November 1, 2016

Dawn of the second-generation robo guides

Maria Kumle

Head of New Solutions, Tieto, PHCW

This blog post is part 1 of the series on Robo Guides.

Wealth management and advisory is being disrupted globally. The second-generation robo guides will provide a digitized tool that shifts focus from wealth accumulation to enabling life plan management.

Wealth management services have typically been the territory of high-net-worth individuals. This is already changing. The advisory scene is being disrupted by something we call digital augmented guidance, which will further broaden the view of what wealth management is and who it is for.

So far, the global focus has been on removing the manual element and open up the advisory scene for the mass affluent and below. Going forward, the financial industry will have to learn to cope with a new generation of investors that are tech-savvy, have high expectations on customer service and demonstrates new wealth and earning patterns as well as increased environmental consciousness.

From pension plan to enabling a desired lifestyle over the entire life span

A study performed by Tieto and Inizio showed that Swedish students on average are quite uninterested in their pensions savings. In addition, the information available to those interested is also perceived as difficult to understand and difficult to get to. This group’s financial providers might not even be traditional banks – fintech providers and social media tools might be perceived as more convenient players to interact with.

Educating and engaging the future generations is a challenge for the financial institutes.

Wealth management needs to change focus from how to support the generation that comes after you, and how to accumulate the largest amount of money, to an activity that enables a desired lifestyle over the entire life span for the investor.

Rethink the business process

Therefore, it is not just about doing the same thing a little cheaper and a little faster through digitalization. The business is disrupting, the individuals to advice are changing, their economic development is changing – the society is changing.

The business processes for wealth management – or life management – need to support this. There will be the rise of a second-generation of robo guides. This tool must be powered by a cognitive analytics back-end system linked to several big data pools.

Let me clarify with an example:

  • Lisa inherits a significant fortune. The financial institute that pays out the inheritance pushes a proposal for financial guidance to Lisa. Lisa has a multivendor life plan linked to her, but she is curious to see if this new vendor will identify any new interesting possibilities. At the same time, her existing multivendor life plan is made aware of the inheritance and starts calculating how this would match up with the existing life plan.

    The life plan for Lisa states that as she reaches retirement minus 10, she wants to move to Tuscany. For this purpose, she has invested in a crowdfunding project for building a residency in various locations across Tuscany where health care services are included. By providing certain sums to the project, life stay points are earned, and up until these are cashed in, the properties are leased out using Airbnb.

    In order to increase the likelihood to be able to enjoy her late working time and retirement years in Italy, Lisa also has a health plan where an insurance policy is used to provide health activities through a “health account balance” where its savings can be exchanged in personal training hours, health club memberships, training equipment and health checks.

    In addition, her life plan in synchronized with her husband's and her children’s and covers everything from school fee’s to spare time activities for all of them.

    The inheritance from the U.S. is proposed – from the various vendors – to be invested in a mix of traditional vehicles, a wine producer in the area where she plans to move (also promising a rebate on wine bought from this producer), an event company in same area and so on.

The basic idea is that there is a need for a tool that takes the investor's total situation into account and presents options from which the investor makes choices. The “robot guide” continuously monitor the investor to learn about the interests and spending behaviours of the investor, and of the community circles around the investor, like close family, sharing communities etc. The portfolio is about enabling the investor to live, not to accumulate wealth.

But isn’t the financial industry driven by profit earnings and the outlook of making money? And where are the earnings in this for the financial institutes? These are questions to which I will return in the next blog post in this series on Robo Advice.

How can you respond to the challenges ahead? If you have any questions or like to discuss your future company needs, please contact me. 


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