Innovation never stops. To keep pace with structural market shifts in the wealth management industry, it is essential to continuously introduce new technologies that can radically augment client experiences and support new business models’ viability.
However, to fully harness the potential of digital acceleration, new technologies must critically address consumer needs to make wealth management seamless. After all, relevance is key to staying timely and timeless.
Let’s identify the 7 main innovations that will reshape the wealth management industry in the next few years or so.
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1. Artificial Intelligence
Today, wealth management trends and developments are mostly associated with the game-changing technology almost everyone is familiar with—Artificial Intelligence (AI). And no, we’re not talking about androids, but highly intelligent software that plays a role in making wealth managers’ jobs better, faster to accomplish, and more efficient.
Today, customer experience is usually self-directed. There’s also an enormous data explosion among structured and unstructured data. Only big data-driven models, AI, and Machine Learning algorithms can deal with this to deliver the right solutions to relevant customers faster and more consistently. The good thing is that you or your company can easily harness the power of AI to make you more productive.
2. Virtual Collaboration
According to Nasdaq, virtual reality (VR) and augmented reality (AR) innovations help wealth management companies make managed investments intuitive for clients, most especially millennials. As more advisers become better familiarized with their skills and capabilities, the adoption rate of these two developments should increase.
The pandemic has made remote working and virtual entertainment through the cloud more accessible, affordable, and convenient. Businesses and clients meet over video conferencing services. This is a testament to AR’s capacity to help wealth managers provide virtual scenarios that can help their clients vividly picture how they are and what to explore financially.
Using these two technologies to engage clientele and harnessing their game-play to promote effective savings and investment practices is something companies should leverage.
3. Increased Tokenization
The first purely digital non-fungible token (NFT) offered by a major auction house was Mike Winkelmann’s Everydays: The first 5000 Days, which was sold for 69 million dollars. Like this NFT, more are seen to become part of the wealth management mainstream in the next few years.
An asset of a purely digital representation’s ownership rights can now be divided, traded, and stored on the blockchain, a distribution-ledger system. Fractionalizing real objects like properties may be difficult, but representing them as tokens works well.
Today, tokenization is seen to open up markets more and boost liquidity as well as make settlement processes seamless. Some even use reporting frameworks to effectively gauge progress.
4. Advanced Analytics
According to Gartner, AI-powered technologies like machine learning, natural-language processing, and deep learning will facilitate the next big advancement in wealth management analytics. It also noted that it is observing a steady progression in the technology’s deployment.
Fintech analytics systems are poised to be more predictive, offering practical guidance on the steps that companies should take for business development.
Per Grand View Research, the global market for alternative data is forecast to expand at a compound annual growth rate of 54.4 percent, poised to occur sometime between 2022 and 2030.
5. Regulatory Technology
Compliance with regulatory issues is becoming daunting for wealth management firms. And given that the regulatory ratchet turns again with new requirements from the Financial Conduct Authority and other watchdogs, wealth managers will continue to harness technology to ensure compliance.
AI-powered systems and other automated digital infrastructure are seen to take over people’s regular and repetitive compliance routines. Anticipating potential regulatory changes, more companies are seen to proactively approach tasks by using new technologies.
As processes improve, parsing through financial regulation becomes faster and easier with RegTech, allowing wealth managers to get actionable insights into their compliance obligations.
There’s also the option to work with a Managed IT Services Provider (MSP) that can implement these compliance software while offering security and 24/7 IT Support. Although, it’s best to partner with one that is certified under the necessary financial compliance standards such as:
- Financial Industry Regulatory Authority (FINRA)
- System and Organization Controls (SOC)
- The Sarbanes-Oxley Act (SOX)
- Payment Card Industry Data Security Standard (PCI DSS)
- Payment Services Directive (PSD2)
- or the Gramm-Leach-Bliley Act (GLBA)
6. Democratization of Financial Advice
Many people are starting to turn to financial advisors to secure their future. Democratizing financial advice, while still having a long way to go, is becoming the new innovative norm. This means that financial planning and its tools are becoming more affordable, customizable, and accessible for everyone, not just for wealthy people.
7. Stronger Cybersecurity
Wealth managers, as we know, hold millions of people’s personal and financial data, making them more susceptible to hackers. One big security breach may result in fines worth millions or even billions of dollars. Moreover, a company’s brand reputation will also get tainted with public distrust.
As the digital world poses more risks and threats from hackers, the finance industry proactively ramps up its regulatory requirements. It demands beefed-up innovative cybersecurity practices and is expected to require more businesses to comply with more complex regulations for data security.
Future-Proofing the Industry
These are just some of the innovations seen to dominate the wealth management industry going forward. Companies can capitalize on this to fare with the digital trends and ensure data security.
As a result, you can expect an efficient system and cost-effective processes, consistent service, dynamic advice, and responsible investing practices—which all result in customer satisfaction. Schedule a call with Nerds Support to see how we can help your Wealth Management firm use technology to gain a competitive edge!