Wealth Management is undergoing rapid transformation as trillions of dollars of wealth transfers hands from baby boomers to the next generation.
In the coming years, roughly $30 trillion in financial and non-financial assets will pass from baby boomers to their children in North America alone. Historically, over 90% of heirs have changed their advisors when the wealth is transferred to them, presenting both an opportunity and a major threat to traditional wealth management firms and their advisors.
A second but equally important threat is coming from robo advisors and fintechs. Robo advisors are luring clients across the board but especially those with fewer financial assets. This erodes future sources of clients and revenue.
To ride on this opportunity and minimize customer and financial advisor (FA) attrition, wealth management firms must fully equip their FAs to meet the demands of these “next-gen” investors whose expectations and preferences have been shaped by new technologies.
While clients demand a personalized experience, wealth managers must invest a significant amount of time to manually derive insights into the changing status and needs of their clients. Wealth managers simply cannot provide this level of personalization at scale, given their time constraints.
As a result, their clients often navigate large financial events and decisions by themselves. Left on their own to sift through mountains of data, clients may be tempted to make transactions that are mismatched to their overall needs and goals. While a frustrating client experience engenders little loyalty to financial services firms, augmenting wealth managers with financial industry-specific artificial intelligence (AI) tools fills the gap between the experience demanded by the clients and what is currently provided to them creating a win-win solution for both parties.
Wealth Management AI Benefits
Important Underlying AI Technologies from CognitiveScale
Hyper-Personalization, Evidence & Explainability:
CognitiveScale’s Profile-of-One AI for Wealth Managers tailors insights and experiences based on observed, declared, and inferred data to drive rich client engagement and actions. The data collected to build this profile can be combined through multiple data sets, derived through past behavior, application feedback, and app analytics, or derived through natural language processing to pull out critical traits to help understand additional client profile attributes. And explainable AI ensures transparency into the system’s rationale. CognitiveScale not only provides AI-powered recommendations to Wealth Managers, but it also explains the reasons why it is recommending something; essential for audits and regulatory oversight.
Quantamental analysis includes elements of traditional fundamental analysis as well as compute-heavy quantitative analysis. Machine learning (ML), natural language processing (NLP) and other AI techniques are used to accelerate and automate the creation of timely insights that are derived from vast historical and real-time financial data.
Learning and Continuous Feedback:
Continuous learning allows the Wealth Management AI application to appreciate in value as user feedback, market data, and transactional data are updated. To enable continuous learning, CognitiveScale provides consistent frameworks and utilities to collect user feedback and additional training data to foster incremental learning.
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CognitiveScale’s Wealth Management AI Solution: Client Advisory Insights
CognitiveScale delivers proactive, individualized Profile-of-One service for clients and contextualized 360-degree view of clients and recommendations for their advisors. The Wealth Management AI Solution empowers financial advisors to measurably improve how they guide their clients through their financial journeys. Its Profile-of-One delivers individualized client insights to FAs and wealth managers to drive the conversations that drive customer loyalty.
To improve financial advisors’ understanding of all their customer needs, the solution curates major triggers and catalysts that impact their clients’ lives. These include traditional financial planning inputs like current portfolios, allocations, transactions, and sector preferences. They also use AI to uncover the client’s financial personality and to infer clients’ unstated preferences. By using these triggers, the system generates individualized insights along with recommendations, supported by evidence to the wealth manager. These insights help wealth managers to scale their customized service to multiple existing and new clients in a way that would not be possible without AI. These insights are integrated into financial advisors’ existing software infrastructure and workflows.
This highly-personalized, but automated service, also helps firms to improve customer retention, lower cost to serve, and increase wallet share.
Helps anticipate & accommodate life events
Increases engagement, conversion, & loyalty
Shares insights proactively & automatically shares with evidence & user feedback
Additional AI Use Cases for Wealth Manager Advantage
In addition to providing insights and recommendations to financial advisors for client service, AI from CognitiveScale can be used to fundamentally remake the wealth management firm. Here are just a few examples:
Inform the advisor of the next best action based on a known domain. This essentially forms a decision support system for the advisor to enable customer servicing.
Run pattern identification over a range of customer interactions to determine the propensity of a customer to complain.
Shortlist prospective clients and the right channel of communication.
Gather data on customers’ behavior to better understand their personality and needs. Using this data, we create a unique client profile which serves as a strong base for advisor interactions.
Advisor contacts the customer and aggregates information, pulling in additional data from public/private sources and creates the Profile-Of-One. The system provides financial advisors with guidance on optimal products/services for the customer.
Match customers to advisors based on a range of observed behaviors and inferred personality traits. This approach creates huge impacts on customer relationships (story telling vs. short, sharp, direct, and to-the-point).
Embrace Change or Wait and See?
Having already been through previous waves of technological change and democratization of information in the past few decades, the Wealth Management industry is experiencing an entirely new game-changer: AI. Once they become aware of the value that Artificial Intelligence is providing their friends and colleagues, financial advisory clients will demand similar levels of service and performance from their own financial advisor. Some firms will embrace change now. Others will scramble to catch up with today’s early adopters. Still others will take a “wait and see” stance.
Either way, change is coming. The good news is that AI is now past the “bleeding edge” stage, and firms can benefit from the experience of previous financial industry AI pioneers. For wealth managers, CognitiveScale offers a full portfolio of financial services AI offerings as well as a proven, repeatable methodology to ensure their successful implementation.