Money Matters | How technology can assist in wealth management

Technology, by nature, is agile. It has evolved faster than the applications it could be used for. Individuals and businesses will need to be entrepreneurial and ambitious in reimagining solutions. Contributors to the artificial intelligence (AI) ecosystem have put together an advanced set of tools. Machine ability to “see”, “hear”, and “understand” has created multiple use cases for a range of activities. The progress in AI, cloud computing, and big data have direct relevance to financial services, particularly wealth management. A combination of the latest suite of tools and basic technological capabilities can resolve many wealth issues that India has.

What about India?

India is now home to more than two hundred thousand dollar millionaires, reportedly, amongst the highest in the world. Add to this an expanding class of hundred million or so savers looking to get richer. The problem is that a large majority of these savers save inefficiently. Savers need handholding and advise. But the supply of qualified advisors is limited. To give a feel on the paucity of advice, as of April 2019, India had about 1,170 Securities and Exchange Board of India (SEBI) registered wealth advisors.

Last mile

Advise scarcity worsens as one moves away from cities. Customised human-machine collaborations are perhaps the only answer for serving the wealth management needs of a large population that lives and thrives in India’s numerous towns and villages. Technology has the ability to address the scale and reach required to solve such last mile problems. From understanding customer needs to customer acquisition and servicing, technological solutions can deliver unbiased, consistent, yet responsive and bespoke wealth advice. A regionalised chatbot that can understand simple wealth needs and that can respond to what-if queries with easy to understand graphics is a plausible offering.

Intelligent edutainment

India’s biggest wealth problem is not just about the acute shortage of qualified wealth advisory experts. Higher financial literacy levels in the media as well as in the society at large are an essential public good. Basic financial knowledge, such as the ill effects of inflation and the advantages of compounding will make it easier for wealth advisors to function. Imagine a Netflix like a recommendation engine that understands literacy needs and deploys graphic content to address these needs. AI-driven basic financial literacy platforms can provide benefits to multiple stakeholders. Both not-for-profits, as well as private organisations, could serve their respective longer-term interests well by putting these concepts to work.

Core wealth functionality

Robo wealth advisors have been successful in many parts of the developed world. Understanding client objectives, incorporating constraints, behavioural risk profiling, computing potential risk/return pathways, and determining alternative asset allocation outcomes, encompasses standardised functionality that most wealth platforms generally provide. Mobile apps that allow clients to monitor and interact with data through a scenario analysis are part of tech-enabled wealth tools. What is missing in these platforms is a localised touch (language, client segmentation based on wealth needs) and edutainment that can shape thinking and address basic behavioural flaws.

The real use of AI in a wealth management setting would be in continuously collating critical decision-making data–especially the client’s behaviour across time. From alerting clients to simple cash flow needs (i.e. not enough money in banks account to pay fees) to providing investment drawdown profiles and generating probabilistic recommendations based on market trends are functionality sets that AI algorithms are best equipped to address.

Over time, an AI engine should be able to notify a client in advance, the range of decisions, the client is likely to take (based on past behaviour), with a pre-mortem analysis of these choices. An automated annual score-card process to review client decisions and compare portfolio outcomes with the investment policy statement requirement is a useful guard-rail for both the advisor as well as the client.

Technology-based solutions including AI sophistication are just tools. It is up to the wealth advisor to harness the power technology can offer. Judgement and personalised relationship management are areas where machines will not be able to help. But everything else is up for grabs. A useful rule of thumb? Activities that can be done in less than a second of mental thought are ripe to be disrupted by technology.


, , , , , , , , ,