Brokerage and Wealth
Advisory models for the newly minted rich
Hybrid financial advice and science-based advisory models are the new callouts for wealth management platforms.
A changing economic fabric supported by a generational wealth transfer from baby boomers to millennials is underway. Born between 1981 and 1996, there are currently about 72 million millennials in the 24-39 years age group.
With that new generation of investors taking charge of its finances, wealth management platforms, the provision of relevant advice and the delivery of services are witnessing a massive shift. Wealth managers, custodians and wealth management software advisors need to rethink and differentiate their offerings with science-based models to engage this new breed of investors, as warranted by these major emerging trends.
More Wealth in the hands of millennials
Information on the go
Yet another major shift is they ask for ‘anytime-anywhere’ access to their financial portfolios from those that manage wealth management systems. Millennials want this information on the go. Unlike earlier generations that depended wholly on standalone relationship managers, and were comfortable with wait times of 24-48 hours or more, this new breed of investors is conceptually different.
Millennials don't want to call, chat or engage in conversations just to undertake a mundane activity like checking a portfolio. They want instant access to their relationship managers. That is a crucial factor driving digitization, and unless traditional players come up to speed, they will be left behind.
Science versus human
A combination of artificial intelligence (AI) and machine learning (ML) technologies are giving way to robo-advisory services, virtual reality portfolios and the more advanced but yet-to-be-fine-tuned quant-based systems (a data-driven approach to managing investments).
By tapping wealth management technology providers for the right AI/ML tools and services, custodians can harness and mine client data from registered independent advisors (RIAs). Thus equipped, they could provide their clients wider and more refined choices of financial scenarios, portfolio simulations, portfolio rebalancing and risk assessments.
With changing investor preferences, wealth management firms must become more responsive to customers by embracing technology and digitization to create distinct offerings.