Tech to scale wealth management

By Author   |   Published: 13th Aug 2017   12:05 am Updated: 13th Aug 2017   12:21 am
Wealth Management

According to Karvy Wealth, “As wealth in financial assets grow at a faster pace vis-à-vis wealth in physical assets, we expect total individual wealth to reach Rs 558 lakh crore by FY21, growing at a CAGR of 12.90 per cent.” Until recently, wealth management services were the preserve of a few high net worth individuals. With growing incomes in the recent times, Indians are increasingly looking at investing options. The financial institutions are welcoming them by demystifying the arcane world of financial asset management for them.

By and large, financial institutions are still conservative in their culture and resort to traditional means of interacting with customers through one-on-one communication. This was meant to generate trust in them so that they can invest their savings in a secure asset portfolio. This probably explains why, though there is a lot of buzz around mutual funds, their penetration is below 1.5 per cent. Indians are still risk averse and approach wealth management institutions warily.

Post-demonetisation, however, India is seeing more customers park their wealth in equity markets. Case in point: According to India Wealth Report by Karvy, investments in private equity funds, venture capital funds, high-yield debt, structured products etc grew 84 per cent year-on-year during 2016.

Educating customers: The writing on the wall for wealth management companies

Most retail banks offer wealth management options, but do not promote them enough. Investing in human capital is expensive and relying on only personal interactions to promote their products is not a good return on investment. With a growing internet penetration and secure digitisation, wealth management firms can look at using technology to engage their customers. Technology is a one time investment which can be used to scale their customer acquisition rapidly. Though it is not expected that customers will flock to wealth management companies in droves, the process of educating and engaging them would begin.

Expanding the scope of wealth management companies:

According to Sanjay Bhargava, Chairman & CIO, Bharosa Club, the quantum of an individual’s wealth does not dictate his investment decisions. What matters is his risk profile & goals. Hence mutual funds are a good asset class for all kinds of investors (rich or not so rich); It’s the job of the financial advisor to hence understand the peculiarities of his client and then recommend an investment plan which is in line with his goals.

That requires not only a capture of the individual goals but also a good grasp of his risk profile. Wealth management companies can use apps, websites, email and social media to gather information about a customer’s needs and goals. With the massive digitisation drive of Digital India, customers are increasingly having an online presence today. So, they can deploy data analytics to accurately and quickly come up with a risk profile based on his footfalls on the web.

Let’s take a look at how wealth management companies are using technology:

Barclays India is offering a way to get a comprehensive view of all the portfolios of the customer. He can now choose the measure to assess allocation, performance or flows, compare his portfolio performance with the benchmark and measure how they moved over time. Further, the customer can share his portfolio group with his friends and family.

Sanctum Wealth has overhauled its platform with a new technology architecture that massively enhances its productivity, mobility and client experience. It has allowed portfolio access through the channels of online and mobile.

ICICI Securities (ICICI’s wealth management arm) uses ‘Track & Act’, a robo-advisory platform built to provide financial tracking and planning advisory for investors. ICICI also engages customers on social media to educate them about their products and services to make investment more attractive to them.

Reliance Securities Facebook page allows one to directly use ‘Sign UP’ feature for opening Reliance Securities Trading Account. Customers of Reliance Mutual Fund (RMF) can use applications such as ‘RMF Risk Profile’, & ‘Goal Calculator’. Reliance Commercial Finance (RCF) has an ‘Ask the experts’ section on its Facebook page, which is a knowledge service aimed to educate. RMF is using WhatsApp for selected transactions and customer support.

What lies ahead?

As more Indians are going to come under financial inclusion, there is a greater need to educate them about ways to secure their future. The cloud, Internet of Things and Artificial Intelligence are set to alter the way wealth management companies conduct their business. Robo advisors will become the norm as they become more accurate and personal. Secure cloud storage will see a lot of customer data move to the cloud, to be used in context during the company’s engagement with the customer. This is just the tip of the iceberg.