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Will your next wealth relationship manager be a machine?

By Umair Hameed

Technology-based investment solutions can crunch numbers faster than any human, are less prone to emotion-driven decisions and they never sleep. And in many cases, they don’t charge as much as their human competition.

There are many advantages to using tech to guide investment decisions. But robo-advisors (like human asset managers) rarely beat the market, and one recent study found that experienced investors delivered better returns than an algorithm in a head-to-head contest.

Besides, financial advice often goes beyond maximizing market returns. It also includes tax and estate planning, and other individual needs that require a human touch. 

So, the short answer is no. Relationship Managers (RM) are unlikely to be replaced by machines any time soon. 

What will happen, however, is that RMs will use data analytics, artificial intelligence (AI) and customized insights to work at massively increased efficiency, and with greater insight into your finances than ever before.   

The wealth management opportunity for banks is massive, but they need to invest in better technology infrastructure to truly capitalize on the opportunity, and more importantly, to help their RMs add value for investors and create unique client experiences. 

Investing is undergoing a dramatic change
Demand for RM services is increasing. Asia is the epicenter of global wealth, with the highest number of millionaires of any region and the largest share of global assets. 

The region’s wealth is continuing to grow, and we’re also about to witness the greatest generational transfer of wealth ever, as millennials and gen-xers inherit from their boomer parents over the coming decade. Credit Suisse estimates that nearly $8.6 trillion will be transferred between generations between now and 2029, although many families haven’t planned adequately.

Investor demographics are changing in other ways too. Women are also investing more than ever before, and Asia is the fastest growth market. In fact, Asian women will add more than US$1 trillion per year to their total wealth over the next four years.

Customer preferences are also shifting, with 75% of wealth owners hoping to create a positive impact through their investments, and the share of impact investment doubling from 20% in 2020 to 41% in 2021.  

Asia is also a region that firmly embraces technology. This means there’s new competition for advisory services that don’t require any human intervention at all. A younger generation is becoming more comfortable with risk, often bypassing RMs altogether and using low-fee platforms like Endowus, Syfe and StashAway in Asia. 

Digital-first financial services institutions (FSIs) are offering lower cost paths to investment. Roboadvisors - which typically gather information about clients during the onboarding process, and then automatically invest based on that data – are also growing in popularity.  

RMs remain a favored choice for investors with significant assets (typically $500K or more starting with the mass affluents segment). Banks need to justify the cost of RMs with strong results and happy clients. And technology is one way they might do this.   

Technology is changing wealth management 
New technology always brings with it concerns about job security - but investment-tech is far more likely to change and enhance an RM’s job than eliminate it.  

The impact will be a bit like the initial effect of ATMs on bank tellers. As ATMs appeared, bank tellers didn’t vanish – but their jobs changed and evolved. They took on more complicated and advisory-led tasks like loans and account openings, while machines handled day-to-day transactions.  

We predict a similar shift when it comes to RMs. 

Banks want to provide better services for less, but RMs already typically serve hundreds of clients each. Digital solutions could be the answer. Typically, RMs will have all the features of a robo-advisory at their disposal. For example, an algorithm could automatically rebalance a client’s portfolio to account for market conditions.  
But new technology could help relationship managers greatly increase their productivity, while providing hyper-personalized guidance to their clients.  

So what kind of technology will help them the most? 
Actionable insights and predictive modelling – FSIs are turning to data analytics to provide relevant insights for their clients. Using data about the client, an investor’s app might share potential new investment ideas in line with their preferences and aspirations. It might also be able to recognize when a client is thinking about leaving, allowing the RM to proactively reconnect.  

  • Better personalization –clients no longer believe a one-size-fits-all service model is good enough. Using data, as well as information collected during onboarding, RMs can help tailor a portfolio to clients’ needs. This also makes a difference for marketing too. An RM might, for example, send out a pre-written email, but will use analytics to pick the relevant audience and then tailor it further as needed for hyper-personalized client engagement and experiences. 
  • Customer service chatbots – Customer service chatbots are increasingly common across all industries. Typically, they work on a hybrid model, meaning they take care of basic functions, and then a person takes over once the queries get too complicated. This frees up RMs to deal with more nuanced requests that might require a higher level of expertise.
  • Process automation – Some tasks are thankless and take up more time than they ought to. For example, technology could easily automate reminders to tell clients to update their passport details, taking one more task off the plate of a busy RM as well as speeding up traditionally paper-intensive processes like client onboarding etc. 
  • An RM cockpit - RMs typically spend 60 to 70 percent of their time on activities that generate no revenue. Some of it is due to increasing regulation. But some of it is also due to siloed systems within financial institutions. RMs can help their clients better if they’re not constantly toggling between systems. A more integrated system und unified front end (for example using Microsoft Teams to bring all relevant data and systems together) would make life simpler and increase efficiency.  

Experience and expertise matters
Ultimately, new technology will enable RMs to focus on the things that really matter. There are many areas where expertise can add enormous value, especially if a client has complex needs and wants integrated advice that ties together tax issues, estate planning as well as saving for education and retirement, among other things. 

If technology can handle simpler problems, then RMs can spend more time dedicated to tasks where they’re needed most, and bring in experts into client conversations with remote advisory any time that makes for happier clients with investments that best suits their needs and purpose.

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