#Innovation — 23.11.2018

Winds of Change: The Future of FinTech in the Wealth Management Industry

Financial technologies, better known as ‘FinTech’, are in the process of disrupting the traditional wealth management industry. As a result, rapid developments are seen in the field of digital wealth management, with additional opportunities expected in the near future.

Fintech Wealth Management

Financial technology is the intersection between financial services and new technologies with the goal of improving existing products and services. FinTech is widely perceived as a driver of innovation, and in the wealth management industry, the adaptation of financial technology has led to the development of digital wealth management services and platforms.

High Net Worth Individuals (HNWIs) enjoy digital tools in many aspects of their lives and they expect the same when it comes to managing their wealth. This is true for HNWIs across all generations and not limited to millennials, as is often mistakenly believed.

People across all generations are now digitally proficient and they desire constant access to sophisticated tools and services. We can identify several key FinTech trends and opportunities in the wealth management industry that will shape future FinTech developments.

Security Remains Key

Security matters continue to be a trend in FinTech. While new technologies, such as facial recognition, can break down barriers between clients and their data, security remains a concern for many.

Innovation in fields such as identity verification and the managing of documents and data is still a prerequisite to the widespread adaptation of many financial technologies. We expect that the conversation around security will carry on over the next few years, which will be reflected in continued innovation in security.

Increased Personalisation

FinTech can improve the client experience by tailoring solutions and services to their individual needs. The future of FinTech will see personalised modelling that can anticipate major events in a client’s life, such as succession planning or retirement.

In these situations, scenario planning and forecasting can identify potential consequences, allowing for better decision making. Wealth managers will also be able to use financial technologies to identify client personas using demographic and psychographic data, which can be used to design customer journeys.

The use of big data for personalisation can result in improved identification and qualification of risk, which can be leveraged in the development of sophisticated service models.

Sophisticated Robo-advisory Services

Unlike the vision that may appear in your head when reading the word ‘robo-advisory’, robo-advisory constitutes automated digital wealth management platforms rather than physical robots.

Robo-advisors are able to provide wealth management advice with the use of algorithms, and some are even able to make financial transactions on your behalf. Moreover, robo-advisors are available 24 hours a day, 7 days a week.

Rather than replacing human wealth managers, robo-advisors are expected to help traditional advisors focus on doing what matters for the client and reduce the time spent on data entry and investment management.  

Overcoming the Challenges of Robo-Advisory

While robo-advisory solutions can prove to be beneficial to both clients and advisors, the wealth management industry will have to navigate through the challenges of incorporating robo-advisory services in its core offerings.

As robo-advisors are relatively easily replicated by other parties, wealth management firms will have to differentiate their robo-offerings. This often means additional investments in FinTech to develop more sophisticated technologies or expand existing capabilities.

In addition to this, measures will have to be taken to safeguard the wealth management industry by ensuring that robo-advisors remain job enabling rather than job replacing.

Streamlining the Omni-channel Experience

With the rise of digital wealth management solutions, many clients are taking their wealth management experience online, resulting in many points of contact across multiple devices that will have to be streamlined. In-person contact and consistency remain important as well, as very few are comfortable with an interaction model that is purely digital or online.

This calls for improved connectivity between the client and his or her advisor across all contact points.

Expansion of Automated Asset Allocation Services

With the use of automated solutions, the asset allocation process can be customized and executed online. This allows for constant monitoring of the portfolio and trigger-based portfolio rebalancing, reducing some of the limitations imposed by office hours and time zone differences.

Automated investment solutions are currently often limited to shares, mutual funds, exchange traded funds and bonds. However, with future developments in financial technologies, we can expect to see structured investments, leveraged instruments and improvements using the real-time capabilities of automated solutions.

While rapidly developing and gaining popularity, financial technologies and digital wealth management offerings still have shortcomings and areas for improvement. We can expect to see swift improvements in these technologies in 2019 and beyond as FinTech firms capitalize on these trends and rush to fill in the gaps.

The advancements in FinTech and an increased collaboration between the wealth management and FinTech industries will result in higher adaptation of new technologies amongst both clients and their wealth managers, benefitting both parties.

BNP Paribas Wealth Management sees the benefits of using financial technologies and offers its own range of digital wealth management solutions. Contact us to find out more about our offerings, or read more insights below.