In the last few years, the key trends in wealth management have been heavily slanted toward Covid-19-related challenges. Remote work requirements and the closure of bank branches and offices worldwide led to some truly innovative digital solutions in the financial industry. Consequently, this resulted in a major shift in focus on all things related to customer experience. As we tread midway to 2023 and discover what it may have in store for wealth management organizations, you can expect to see this focus area remain with most wealth managers giving their channels and CX solutions a much-needed overhaul.
Consumer expectations are going to keep getting increasingly digital oriented. Retail investors today want to be able to buy something in two clicks or a few taps on their phones. In fact, according to a report by EY, usage of fintechs from 2021 through 2026 is expected to double from 9% to 18% – drawn mainly by personalised digital experiences and low-friction switching. The report also demonstrated that the appetite for virtual advisor interactions has grown from 12% in 2021 to over 40% currently.
Delivering on this ever-rising bar of customer expectations means companies must clear their preconceptions and move into better digital experiences to help users make fully informed financial decisions. Looking at the current scenario, we highlighted key trends which will continue to gain traction this year. Whilst the following list is far from exclusive, these are some of the key topics that represent the current areas of interest.
Gamification in wealth management has since been gaining much popularity as it induces an intrinsic motivation for retail investors to invest. However, using techniques such as leaderboards and confetti are often leveraged to drive excessive or high-risk trading, or to encourage other harmful behaviours at the expense of investors. In a previous post, we went in-depth about the risks that come with gamifying the investment journey and outlined a slew of sustainable ideas wealth managers can use to gamify their solution without falling into legal hot water.
While visualizing financial development has an extrinsically motivating effect on retail investors' desire to increase their capital, if not managed properly, wealth managers run the risk of diminishing the perceived seriousness of handling real money. The GameStop debacle in 2021 and the downfall of cryptocurrency exchange FTX have provided abundant evidence of the dangers of behavioural finance.
However, the ways to implement gamification will drastically evolve going forward. For instance, to ensure that consumers make well-informed decisions, companies can utilise the use of push and pull notifications suggesting personalised strategies, guiding clients to achieve their goals. Integrating financial analytics such as OutRank® for an interactive financial journey that aids the customer to make educated financial decisions will gain more loyalty compared to encouraging gambling or irresponsible behaviour.
ChatGPT’s release has catapulted AI, large language models and generative AI into the global spotlight altering a significant number of operations in wealth management and financial advice. The effective use of AI could allow wealth managers to onboard a larger pool of clients without compromising on service quality. Recently, a fictional fund generated by ChatGPT outperformed the average of the UK’s 10 most popular funds, which collectively lost 0.8% in value over the same time period.
Financial incumbent Morgan Stanley is already witnessing the benefits of using ChatGPT. It leverages the technology to process content and assimilate its intellectual capital in the form of insights into companies, sectors, asset classes and international capital markets. With the tool, its financial advisors are better equipped to analyse large amounts of data and get answers to queries in an easily digestible format, and as a result, better serve their clients.
Looking at the usability of the technology, Open AI’s ChatGPT won’t be the only AI tool taking the financial industry by storm. JPMorgan Chase is developing a ChatGPT-like AI software service, dubbed IndexGPT, to select investments for customers. IndexGPT will tap “cloud computing software using artificial intelligence” for “analysing and selecting securities tailored to customer needs,” according to a filing by the company.
The rise of AI in financial advice and wealth management is indeed a necessary way forward as it will make customers more comfortable with and appreciative of the benefits automated advice can bring. Moreover, using AI alongside financial analytics tools can transform the customer experience entirely.
Of course, using AI technology comes with risks. In a regulated sector like financial services, domain expertise and risk management are crucial. This is where Kidbrooke® comes in. Decades of research in quantitative finance and behavioural economics are collated into APIs that can empower a financial institution to build trustworthy digital wealth experiences.
The growing use of digital tools is having a profound effect on how clients view their wealth relationships. Driven by heightened expectations, retail investors now seek personalised financial solutions that cater to their unique needs, goals and aspirations.
It’s now paramount to get a deeper understanding of clients' preferences, values, and financial objectives to provide holistic and highly individualised recommendations.
Data-driven insights are at the forefront of personalised wealth management. Having a digital core will help wealth managers to analyse vast amounts of data, including financial profiles, risk tolerances and goals, identify patterns, optimize investment strategies and deliver superior client experiences.
To ensure customer loyalty as well as gain an efficiency edge, wealth managers and financial advisors must modernise their core infrastructure by investing in personalisation and advanced data analysis tools. Only then can wealth managers deliver bespoke investment strategies, comprehensive financial planning and tailored risk management.
The client-centric approach, driven by personalisation and advanced technologies, will position wealth managers as trusted advisors who provide tailored solutions in an increasingly complex financial landscape.
It’s no secret that there is a massive disparity in access to and quality of financial services between different socioeconomic groups. Underserved segments continue to face obstacles such as limited financial literacy, lack of trust in financial institutions and limited access to personalised advice therefore struggling to grow wealth or navigate complex financial decisions.
Financial analytics can play a crucial role to mitigate these risks. Using the right tools, wealth managers can analyse intricate personal economic situations and market trends on the fly, and with predictive modelling they can help underserved customer groups improve understanding and management of their financial lives.
Tools such as OutRank® can help identify potential risks related to the lack of diversification. Wealth managers can then develop strategies that incorporate risk mitigation measures, such as a more diversified selection of financial products fit for the customers risk profile, and appropriate insurance coverage for retirement planning. By using technology to analyse multiple data sources and leveraging cutting-edge predictive models, wealth managers can provide a more comprehensive evaluation, while offering a smoother customer experience and better access to previously underserved customer segments.
One such example is UAE-based insurance company, HAYAH Insurance, which partnered with Kidbrooke® to enable its customers to set up investments in mutual funds and ETFs. The key purpose was to improve the financial well-being for underserved group of customers in the Middle East.
HAYAH Insurance used Kidbrooke’s financial simulation engine OutRank® to determine investment amounts required to fulfil its client’s investment goals and monitor those goals over time. Should the financial conditions change, users would be notified with suggested actions and notifications to encourage them to get back on track.
Ultimately, leveraging financial analytics will be the way to go despite the challenges brought about by 2023. Most importantly, by placing clients at the centre of their operations, wealth managers and financial advisors can forge enduring relationships and deliver exceptional value.