Wealth Guide: How can a start-up wealth management firm balance and build differentiation through tech

The regulatory and technological advancements that have happened in the last decade have revolutionized the wealth management industry.

There are many platforms that are offering retail-oriented products such as mutual funds, equity broking, and deposits to the very large retail customer base.

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Technology and standardization have disrupted the traditional models of business and made it more accessible.

These disruptions have aided wealth management firms to create digital platforms and provide a customized experience to clients for their needs.

Atul Singh - Founder and CEO Validus Wealth helped us decode the future of the wealth management industry in India:

Many retail platforms are widening their product offerings to collaborate with other entities for services such as Employee Provident Fund (EPF), National Pension System (NPS), banking, etc.

Such an offering makes it an all-inclusive space for wealth. Moreover, some of them are moving to solve other next-level challenges such as advisory.

Robo-advisory is a very logical step in this direction to create an advisory that is very affordable and unbiased. However, this is an area that initiates conflict with non-retail businesses.

Keeping in mind all the above tech-based capabilities, HNIs and UHNIs are expecting an uncomplicated decision-making process based on data and analytics.

Being able to meet the specific requirements of each client and various options to choose from, is feasible only with the support of suitable tech-based tools.

Wealth managers and the advisory team will need such instruments to create a path for decision-making.

Another challenge to this is ensuring that the firm’s advisory standard across geographies remains the same, all the time. The difficulty to continuously monitor stated investment mandates has reduced as firms and systems are evolving in this space very rapidly.

The portfolio construction process and market movement can be monitored by systems and necessary alerts can be given by the system to seek human intervention.

This may lead to a change in the client’s approach to wealth management and cause further disruption in the industry. Firms and wealth managers in future could also be compensated for objective-driven and/or goal-driven investments where outcomes can be monitored.

Apart from these two, convincing product providers to be ready for the digital ecosystem is a big challenge for wealthy firms.

Providers such as brokers, AMCs, banks, etc., have standardized their processes for retail clients and have developed APIs to support all types of transactions.

For the unique needs of HNI clients, many product providers are not yet completely digitized. Integrating with all providers is another big scope for the next level of digitization.

Many fintech and wealth tech platforms have emerged that are focused on offering niche solutions to long-term investor problems. The current millennial generation has loads of information available at their fingertips and wants to look at multiple options before deciding.

A digital platform like a mobile app would be a perfect fit for these investors as it could encompass information on global investment options, intelligence on varied asset classes, DIY videos, and all of this can be provided in regional languages as well.

India has recently launched an account aggregator model which enables customers/investors to share their private and confidential financial data across the entire spectrum.

This tool will be the next big lever of growth for wealth management firms just like UPI revolutionized the entire Indian payments ecosystem.

This will help personalized digital solutions for investors in a transparent, seamless, user-friendly, and zero-to-low-cost fashion.

Along with addressing issues around data privacy and identity theft which can scar an individual’s credit score. Customized solutions can be offered to the investors by leveraging their data with the help of AI/ML and vast data analytical tools to provide customized solutions.

All important details regarding the different products invested in like asset class type, annualized returns, applicable tax rates, holding period to determine short/long term, deviation from strategic asset allocation, etc via the robust dashboard.

Digital platforms can also be deployed efficiently to ease the operational, reporting, compliance, legal and regulatory aspects through the entire financial journey of the investor.

This will not only reduce expenses but also help avoid errors in filling basic information like KYC, ensure on-time filings and registrations, and timely payments and receipts.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)