Fintech on Friday: How AI can bolster the human side of wealth management

Private bankers like to say that their industry is all about building relationships. While this may conjure images of oak-panelled boardrooms, private dinners or days on the golf course, these days technology has just as important a role to play in how wealth managers interact with their clients.

The banks are having to react to this digital revolution. Some of their evolution is being done in-house, while other parts are done in conjunction with third parties. Finantix is one such company, says co-founder Alessandro Tonchia, explaining how it provides technology with enable wealth managers to sell more to clients, as well as being able to provide better advice.

“In wealth management, the two are connected,” he claims. “It is not a push sell. You will sell only if you can demonstrate that you can provide meaningful advice. And the better advice you have, the more chance there is of people doing business with you.”

What unties the two is having a deep understanding of the client, believes Mr Tonchia, as the greater the understanding of circumstances, goals, family constraints and so on, the better the advice provided is likely to be, while also proving useful for sales intelligence.

“So a lot of our focus is about having a data model that collates both structured and unstructured information about the client,” he adds.

Finantix, which has been around for 20 years, is now using innovative technology such as AI and NLP [natural language processing] to better collect client information around clients as well as creating rules-based advisory processes, and then personalising the customer experience and how they receive content.

The technology to do this has been around for the last five years or so, says Mr Tonchia.

“We are not trying to cure cancer. We are saying given the processes you have, how can you make them more productive? Less error prone and more insightful?”

For example, he claims that AI functionality can make the KYC process go from six hours to an hour, or if an adviser is preparing for a meeting, collating numerous documents and so on, or getting up to speed with regulations, what might once have taken 45 minutes can now be done in five.

“There is a very strong focus on making the adviser more productive, but also to allow a more personalised client approach, because the software allows you to remember the client preferences and highlight investment ideas that are in tune with them. We don’t want to throw away what wealth managers are doing now, we just want to make it a bit sharper.”

Finantix provides software which private banks are able to plug into their existing systems. Mr Tonchia describes it as being like an “umbrella” which sits on top of core banking systems. The firm’s clients, which include names such as Deutsche Bank and HSBC, use it for different things, some to provide advisers with client-centric tools, others to give their customers a self-service portal or to assist with onboarding processes. Some start with the client portal and then choose to utilise other parts of the offering, while others have taken the firm’s development tools in-house so their own IT departments can build very unique solutions.

Regulatory boost

With financial services firms having to comply with increasing levels of regulation, technology has been seen as one way of saying on top of the mountains of legislation, and software firms such as Finantix have undoubtedly been benefited, says Mr Tonchia.  

“I think both the UK and Switzerland, which are the core wealth management markets we are looking at, in the past there was the sense that the top wealth managers were so unique, so white gloved, that you could provide the necessary service,” he explains.

But in a world that has MiFID II and complex AML and cross-border rules, that is no longer enough to protect these banks from making violations, he claims.

“Our pitch is that you can make a virtue out of this necessity, because you can sell more aggressively, you can advise more spontaneously because behind the scenes we automatically filter away products you cannot sell to a client, we control potential risk exposure that you have. The software eliminates the danger.”

Much of the discussion around AI, in other industries as well as financial services, has centred around the job losses that are likely to arise because of increased automation. But Mr Tonchia insists there is still very much a role to play for the human adviser, and that AI is there to make these jobs more productive.

“We don’t want to automate to the point that you lose the special relationship advisers have with clients,” he insists. Yes, advisers are giving away a certain freedom of action and control over data and clients by using software such as Finantix’s, but at the same time they are being given tools which are designed to make them more effective and professional.

“If an adviser is having dinner with a client and they want the latest research on the Russian market, well they can have it in one or two clicks and share it quickly. There is no need to call compliance to check if a product is suitable, we immediately give them an answer.”

And with the rise of robo-advisers and the growth of passive investments, wealth managers need to find ways to show that the premium they charge for their services is worth it.

Finantix continues to grow, making recent acquisitions and having a private equity company invest in it in late 2018. And its horizons are expanding too. “We opened in Japan last year, Australia this year. We see Europe and Asia as our key target markets and are also carefully looking at North America, where we have some clients.”