“We are releasing the computer into the wilderness” announced Hendrik Leber of Acatis Asset Management in March. He was, of course, referring to the recent launch of the first global equity fund to be fully controlled by artificial intelligence. Computer-based research and trading solutions may have been around for some time, but Leber’s technology is particularly smart. It is able to discern patterns of non-linear developments; it is capable of ‘deep learning’.
Preliminary tests show that this computer-optimised fund has outperformed the market by 3-5% a year, over a five-year period. Despite being a renowned fund manager, Leber’s admission that “this computer is vastly superior to me” gives credence to the suggestion that robots could soon replace humans in many surprising jobs and sectors. (Cue the sharp inhalation of breath from fund managers everywhere.)
Developments in the digital space which impact the world of wealth management are now numerous: from AI to biometrics, FinTech to RegTech, the roster reads like a veritable ‘A to Z’ of innovation.
If you are still questioning the relative value of digital integration, then you are behind. The mind-set shift needed? Stop thinking about protecting the current business model from the technological revolution and start thinking about strategies for progressing in this new context.
As with all new technologies, to make best use of it and adapt to an increasingly automated workplace – we need to remain open-minded and willing to learn. Future managers, for example, will increasingly need skills to understand and lead a workforce enhanced by digital and AI, so streamlining and reconfiguring current operating environments should happen in tandem to this evolving landscape.
And adoption of new technologies is happening faster than ever before, so the urgency of this reorientation should not be underestimated. Consumption of new technologies is increasing at a faster rate than ever before; take the telephone, for example, which was launched before 1900 but took decades to reach just 50% of households, then compare it to the mobile phone which took roughly a single decade to reach the same level of penetration when it was launched just before 1990 (see Figure 1).
Put simply, consumers no longer view technology with the same level of cynicism that they once did.
Figure 1: Consumption spreads faster today
Recent research undertaken with CFA Institute revealed that 75% of wealthy individuals anticipate that enhanced access through digital channels will become more important to their relationship within the next five years. Worryingly for client relationships, however, our research also demonstrates a discrepancy in the way wealth practitioners and wealthy individuals perceive wealth management today.
Figure 2: The value of professional advisors
As wealth management firms continue integrating digital solutions to enhance their client experience, more attention must be paid to coaching wealth advisors through these times of change. The best firms will not only be innovators and early adopters, they will also take proactive steps to ensure alignment between clients’ and advisors’ evolving perceptions of technology in wealth management.
Indeed, central to the success of digital integration is a clear vision as to the purpose and objectives of harnessing innovation. Every firm must understand whether digital is an interface to the customer, a distribution channel for streamlining execution or a supporting technology to manage client information.
The wrong choice can doom the business to failure; being overly ambitious without internal buy-in can create conflict with traditional business leaders and potentially damage traditional revenue streams. Yet, not being ambitious enough can stifle business growth and leave propositions vulnerable to competitors who are working better, faster, smarter or more creatively with technologies.
If we get it right, intelligent automation has the power to liberate advisors from routine processes, freeing up time for more creative value-added activities, and helping us provide clients with more compelling insightful services.
As firms tread out into the digital wilderness, the key question will be how to align digital integration to the existing growth agenda or re-write growth objectives based on digital aspirations. Fighting to protect the business from technologies will be futile, but placing innovation and talent front and centre in the business strategy can help firms to progress in this new environment.
News from the world of wealth:
Robo-advice pioneer says human advisers soon won’t be needed – FT Adviser
Bill Gross says market risk is highest since pre-2008 crisis – Bloomberg
Amazon to ramp up lending in challenge to big banks – FT
Macron has chance to make France a better investor – Reuters
Emerging technology efforts face stagnant funding levels – Wall Street Journal
Thought of the week: “Tell me and I forget. Teach me and I remember. Involve me and I learn.” – Benjamin Franklin
Author: Annie Catchpole, Associate at Scorpio Partnership.
Expertise: Annie works on the research team at Scorpio and leads projects with a marketing and market insight focus. She runs the FutureWealth insight programme, a research and thought leadership initiative on the needs of the global HNW.
Background: During her time at Scorpio, she has completed a range of assignments for family offices, wealth managers and private banks, as well as a number of internal marketing projects.