Why do we want to know about things that might happen before they even happen? It’s human nature, afterall, to be curious and cautious about uncertainties. Given that technologies can be trained to support our basic needs, why can’t we take it a step further and use it to predict the future?
Prior to smartphones, we would’ve never dreamed we’d be living our lives on our phones, much less put our trust in self-driving cars. However, technologies have jumped leaps and bounds in the past 20 years, leaving the door open for endless possibilities, especially when there’s access to the modern day goldmine – data. Through the use of data, we set out to build Bambu Predictive Planning, a solution to make predicting the future a vital part of financial planning. With a focus on analytics, Bambu Predictive Planning aims to help advisors and clients set well-informed financial goals and to better manage their wealth with their futures in mind. Let’s get into how we did it.
The need for better financial habits
We’re tackling a huge problem, one that affects many individuals in today’s financial climate – generating wealth. According to a study done by Northwestern Mutual on the financial behaviors and status of Americans, the average amount of personal savings fell from $73,000 in 2021 to $63,000 in 2022. While the pandemic has pushed many people to start considering their investments and savings more seriously, maintaining positive financial habits might not be as easy.
Most times, we don’t even know what we’re going to have for dinner, much less what we’ll be doing in 5 years. So we start at the beginning, with a goal. We want to nudge users to create a plan and help them stick to it. This is where our Wealth Management Predictive Planning solution makes a difference.
Our WealthTech solution tracks the progress of users and motivates them to continue their journey of financial freedom. We’re combining predictive analytics with financial planning to guide end-investors to plan for their futures, whether it’s short or long term, and help them achieve more in their lifetimes.
So, how does it work?
In a recent WealthTech Unwrapped podcast with Alexis Calla, Chief Product Officer at DreamQuark, he mentions that at the core of wealth management is simply behavioral management. Ultimately, there’s only so much an advisor can do to manage investment risks as the state of the markets remains out of their control. Technology, like Artificial Intelligence and Machine Learning can offer a much more sophisticated approach to analyze and optimize the behavioral patterns of clients. Such tools offer advisors better insights and intelligent solutions that help their clients achieve their goals strategically.
In the same vein, Bambu Predictive Planning leans on lived experiences to recognize patterns and design financial planning strategies that are specific to demographic groups. Our models are trained on historical data from the National Longitudinal Surveys (NLS) by the U.S. Bureau of Labor Statistics, which aggregates significant life events that people have experienced over the last 40 years. Using these data points, our simulations track the behaviors to display the most probable timeline of events forward from today, based on your life history.
Firstly, we’ve to understand a user’s profile and history, which we categorize into 5 core channels: employment, marital status, children’s needs, household size and age. These groups form the foundation of the data that the Hidden Markov Models (HMM) are trained on. Bambu’s Co-Founder, Aki Ranin, explains that the HMM “take sequential longitudinal datasets, such as moves on a board, stock prices, or events in real life, and model the relationships between them.”
The best models are modified by forwarding the data through the transition and emission probability. With nearly 14 distinct states that correspond to various life events in the model, the probability a user will be in a particular state in any given year is calculated and computed. Combining real data and the predicted future events that the HMM generates, the best simulation is chosen by a Generative Adversarial Network (GAN) Discriminator.
On the front-end, users will be able to access information like their demographic group similarities, risk profiles, and their most probable timeline of future events. They’ll also be advised with financial wellness recommendations on how to manage and plan their finances and invest within their means.
Who benefits from simulated life events?
For our end-users, visualizing major life events that could affect their financial management at a glance encourages them to be mindful of the future that they need to plan for. We want to help individuals to prepare for any unexpected (and expected) circumstances. Regardless of the volatility of the economy and our lifetimes, one thing’s for sure – if you fail to plan, you plan to fail. With Bambu Predictive Planning, we’re aiming for transparency in a user’s life trajectory and steps to be financially stable through data-driven recommendations.
While we’re focussed on achieving financial success with end-users, Bambu Predictive Planning also helps advisors enrich their advice and the ability to offer more personalized services. With the rise of leveraging A.I. for various data challenges, it’s important that the right tools are used to increase customer engagement, get comprehensive insights and decrease overall costs. Analysis capabilities like these can help to lessen the impact of management biases on decisions and executions as well.
The 3 main use-cases we foresee are:
- Lead generation and prospecting: Engage potential new clients with an interesting and insightful experience rather than filling in boring forms.
- Integrate the future into your platform: Add life event simulations into your advisor workflows for lead generation, prospecting, and client engagement.
- The NEW Robo User Journey: Instead of one goal, simulations can generate 5-10 new goals to drive increased engagement and AUM.
This means Bambu will be able to offer Predictive Planning as a white-label solution or API depending on your needs. Feel free to reach out to us to discuss how Predictive Planning might fit into your plans.
A journey of a thousand miles begins with a single step
It’s an incredibly important step for advisors and agents to start conversations with their clients about aspirations and risks in order to build a comprehensive financial plan. Afterall, we all need a little help sometimes, especially if we’re new to the game. We’d like to think we’re helping you and your clients take that step with the right tools and with ease.
If you’re interested to learn more and try out our Predictive Planning tool, head over to our website or Microsoft Appsource with Dynamics 365 or Cloud for Financial Services. Don’t hesitate to reach out for more in-depth information, we’d be glad to schedule a demo with you to share more about how it works.