In partnership with Financial Times

Money managers of the future

How fintech can brighten consumer experience

Wealth and the way we manage it are changing radically, and a range of fintech solutions are improving and automating the delivery of financial services. There has been huge growth in payments innovation, and consumers are lapping it up, with digital wallets being adopted in the US twice as fast as social media was. Consumer needs are variable and ever-changing, and fintech is providing efficient ways to service them.

Additionally, automation is transforming the way banks are providing services, from recognising identity and fraud, to robo-advisors evaluating risk and managing a person's money based on investment objectives. Both small and large banks have been using AI in recent years. Also, smaller organisations without formal data science expertise have been able to incorporate AI (Artificial Intelligence) into their activities, thanks to the availability of AI as a Service (AIaaS) from Amazon, Google and so on.

However, it also estimates that AI technologies could deliver up to US$1tn of additional value each year.

Emerging opportunities

It’s clear that algorithms are going to redefine and transform all industries, and money management will not be an exception. As AI and algorithms emerge further, the expertise of financial advisors and wealth managers will be reinforced, and new opportunities to provide a better value customer proposition will arise.

Client relationship managers will be able to improve their customised advice interactions using fintech to analyse the customer’s current portfolio, risk tolerance, past experience with financial products, compliance restrictions and availability of suitable solutions in real time and through different channels.

“Those players that will be most successful in the wealth management industry will be the ones who can leverage these algorithms, adopting the client perspective, which is mainly driven by security, personalisation and usability,” says Victor Matarranz, Santander's global head of wealth management and insurance. “Behavioural finance has demonstrated both the value of automated guidelines and financial planning tools to mitigate behavioural biases, and also the need for personalised advice, as perceptions of risk and return are profoundly personal.”

Humans and machines

Innovators are developing ever more sophisticated and capable robo-advisors. They are allowing financial institutions to concentrate their real human interactions on the processes that impact the most: in providing better experiences and a more satisfactory customer journey, with personalisation and final judgement always required.

This needn’t spell the end of your trustworthy relationship manager; machines can never replace the human element completely.

“Financial advisors can instead do more of what they do best: listen to and understand the clients’ needs and provide tailor-made solutions.” In fact, this change presents a real opportunity for wealth managers to redefine their business model and improve the quality of service offered to their existing clients.

One of the biggest impacts of pure robo-advisor solutions will be providing assistance to people who have never before had access to financial advice. Robo-advice is detailed and objective, with little room for intuition. This democratises the process and opens up opportunities to smaller investors.

For more affluent customers, a hybrid model may evolve, as solutions that use AI, big data and algorithms will be fully integrated into traditional models, in order to complement and optimise wealth management offerings.

“Of course, financial advisors will remain central to wealth management,” says Matarranz. “But robo-advice will add new capabilities that wealth management firms will need to adopt and integrate. It will complement, rather than displace, relationship managers and advisors.” The key to making it work will be enabling a banking culture that fully embraces the disruptive elements of the technology while still allowing the necessary human touch.

Another important byproduct of digital acceleration is cyber security control. While cost-efficiency, data opportunity and customer experience are key drivers, security is also paramount, especially with the rise in remote working. The need for solutions itself represents a growing investment opportunity.