot do. These advisors can give experienced advice about long-term life decisions like retirement planning, private investing and inheritance strategies for their children.

A Hybrid robo-advisor is essentially a tech-assisted service, and not 100% automated. It allows wealth management firms who use their people to generate fees with a partially automated solution in which the human element is not completely removed from the loop. Most private bankers and wealth management firms agree that there is value in algo driven investment approaches, but whilst it might help as a mass market solution, there are frequently edge cases where automated guidance isn’t appropriate.

A colossal transfer in prosperity from an aging baby boomer generation to generation Y is currently underway, and coronavirus-induced technology has now reshaped the industry in ways that demand greater efficiency and adaptation to digital and videochat channels. The stakes are immense, and each year more than a $1 trillion is inherited by new generations. Global High-Net-Worth Individual capital is estimated at over $55 trillion, and is anticipated to grow at an average annual rate of 6% to 9% over the next five years. In 2020, baby boomers and millennials—retain over 50% of all investable assets in the U.S., some US$35 trillion. While generation X will continue to be the most affluent segment leading up to and beyond 2030 their share of net household capital will trickle down to 44.4% by 2030. Today younger investors will never be more important to wealth managers, and therein lies the biggest challenge for the industry, asset attrition rates exceed 50% in intergenerational transfers of wealth. Hybrid robo advisors are the answer to customer retention and loyalty in an environment of constantly changing demands and an availability of choice by those who have embraced the pandemic environmental factors and emerged as Wealth Management 2.0.

How Thynk Digital can help you

If you are interested or looking to upgrade or deploy a Wealth Management 2.0 solution in your business, you should contact us. The Thynk Digital team has a state-of-the-art Wealth Management 2.0 platform called Tonic. Our UI and UX team are also able to custom design your entire client lifecycle experience from digital onboarding, KYC, Risk assessment and your enhanced mobile/internet customer interface. We are experts in developing Wealth Management 2.0 solutions and Videochat functionality into your client experience and have a proven track record with experience of many live roll-outs to investment banks, asset managers and wealth management firms globally. Thynk Digital is a Microsoft Gold Partner and at our Global Innovation Center (Thynklabs), we work with leading financial organizations to define and reimagine the next generation of Wealth Management Services.

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