Why your asset and wealth management business needs automation

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
Bill Gates

Since the last global financial crisis of 2007-08 assets under management have experienced a sustained growth across the globe. According to experts at PwC this is expected to continue and reach US$145.4 trillion by 2025. While the COVID-19 pandemic and the associated economic downturn might slow this development, the underlying trend will persist. Despite the positive outlook, the wealth and asset management industry is confronted with a paradigm shift which is in full progress – challenging the old ways and pushing traditional players to embrace digitalization. Companies with a limited understanding of the broadening role of technology will fall inevitably behind.

External factors drive automation

A company’s technological framework becomes an historical heritage that grows in complexity the longer a company exists and adjusts to evolving requirements. Therefore, it comes as no surprise that the main drivers for automation processes are not internal but rather external factors. For asset and wealth management companies these can be divided into three main areas:

  • Regulations: Since the global financial crisis, regulators have pressured financial institutions globally towards more transparency, requiring them to comply with their fiduciary duty towards their clients and to provide value-for-money services. As this regulatory oversight is expected to keep increasing, best practices have shown that it can be best addressed with the help of automation.
  • Cost-effectiveness: The pressure of decreasing profit margins, rapid technological progress, a shift towards passive investing as well as ultra-low to negative interest rates force companies to enhance their operational efficiency. Further, cost sensitivity of customers and an evolving competitive landscape with new digital entrants has become a primary determinant of flows across the global wealth and asset management community. Increasing operational efficiency while decreasing costs calls for automated processes to substitute work labour inefficiencies and reallocate resources to more valuable tasks.
  • Customer expectations: As in all areas of life, expectations towards personalized, anytime/anywhere, intuitive digital solutions have been on the rise also in the financial sector. This is further accelerated by the estimated large wealth to be inherited by a generation of digitally savvy. Hence, the digital customer experience has become a differentiator and a way to keep the next generation of wealthy clients.

Applications of automation across three areas

Within the wealth and asset management industry, automation can be applied to three distinct areas with each its respective objective: enriching the front office experience, enhancing the middle office processes and streamlining the back office operations. Following we have selected a few applications across these areas as illustrative examples.

  • Enriching the front office experience: With client expectations rising towards an upgraded digital experience, the client and advisory relationship can be improved at each interaction point. The most obvious example is the account set-up: it traditionally involves tons of paper, repeated data provisions from the client as well as several back and forth interactions. Automation can simplify this process, enhancing convenience and hence contributing to a better client experience from the get-go while facilitating anti-money laundering/know-your-client (AML/KYC) requirements. Interactiveness can be enhanced with smart chatbots that enable clients to tap into subject matter experts’ knowledge at any time and anywhere. Additionally, clients can be served with increased speed, accuracy and availability while better personalized services can be provided. With automated alerts, visually enhanced data information as well as analytics dashboards and reports, relationship managers can better serve their clients. To fulfil the increasing client demand for transparency tailor-made real-time reports with built-in data quality checks can be generated for review or queued for distribution via automated delivery to clients.
  • Enhancing the middle office processes: The possibilities of automation within the investment processes are very wide. On one end of the spectrum we find the automation of simpler high-volume and/or repetitive tasks – the socalled robotic process automation (RPA) which performs selected actions based on a defined ruleset. At the opposite end of the spectrum we find AI algorithms built around a learning model that enables it to take decisions based on experiences made and beyond what has been programmed manually. Exemplary applications within the various areas of the investment process include:
    1. Research: From data maintenance, collection and cleaning to interpretation of relevant information via natural language processing.
    2. Execution: From simple to complex execution algorithms taking account of regulatory constraints, individual client’s objectives, market conditions and impact.
    3. Portfolio Management: From robo-advisors providing automated investment advice at low costs to deep learning automated trading systems mimicking the workings of the human brain in decision-making.
    4. Risk Management: From tailor-made risk dashboards to detection as well as management of known and unknown risks of ever increasing volumes of data.
  • Streamlining the back office operations: During the trade processing phase automation can be used to match orders, verify transaction details and to handle exception alerts: while this increases speed of handling, it also eliminates potential incurring errors and frees employees to focus on more valuable business tasks. A single, automated bot could execute accounting and administration processes such as asset and cash reconciliation, including built-in support for tax assessment and filing requirements at a fraction of the costs. Bots can facilitate the hand-off of data across systems and ensure money has been transferred into and out of specific accounts. When we consider expensive penalties for lacking regulatory compliance combined with the continuously increasing regulatory complexity, intelligent automation appears the solution to help tackle these challenges and reduce breaches (e.g. by scanning investment management agreements, RPA can read and extract the most relevant information to then transpose it into compliance rule coding screens faster and more accurately than individuals could do).

Sankey’s approach to automation

The benefits of automation are multifaceted and include cost reduction, better usage of your resources, accuracy improvement, higher speed of processes contributing to an overall productivity increase as well as driving higher staff satisfaction altogether. While Sankey Solutions operates as our customers’ extended CTO team, at Sankey we take a partnering approach in developing custom automation solutions that best address a company’s needs while fitting into its framework – whether technological, organizational or other. Depending on your starting situation and requirements, customized solutions can be implemented over the course of few weeks and often on top of your current technology architecture – hence avoiding major infrastructure costs. Having worked on automation projects around the globe for clients ranging from start-ups to Fortune 500, we have enabled them to be better equipped to face their industry challenges – today and tomorrow.

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