My Financial Advisor is a Robot, So What?

December 18, 2017
My Financial Advisor is a Robot, So What?

As the first wave of so-called robo-advisor implementations in Asia has passed, many institutions that have turned on an automated investment advice ask themselves “And now what?”. Could it be that digital wealth management is a solution without a problem?

While the technology might be fascinating in its own right, it is worth remembering that a technology only becomes truly successful if it enacts change that is already waiting to happen. In the realms of wealth management, a growing number of affluent citizens are accumulating wealth that should be invested to the benefit of the individuals and of society as a whole. However, the current (cost) structure of banks and wealth managers prevent provision of sound general advice, let alone personalised advice.

The key is to accurately identify a target group, their specific needs and connect it to the appropriate digital channel. Many commercial banks in Asia are sitting on millions of clients, and could be doing more with them. A specific digital solution might not fit all of them, but only some of them. The target group could be defined by age, savings rate, the stage of their financial life cycle, and other statistics. Crucially, the financial institution offering the digital wealth solution must make intelligent use of the client data it possesses; be it from descriptive customer information, from transaction data or the markets. Typically, data science would look at the behaviour of a sample of the target group, and extrapolate their choices to the rest of the group.

We all know the experience from online shopping. As soon as an item is bought, the robotic salesperson presents us with items other customers have bought after making the same choice as us. Similar patterns can apply to financial services. People in similar financial circumstances might make similar decisions. The digital advice is customised and suitable; risk profiles and overall circumstances are considered when presenting a solution – it is like having a personal banker at our disposal 24/7. Clients should welcome the increased use of data-analytics by their financial institution, as it leads to solutions that the client can recognize as relevant to their personal situation. Employing a digital solution will broaden the data availability and increase its quality, depth and completeness, and as such, initiate a virtuous cycle.

The client’s individual situation might also include an analysis of financial solutions already in place and potential gaps – not a medical but a financial check-up. And as a result, suggestions can be generated on how to close those gaps. Like medicine prescribed by a doctor or pharmacist, which often involves individual dosage depending on the patient’s condition, digital wealth management techniques create user journeys as individual as the customers. Yet these journeys are always consistent with best practices, current market conditions and local regulations. It is these parallels between looking after our health and our wealth that make us think of the new era of wealth management as wealthcare.