We live in a world where technology touches all areas of our financial lives, from wealth management to banking, investment to insurance and beyond. While FinTech covers the broader financial technology sector, subsectors are now emerging, such as WealthTech and RegTech, to name but two. Focusing on WealthTech, what are the long-term benefits and how does this enhance wealth?
Increased accessibility
Historically, wealth management was seen as a financial service for the rich and famous and not open to general investors and the general public. However, the introduction of WealthTech has taken wealth management to a different level, in what is described as "democratised access". In addition, as the cost of running wealth management services, via WealthTech platforms, has reduced significantly, this has seen a fall in minimum investment limits.
User-friendly interfaces have also removed many of the previous layers of mystery often associated with wealth management services. In addition, the fact that you can access WealthTech platforms via many different devices has further enhanced usage levels and accessibility.
Enhanced personalisation
Like the investment sector, wealth management has always been a heavily regulated part of the financial world. From risk tolerances to broader financial assets, investment preferences to long-term financial commitments, wealth managementrequires the collation of a lot of information. This is before we even begin to process the data!
Modern-day WealthTech services have leveraged the vast power of AI and Machine Learning to analyse massive amounts of data. This has taken personalised investment recommendations to a new level, with wealth managementcompanies now able to demonstrate various scenarios. In addition, the ability to project potential investment performance and cash flow into the future also educates investors about their personal choices. Are they targeting the right long term investment goals?
Improved efficiency
As we mentioned above, collecting data when taking on a new wealth management client is critical but also time-consuming. WealthTech platforms can now automate a vast range of services which were wholly/partly manual in years gone by. This leaves wealth management teams more time to focus on the customer and build/enhance what are already close relationships. This improved client-centric approach, together with minute data analysis, is a win-win for all parties. The ability to digest, analyse and report on reams and reams of data in a split second is priceless.
Data-driven decision-making
Whether looking at wealth management as a whole or the WealthTech sector, there will always be a degree of human interaction. However, the ability to make data-driven investment decisions takes out a degree of personal preference and emotion. Using cutting-edge algorithms and other analysis methods allows us to dig deeper into often complex investment trends and simplify them. This allows wealth managers and customers to have a greater understanding of what moves markets and the ability to broadly forecast future movements.
It is important to note that not all data-driven decisions will be carried out; there will be a degree of human filtering andadaption. We are not in a situation where WealthTech platforms have taken control, but they are certainly a beneficial automation and analysis tool.
Enhanced compliance
As mentioned above, the UK financial services industry is heavily regulated, and compliance is always front and centre. Data-driven high-tech WealthTech platforms ensure that all research and decisions consider the latest regulations and compliance obligations. This may seem like a relatively modest benefit, but it saves time and money in the short term and helps avoid compliance breaches and potentially hefty fines.
Conclusion
While using complex algorithms and cutting-edge technology to digest, analyse and create reports around vast amounts of data is not new, bringing wealth management to the masses is a huge development. The use of new technology, easily accessible by an array of electronic devices, has particular attractions for the younger demographic. As these are very often the age groups which fail to appreciate pension contributions and similar actions in their early years, the long-term benefits are only just emerging.