Millennial investors seen to drive financial technology

14 September 2017   Category: News, Asia, Global   By Asia Asset Management

Financial planning technology is expected to undergo rapid changes over the next few years to meet the demand and expectations of millennial investors, according to a recent report from Celent.

William Trout, senior analyst at Celent, a US research, advisory and consulting firm focused on financial services technology, who authored the report says that "financial planning technology is now approaching the future at lightspeed".

It’s a conclusion based on his interviews with over two-dozen solutions providers and technology users, including vendors, wealth management firms, and investment advisers over a period of three months.

"A longstanding (technology) vendor arms race, built on the increasing complexity of solutions, now tilts towards ease of use,” Mr. Trout says in the report released this month. “This focus on a more intuitive workflow reflects the preference of the adviser, as well as that of an end client increasingly engaged through digital portals.”

Among other things, he highlights the increasing use of technologies such as artificial intelligence and robo advisers, as the financial planning industry tries to automate as many functions as possible.

Robo advisers are a class of financial advisers that provide financial advice online with minimal human intervention.

However, this does not mean technology will replace humans.

"The point is that what can be automated, will be. At the same time, the role of the adviser appears more important than ever, and not just due to the emotional considerations inherent to the planning process,” Mr. Trout says.

"Technology can help reduce friction and boost delivery of services to the end investor, and at the same time, help humanise the process," he adds.

According to the report, millennial investors prefer more financial planning-related tasks to be automated, or addressed through self-service digital portals.

They only want to work with an in-person adviser when they have gained significant assets, or when they are looking to set long-term financial goals.

That means 'traditional' financial advisers have to change their mind-sets to survive.

"The traditional adviser is often left cold by millennial behavioural characteristics, which may include scepticism, disdain for ceremony and a 'right here, right now' mind-set,” Mr. Trout writes. “But the adviser whose horizons extend beyond the golf course needs to find ways to address that millennial generation's mobile, 24-7 mind-set and sense of immediacy.”

He urges financial planning companies to quickly embrace technology and to jump onto the digitalisation bandwagon. He predicts that companies, which succeed in making this transition “will see a tenfold return of their efforts.”

“Indeed, the more firms invest in strategy now, the less repositioning they will need to do in the future. This logic holds true not just for the financial planning vendor community, but also for the banks, brokerage firms, and other wealth management institutions that have become vested in its success,” Mr. Trout says.