The wealth management industry has been exposed to a number of different changes. With a change in the profile of investors and technological changes, wealth management has transitioned from traditional advisory driven services to digital wealth management.
Wealth management is an umbrella term for a range of different services provided by wealth managers to their clients including:
Wealth based consulting is dynamic and the changing market has led to wealth management serviced being provided online.
What is digital wealth management?
Digital wealth management means the use of technology to provide advisory services. This technology is not restricted to providing online access to a website or a mobile application. It extends to providing data driven research, artificial intelligence enabled user interfaces, low cost advisory services and stronger client engagement. To put it simply, digital wealth management uses technology to provide last mile consulting to a diverse set of investors i.e businessmen, young investors, high net worth individuals and other wealthy investors.
Traditional wealth management tends to focus on offline relationships with a personalized touch. However, by shifting data insights and management control online with the help of technology, wealth managers can ensure similar advisory services at a lower cost.
Wealth management in India is complicated because of the diverse range of consulting and services that the manager is expected to provide. With a growing number of rich Indians looking to get professional management, turning to digital wealth management is the best way to bring more investors into the fold.
How does digital wealth management work?
Digital management works very similar to traditional wealth management. However, instead of consulting with an advisor, technology is used to collect data. Before you opt for wealth management, you need to decide what wealth management services you would want i.e portfolio management, investment advice, succession planning, tax advice etc. For most investors, portfolio management and investment advice are the primary areas of consulting they need.
The best online wealth management technologies start with you deciding your wealth goals i.e how much you want your portfolio to grow in a matter of years. The next step is deciding your risk tolerance. Together with this data, digital wealth management technology can help craft an investment strategy based on artificial intelligence and data driven research.
Once you have a strategy in place, the wealth management technology works to find out an execution plan for you. Once you’re ready to execute the investment plan, the wealth manager will step in to help you with last mile execution.
Many digital wealth management companies also provide a mobile application for you to manage your investment decisions. This app provides research reports, portfolio analysis, portfolio health and other data at any time. Wealth management companies may also offer robo advisors or technology that provides investment advice to the investor based on certain inputs. However, this advice does not factor in long term goals, lifestyles or specific needs. Those require a wealth manager’s time and expertise.
Digital wealth management does not mean a complete replacement of any human contact. Technology can’t be expected to provide nuanced solutions to investment, legal or taxation problems. A wealth manager can step in to take over in such cases. Digital wealth management simply provides greater control and information to the investor to take decisions at a lower cost.
Digital wealth management is the way of the future for a more inclusive wealth management industry with a low entry barrier for smaller investors who want such services.
About the author: Nirav Desai is a financial advisor and has a 10-year plus experience of working in a reputed mutual fund company. In this article, he has written about how digital wealth management works.