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Can Financial Advisory Services Adopt A Hybrid Model? – Wealth Tech Digest #1

Key takeaways

✅ Can Financial Advisory Services Adopt A Hybrid Model?

Axis Corporate research study focused on digitizing financial advice. The report foresees the democratization of complex financial advisory services in the coming years. Through digitization, financial advice is made available to a segment of the market that previously had no access. This digital future will remove existing barriers and put financial advice within the reach of everyone. And this access for the masses needs to be accompanied by a redesign of our banking distribution models. In order to survive, banks are going to have to clearly define their operational model and commercial processes. But even more important to their success will be their approach to client relationships. Being able to offer the right product to the right person at the right time will be critical.

Doing this involves analyzing client activity and habits to better understand their needs. Then, those needs should be matched with relevant offers that go far beyond traditional investment management services. In an effort to counter the disruptive effect of BigTech, banks are already focused on opening new digital channels and improving customer experiences. Digitizing financial advisory services is among the top strategic priorities at nearly 70 percent of surveyed banks. And 95 percent of banks believe that digitization will materially affect the role of their bank branches. The hybrid model where financial advising exists both face-to-face and via digital channels is favored as the best option moving forward.

✅ Will StashAway Educate Their Way To The Top?

In just three and half years, StashAway has attracted more than $1 billion dollars in assets under management. They claim to be the first digital wealth platform in the region to achieve this milestone. Market volatility in recent years has included two market corrections and one market crash last year. But despite all of this, StashAway has generated strong returns and has continued to attract assets. They are generating annualized returns ranging from 16.5 percent for high-risk portfolios to 4.3 percent for low-risk. According to their co-founder Michele Ferrario, cash in the bank is the firm’s biggest competitor. 46 percent of the financial wealth in Asia is held in bank deposits, compared to only 14 percent in North America. This has led StashAway to focus on more than just sophisticated investment principles and customer service. It has led them to emphasize financial education so that more people can understand how to manage and grow their wealth.

Co-founder Ferrario says that this educational relationship with the public has been key to their fast growth. The firm’s total paid-up capital is around $36 million dollars, which has gone towards launching new portfolios. These include an income portfolio, a cash-management portfolio, and also new market entries in Malaysia and the MENA region.

✅ Why Do Spreadsheets Still Rule The World Of Alternative Investments?

We take a look at the challenges financial advisors face when reporting on alternative investments. Chief among them? Spreadsheets. They remain a significant obstacle in an asset class plagued by manual processes. Most alternative investments are still reported using PDFs delivered by email. Bob Miller is a Fintech expert and CEO of PCR, a private client wealth aggregator. According to Miller, alternative investments are experiencing significant growth in the private client segment. Many firms have thousands of positions that rely on people to gather everything and manually transcribe the data into spreadsheets. From there, the spreadsheets are checked and then sent into their target system. But many firms are seeing the number of positions required to manage these processes get out of hand. According to Miller, these firms are passing a critical tipping point. Quality suffers, new risks are introduced, and there are growing concerns when it comes to scaling.

In response, Miller says that PCR is completely reinventing how aggregation is done globally. They are focused on offering a safe, easy-to-implement global data aggregation tool for the most difficult to aggregate investment data. To tackle this challenge, PCR has partnered with Addepar, another wealth management platform. Together they hope to help clients automate the aggregation and reconciliation of alternative investments. PCR aims to balance 90 percent automation with the reality that smart people are still required to be involved. They see digitization as a technology that will continue to drive the wealth management space forward. And more technology enabled solutions means more demand for reliable streams of data. Solutions like those from PCR and Addepar’s partnership will make this shift forward a reality. With these new solutions, more firms will be able to pivot away from all of the manual collection and reporting. Instead, they will be able to focus on the next innovation in an investment category with plenty of room for new ideas.

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