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The pace and scale of digitisation in the financial services sector continue to accelerate. The high-touch wealth management sector, in particular, is embracing technology in both back-office and front-end functions.
Eric Enslin, CEO at FNB Private Wealth and RMB Private Bank, believes most financial institutions understand the massive opportunities that technology offers to enhance administration, meet rising compliance requirements, inform their wealth management strategies and, importantly, engage with clients in relevant ways.
“Digital technologies reduce friction for both Wealth Managers and clients by offering faster paperless, processes, convenient investment tracking online via the web or an app, and easier access to commoditised products like tax-free accounts.”
Mike Wood, Director at Apio Wealth, agrees that technological advancements have had a substantial impact on efficiency and effectiveness.
“Failure to implement and utilise the many technological resources now available to Wealth Managers will have detrimental consequences for their business. With advanced programmes designed to complete financial needs analyses, estimate estate costs and needs, and project future returns and values has, in my opinion, allowed for one advisor to more efficiently manage and serve a much larger customer base without sacrificing on the quality of advice they offer.”
However, technology's greatest value for Wealth Managers lies in its ability to deliver bespoke, hyper-personalised solutions.
Shaun Kotwal, Head of Wealth and Investment, South Africa for Standard Bank, explains that while many financial services providers embrace digital and platform technologies to offer clients convenience and offload many basic processes or repetitive tasks to the end-user, this functionality doesn't reinforce the wealth management principles that resonate with high-net-worth individuals (HNWI).
“We, therefore, invested significantly to develop relevant solutions across mobile and web, with a focus on how technology can elevate client relationships and interactions, and augment the process to prioritise their unique needs, like aggregating investments to provide a single view of their portfolio, and improve their ability to achieve their goals, such as protect, grow or transfer wealth.”
A HNWI's financial circumstances are also, generally, more complex than those of a retail investor's. “Wealth Managers should, therefore, leverage technology to understand these complexities and structure relevant solutions through personalised scenario planning and forecasting.”
Specifically, technologies such as analytics, artificial intelligence (AI) and machine learning (ML) can analyse big data and segmented client-specific data to construct personas and client profiles that inform customer journey mapping.
“AI helps us find commonalities and uncover insights, while ML provides an overlay to reveal how under-invested clients may be in a sector or spot gaps in portfolio construction. We are then able to model returns and growth and anticipate liabilities, which helps us make clear, informed personalised investment decisions. But rather than disintermediate the Wealth Manager's role, these technologies augment the human advisor-led approach, which helps clients to remove emotions from the decision-making process and instils greater confidence in the proposed approach,” continues Kotwal.
Winston Monale, Head of Absa Wealth Advisory, states that a Wealth Manager's role is primarily to understand a client’s current and future financial needs and help them achieve their investment objectives.
Within Absa Wealth, investment teams already leverage AI and ML to predict returns at an asset class, fund and a stock-specific level. “These key inputs inform asset allocations and portfolio construction. And these technologies will play increasingly pivotal roles as next-gen investment teams implement algorithmic trading programmes.”
Beyond investment management and fund construction, Monale adds that AI is also dispensing advice via rules-based systems.
“While technology is a great enabler and there may be many instances where taking the emotion out of an investment decision may be optimal, wealth management requires a human touch to give clients peace of mind regarding their financial affairs. We, therefore, believe that AI-enabled robo-advisors and humans do not compete, but rather complement one other. If we understand where the synergies lie between humans and machines, we can leverage these technological advancements to enhance what we do for our clients and how we do it.”
Mike Wilmot, Head of Advice and Solutions at Nedbank Private Wealth, believes the emergence of AI-enabled robo-advisors will positively and profoundly change wealth management.
“This technology will broaden market access to investment expertise and advice in a commercially-sustainable way, compared to traditional people-based financial planning and wealth management models. However, robo-advisors will not replace wealth management advisors. Augmented advice or hybrid models will bring to bear the best ideas and services delivered by humans, augmented by tech across many areas of the wealth management value chain, which is extremely exciting for clients, the industry and the economy.”
Tom Elliott, deVere Group's international investment strategist, elaborates that HNW and UHNW individuals, in particular, will always require access to expertise on tax, property, trust law, among others, which are surprisingly subjective and, as such, not amenable to AI.
“Wealth Managers that offer these services may find they are managing client money as a loss-leader, perhaps using their robo-advisors to do so. Wealth Managers unable to offer additional professional services are particularly vulnerable to cheaper AI-driven platforms.”
Reginald Labuschagne, Head of Product and Strategy at Sanlam Private Wealth, agrees that self-service advice works in certain instances, but as complexity increases, technology cannot yet replace expert human interactions.
“Technology eliminates onerous elements from the client engagement and wealth management processes. This creates opportunities to elevate client conversations and improves outcomes to deliver greater value, which is important because clients still want the human element in their engagements, often to assure them that the proposed approach is correct.”