Whitepaper: Achieving value at scale with digital advice and enhanced client engagement

Thomas Bosshard
  • Thomas Bosshard

Requiring major restructuring to banks’ existing business models, wealth managers are facing substantial changes due to MiFID II and upcoming FIDLEG legislations. A new whitepaper explores how banks can respond to the new rules with digital solutions and what this means for their advisory businesses. It also takes a closer look at the challenges of automated and hybrid investment advice and investigates how a new breed of advisory solutions can create value for the client while sustaining business growth.

In a nutshell, the new regulatory requirements aim to ensure that financial professionals work in their clients’ best interests, leading away from a sales-based approach and the conflicts of interest it generates. Wealth managers must now determine the level of protection needed in accordance with investment types, assess client compatibility with products and services and facilitate an audit trail for compliance reporting. These processes can be fully automated, as solutions from digital wealth management providers Luxoft and Adviscent, who co-authored the whitepaper, demonstrate.

Increased automation and digitization of modern wealth management

Modern core banking systems, risk engines, portfolio construction and optimization tools offer the ideal basis for highly automated investment processes that at the same time allow a certain amount of flexibility such as the incorporation of tax or business rules and client customization.

Many banks have now recognized the huge potential of relying on machine-generated investment portfolios based on investor profiles. An algorithm will always be faster and more thorough at diversifying risk and at allocating, recommending and rebalancing portfolio investments than the human brain, and does so at a much lower cost. Testament to this technology-based revolution is the success of robo- and hybrid advisory platforms, which have made investing easier and investment advice overall more accessible.

Improving manager-client interactions

However, these new advisory models do not meet all clients’ needs. The whitepaper concludes that, while catering to the needs of the millennial “self-service” investor—the affluent clients of the future—and facilitating easy client onboarding, completely automated advice does not do much for trustful long-term relationships between clients and their advisors. In fact, the low interaction rates that fully automated advice entails may even explain why some wealth managers are reluctant to relinquish full control over to machines. Recognized as artificial intelligence’s “black box”, a lack of transparency and inability to explain the decisions underlying portfolio construction may even undermine clients’ trust in the long run.

Introducing story-based investment advice

This is where solutions such as the Adviscent Interactive Advisor Framework comes in. Enriching investment proposals with cost-effective, technology-enabled investment storytelling that leverages the capabilities of the investment office creates opportunities to engage with the client and allows visibility of investment decision-making. Technology-enabled personalization of investment content makes investments proposals more meaningful, relevant and engaging, thus fostering a dialogue between clients and their advisors as well as trust.

Increasing the level of interaction by integrating personalized and task-related content to support client engagement and loyalty will help wealth managers capitalize on the huge potential and cost-effectiveness of digital advice while catering to the needs of all of their clients, thus creating value at scale.

Learn how you can personalize digital client experience to increase engagement and revenue.

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