A Digital Roadmap to Reaching Life Goals

November 9, 2016
A Digital Roadmap to Reaching Life Goals

I always found jogging dull. But a little app on my phone has changed that. It is called “Zombies, run!” and simulates a pack of hungry zombies chasing me during my run through the deep dark forest. The app creates a whole new experience: I find jogging much more engaging – and I also run a bit faster.

What virtual zombies can do for a runner, digital wealth management might be able to do for the mass affluent that lack personal advice. Creating an engaging and stimulating experience, and accompanying the customer through her investment journey.

A good example of how such a piece of technology can help is when considering the process of investing in life goals. Customers often save for specific near-term or long-term goals. We all save for retirement. In addition, some people might save for a holiday, a car or a home. Education, too, can be a worthwhile goal saving for. There are many examples.

Digital wealth management can offer a tool to the customer to understand the funding needs and time horizon of her financial ambition. However, simply putting money into a savings account might not accumulate enough money to reach the goals within the desired timeframe – especially in times of record low interest rates. We cannot save ourselves to prosperity, we need to invest. But how?

Common wisdom recommends more equity at the beginning of the period and a gradual shift into bonds towards the target date – without much more specifics than that. However, technology takes a step further and specifically quantifies the optimal asset mix and the risk of not reaching the goal (shortfall risk). While sophisticated Monte-Carlo simulations run in the background, the customer is guided through a friendly and engaging user interface to intuitively understand the dynamics involved in asset accumulation through investing.

Once parameters, like initial and monthly contribution and goal horizon, have been decided on, the plan is put into action seamlessly. At the push of a button the customer can make an initial investment on the same platform. And that is not the end of the story.

Interaction takes place over time: once an initial investment is made, and regular contributions are made, the customer can check her progress. What if a few payments are missed, or what if markets drop sharply? The goal-based investment tool may present the customer with different options on how to get back on track. Be it higher contributions, a longer time horizon, or an investment with a higher risk/return profile. Again, changes to the allocation can be implemented directly on the platform. This interaction is an experience, and a journey that a financial institution can take with its client towards a financial goal.

Of course, a human advisor can interact and offer good advice too. But he cannot scale across hundreds of thousands of clients with accounts too small to warrant a sustainable relationship. A human could not provide the appropriate level of attention to each customer, and react in time when change is necessary. Only a digital wealth management platform provides the stability needed for an ongoing profitable relationship. A prospective customer with the intention to invest in a life goal represents an opportunity for the financial institution to successfully convert a banking relationship into a long-term wealth management relationship. A relationship that can be profitable for both parties.

To learn more about how goal-based investing can enhance the wealth management experience of your customers, contact sales@quantifeed.com.