Would You Trust A Robot With Your Wealth Management?
An Old School Industry
The legacy of wealth management firms is built on a long running infrastructure of trustworthy individuals, personalised goal setting and concrete results. Wealth managers and financial advisors work for years in industry before ascending to work with top clients. They establish confidence in their clients, take the appropriate risks and most importantly deliver on what they offer in ways only a human can. Or so we thought.
Tech Taking Over
As investors pour funds into advances in tech, new technology startups are established on average every 30 mins in the UK. Accordingly, demand for data science graduates has more than tripled since 2015. Growth in tech has been accompanied by radical shifts in the finance industry. As finance becomes increasingly digitalised; Fintech startups are beginning to steal the limelight of traditional banking.
The effects are widespread. Today, millennials are more likely to use mobile apps for wealth management advice as opposed to approaching large firms. A testament to the findings that millennials prefer digital over spoken communication. It is true that currently, millennials own a small slice of total wealth, but they stand to inherit and accumulate more than any generation prior.
WTF is a Robo Advisor?
Just like how google is powered by algorithms to make it so much better at finding information than any human, early stage startup companies are working on developing robo-advisors to improve the accuracy and efficiency of what a human wealth manager can offer.
The idea is to use machine learning algorithms, built off a huge data pool, to make investment decisions more evidence-based and so more “reliable”. UK-based startup, Wealthify, is developing an algorithm which recognises and anticipates market movements before presenting a proposal to the client along with various risk factors.
European wealth management firm, Novafina goes one further in creating a self-teaching algorithm which can run free of human input in choosing optimal open and close positions on the market every day. The company claims the algorithm will target on average 20% returns and expand wealth management products beyond the super-rich clientele.
The attraction? Algorithms utilise huge data sets to make their calculations more evidence-based and so arguably more accurate. They also do all this for a lot cheaper than your average Venture Capitalist.
The reality? There is no long or even mid-term data on how an algorithm will perform in the stock market. The risk is huge and while theoretically an algorithm is much more reliable than a human, we’re just not there yet.
The Opportunity to Seize
Fully automated robo-advisors may be a while off. Nevertheless, it’s clear that wealth managers aren’t connecting with millennials in their native language: digital. SalesForce found that improving digital capabilities is the central goal for wealth managers in preparation for the next generation of millionaires. The boat is still yet to set sail, but fast preparing to leaving port.
A Flowwing Solution
Our mission at Floww is to improve the transparency and accessibility of the funding process between startups and investing parties.
Floww’s platform provides tools for digital communication optimising deal flow, allowing frictionless opportunities for VCs to discover viable investments. Raw industry data insights improve transparency on Floww so that no skeletons can be hidden in the closet.
A stylised portfolio management system allows VCs and Wealth Managers to connect with a new era of startups in the evolved digital landscape.
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