Unless an advisor is within touching distance of riding off into retirement, advisors should be well versed about the need to embrace technology.
The demographics of the primary customers of wealth managers are shifting to a younger, more tech-savvy generation. Monica Hovsepian, Global Industry Strategist, Financial Services, OpenText, argued that these technological changes are coming at a critical time for the market as the industry prepares for the largest transfer of wealth in history.
She said the baby boomer generation will transfer approximately US$59 trillion to their millennial heirs between 2007 and 2061.
She said: “This opens the door for the next generation of wealth managers to take advantage of the power of new tools driven by artificial intelligence and advanced analytics as they become increasingly relevant and important to the success of the industry. Importantly, these changes allow for wealth-management at scale – helping to provide more personalized, more effective service to more customers than ever before.”
She added: “This emerging ‘mass-affluent’ market is generating significant interest, with brokers needing to embrace new online tools and services to target this demographic.”
Reports suggested this trend could spread down-market, bringing new sophisticated management services to more customers than ever. The general consensus is that millennials are the bullseye audience of the future for advisors, many of whom are not paying enough attention to the children of their clients, according to Hovsepian.
She said: “Given the disruption in the industry, wealth managers should be turning their attention to new tools such as artificial intelligence (AI) to augment and transform the way they interact with clients and deliver services. These AI platforms can help lower costs, mitigate risks and increase revenue for the wealth management industry as well as improve overall customer experience.”
Hovsepian broke the benefits down into five elements for WP:
“Chatbots and Robo Financial Advisors are being used over the telephone and online to perform functions such as answering frequently asked questions and on-demand chat with customers – a time-consuming and tedious task for humans to perform. These examples of AI demonstrate how automation can free up time, allowing wealth professionals to focus on higher value tasks such as meeting with clients.”
Robotic Process Automation
“Robotic Process Automation (RPA) can help to automate rote tasks otherwise performed by humans, helping save time and money as well as prevent expensive errors. RPA is useful in situations such as gathering information for client authentication or requests for information about a new product or service before the client is connected to a customer service representative so they are able to provide assistance in a more timely and efficient manner, helping to improve client relations.
“In addition to these improvements in the front-end, RPA can also help with middle office functions such as:
- onboarding by maximizing the amount of data collection and sharing and form pre-population;
- compliance by maximizing automation of basic process and helping to avoid redundancies;
- reviewing documents for completeness and accuracy
- creating reminders for account management milestones – such as renewals, anniversaries or retirements
“In turn, these benefits result in quicker revenue generation through faster onboarding; improved customer satisfaction and retention through accuracy; lower costs and lower default losses through efficacy improvements.
“Back-office functions such as payment processing are improved with RPA though techniques such as auto-correcting, which accelerates payment speed and, in-turn, increases customer satisfaction. RPA is also used in fraud detection where smart routing results in fewer false positives, lowering costs and losses associated with fraudulent activities.”
“Using AI not only helps lower costs and increase revenue as well as improve the customer experience, but it is also being used to mitigate financial, criminal and operational risks by running liquidity, anti-money laundering and stress-testing scenarios. Other uses such as advanced fraud detection can detect patterns of suspicious behaviour through knowledge of customers.”
Lead generation and management
“Because AI gathers more customer information, it allows wealth professionals to gain new insight into opportunities to offer clients new products and services. For example, a wealth professional could be alerted by AI systems if a client has assets that could be put toward an education fund or otherwise invested.
“AI can streamline a variety of routine tasks in this area – from automating account reviews, generating appointments, matching customers with specialized advisors, or recommending associated services such as insurance brokers, lending services or credit.”
“Using data gathered from AI tools, it’s now possible to obtain better quantitative analysis on how products and services are performing in terms of generating revenue, reducing loss, improving customer service and mitigating risk. These insights will be invaluable for the wealth management industry given the coming changes and need to adjust products to suit the next generation of clients.
“As the demographics of the wealth management industry evolve, changes to longstanding practices are being made. Savvy wealth managers will adopt the use of AI-augmented tools to free their time from mundane tasks and enable them to solve more critical and complex problems – which is where their real competitive advantage lies.”
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