UNLEASHING POSSIBILITIES IN WEALTH & ASSET MANAGEMENT WITH AI

By Suman Nambiar, Global Head of Strategy, Offerings & Alliances at Mindtree Digital

The use of AI in Financial Services has been transforming business processes and functions for some time now across areas like Credit Scoring, Risk, Fraud, Trading and Back Office Operations. Front Office applications on the other hand, especially in Wealth and Asset Management, have a lot of untapped potential where the use of AI is concerned, especially to transform the customer experience and how these services are delivered to retail investors. While Algorithmic Trading has been around for many years, and the use of AI, along with other automation technologies such as Robotic Process Automation, has been a focus for increasing efficiency, productivity and cost savings across Back Office operations.

Given the relationship-based, ‘High Touch’ model of serving customers in the Wealth Management industry, it has been reluctant to use technologies like AI to mediate interactions with customers as this tends to have a negative perception in customers’ eyes and leaves firms feeling that they would lose the customer intimacy and knowledge that helps them differentiate their offerings and quality of service. However, the traditional model is hard to scale without charging significant premiums for quality of service – in some firms, it is not uncommon for Wealth Managers to manage 200 to 500 small portfolios at the same time, which means templatized investment approaches and strategies are rolled over from one portfolio to the next.

Suman Nambiar

As more and more millennials start to become potential customers for these services, the need to use technology to deliver a personalized experience in line with their expectations is becoming critical for the industry, especially as Fintech startups promise to eliminate wealth managers altogether. However, robo-advisers and the like have by and large failed to deliver on their initial promise – there is hence a clear opportunity for the industry to use AI technologies within their current business models to transform the Front Office experience. Other industries such as Retail, Consumer Packaged Goods and Media are now much more mature in how they collect and integrate data to create a comprehensive profile of the customer to personalize their offerings – while the Wealth Management industry has extremely detailed data on the customer, personalizing offerings using this data at scale has always been expensive.

AI technologies now enable Wealth Managers to deliver highly personalized, ‘White Glove’ services to investors at extremely accessible price points, with the kind of deeply personalized investment recommendations and insights that were otherwise generated by teams of expert analysts for High Net Worth investors, thus democratizing investments and making them more accessible than ever before.

There are 3 key ways in which AI is transforming this space:

  1. AI now enables the processing of vast amounts of different kinds of data – news, market data, video and audio feeds, company factsheets – along with data on a given investor’s portfolio and their preferences, to create completely personalized feeds relevant to them and their preferences – in real-time.
  2. Machine Learning algorithms crunch data across markets and asset classes, aligning with investors’ risk propensities and preferred investment styles, to generate investment insights and recommendations tailored to each individual investor. E.g. one sees 5 undervalued equities in European fashion, while another sees 5 recommended Asian Industrials, both generated by the Mean Reversion algorithm. In addition, with the wealth of past data that is available, the investor can back-test these algorithms to see how they would have performed in the past, before they make any decisions.
  3. Lastly, the entire investor experience is underpinned by the Self-Learning capability that AI enables – information feeds and investment insights are continuously tweaked based on actual user behaviour. For instance, if news items on mobile phone manufacturers and investment recommendations on these companies are not being clicked or viewed, these will be deprioritized and others moved up instead, thus ensuring that all content is always tailored to the users’ explicit and implicit preferences.

 

Different Wealth & Asset Management firms are approaching these technologies from different perspectives – some are enabling their investors with self-service tools, while others are focused on putting the power of these technologies into the hands of overstretched wealth managers who can now deliver a true one-on-one experience, with personalization of information and insights matched to each investor. While industry business models evolve to make the best use of AI, it is clear that the transformative effects are already being felt across the Front Office and how investors experience these services, which will only accelerate further as more and more possibilities are unlocked.

 

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