How FinTechs optimize wealth management firms

How FinTechs optimize wealth management firms

The introduction of FinTechs in the wealth management space has brought about tremendous changes in how financial services are delivered. These new technologies have focused primarily on client wants and needs. Although, catering to financial advisor desires is just as important.

Most advisors turn to FinTech solutions to free up their time from more redundant tasks and focus on providing comprehensive services to their clients.

When asked about their technology expectations, 80% of advisors want to be able to focus on the client relationship. Of those, 90% have needs for client onboarding and portfolio data management, 85% for client service and communication, and 83% for analytics. This data comes from a study conducted in the United States by the Institutional Investor’s Custom Research Lab.

Focusing on the essential areas of the business would also allow advisors to offer a more client-centric approach. In turn, this means improving customer satisfaction, which is a win-win proposition. Luckily, the latest FinTech solutions seem to promise just that, by streamlining and simplifying the financial advisor’s role and responsibilities.

Humans vs. FinTechs

While some financial advisors may fear ultimately being replaced by robo-advisors, this is far from reality. In fact, a 2022 study by Vanguard found that 93% of investors already advised by humans stated that they would choose a service that includes a human advisor in the future. Moreover, 88% of investors with digital advisors said they would be willing to work with a human in the future.

Despite an exodus of investors from self-directed investment tools in 2022, a Forbes article predicted strong interest in hybrid investing in 2023. In fact, Vanguard’s study helps us understand why: It suggests that investors have different expectations from human and digital advisors, depending on the specific task.

Investors tend to prefer human interactions for soft skills like building relationships and addressing their individual needs and emotions, citing peace of mind as a primary factor. For example, investors prefer a face-to-face advisor to develop a holistic retirement plan that considers the client’s emotional needs.

Conversely, when it comes to making objective decisions, investors typically prefer an algorithm. For instance, they are more likely to trust a robo-advisor that recommends purchasing specific financial products to improve portfolio diversification.

This difference in client preferences shows how effectively FinTechs and humans can complement each other. As a result, investment advisory teams have a unique opportunity to adopt a range of tools to better serve their clients. FinTech integration can also lighten their own workload. This allows them to focus on other tasks that benefit both their firm and their clients.

3 challenges for investment advisors

Today’s advisors face unique challenges in the form of increasing workloads and client expectations. This leaves many with little time to optimally develop their firm’s potential. Under these circumstances, they seek to spend more time engaging with their clients and less on mundane management tasks. They face three main challenges:

1. Proliferation of financial solutions

The first challenge is the use of various financial software resulting in an unorganized system that is far from streamlined. A poorly arranged set of tools ultimately results in increased workload.

To address this issue, firms have two options available, and the most effective solution is likely to incorporate both strategies. First, they must choose an all-in-one solution that covers the widest range of tools possible. Secondly, they must choose tools that have superior interconnectivity capabilities, namely through application programming interfaces (APIs).

2. Customization of client relationships

Recent disruptions in client expectations are largely due to significant advances in digital technologies, accelerated by the pandemic. As a result, today’s clients have become more demanding and expect more client-centric financial planning services.

The excessive customization of financial services is a double-edged sword. Maximizing service customization to fit the unique needs of clients is sure to improve customer satisfaction. However, it is also incredibly inefficient for financial advisors.

Advisors have the option to specialize in a particular segment of investors who share common needs and characteristics. As the baby boomer generation ages, promising new market segments are emerging. A successful segmentation strategy reduces the number of personas to which one must adapt, and helps standardize interactions.

Another aspect of this problem is the significant amount of time that advisors spend creating customized client reports. Fortunately, some wealth management platforms provide tools that help advisors in generating customized reports and targeted marketing information.

3. Administration and compliance

In addition, administrative tasks and legal compliance can be a burden for many firms. Although necessary for efficient operations, they are often complex and time-consuming for advisors and support staff who would prefer to spend their time on more profitable tasks.

Fortunately, FinTech solutions can help streamline these management tasks and provide a competitive edge for advisors. Some solutions offer automated workflows or task managers that identify portfolios requiring attention, time-sensitive tasks, and priorities. To meet the unique needs of each advisor, such software should be highly customizable.

Grouping activities is another effective approach to minimize time wastage. Therefore, tools that allow for aggregating and executing multiple actions at once are crucial. Additionally, an efficient order aggregator is also essential, since it not only saves a significant amount of time but also reduces transaction costs.

Finally, compliance with laws and regulations must be intrinsic to any effective solution.

What are FinTechs?

FinTech companies seek to improve and automate financial services of all kinds through the development of financial technologies. In essence, they are utilized to assist both large and small businesses as well as consumers in effectively managing their financial operations, processes, and daily lives. This encompasses a wide range of financial technology services, including mobile banking, digital debit cards and credit cards, as well as more specialized applications such as WealthTech and RegTech.

FinTechs in Canada

Over 1200 Canadian FinTech companies provide support to traditional banks, financial institutions, and individuals. Canada’s FinTech industry is expanding and increasingly gaining significance in the global ecosystem, with thriving centers located in Toronto, Montreal, Calgary, and Vancouver.

What is WealthTech?

WealthTech companies develop technologies that automate the investment process and support the design of investment strategies. The spectrum of WealthTech solutions is wide. It ranges from all-in-one wealth management platforms to more specialized uses, such as digital brokers, digital wallets, and blockchain technologies.

Some of these tools are aimed at individuals while others are designed for traditional wealth management services. The most recent developments include concepts such as machine learning, micro-investing, and big data.

WealthTechs in Canada

Canadian portfolio managers have access to suppliers that offer the necessary tools for their work. Croesus, the largest WealthTech company in Canada with over $1.7 trillion in assets under management through its solutions, provides a reliable resource for portfolio managers. Croesus’s solutions include an all-in-one portfolio management system, a centralized portfolio rebalancing tool, and application programming interfaces (APIs).


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