Financial Advice 2.0: Inventing super-human advisors

Fintech on Fridays

In a world where technology is ever-changing and regulations ever-increasing, human advice is costly, ineffective, and risky. Robo-Adviceon the other hand, doesn’t resonate with clients on a personal level. Now, what is there to do? Here the Cyborg, the Hybrid-Advice philosophy enters the scene. human advisor with techsupported superpowers. 

The best of both worlds: efficiency with a human touch 

The problem today is, that human-centered advice is more expensive than ever. And clients are reluctant to spend money on itespecially when there are alternative services in the market available free of charge. Regardless of the availability of such services though, customers still have complex needs. And the faster financial markets advance, the more complex those needs get. A demanding regulatory environment for banks and their advisors puts them in an unpleasant spot. So, what is the current quick-fix given these circumstances? Private banks increase the minimum assets required to become a client or they abandon the typical financial advice altogether. Some banks and Fintechs try to disrupt the market for financial advice with Robo services, but with mixed success. What are the main obstacles for both? Robo Advisors lack the human touch and Private Banks are less efficient.  

The answer to this challenge is technology that enables financial advisors to be more efficient in targeting the right clients and giving them personalized proposals. Instead of going through many different lists and investment guidelines (blacklist, recommendation list, etc.), the software handles the process. Instead of checking if the proposal is within the boundaries of the portfolio, or if any client or bank-restrictions are violated, the software can handle that within secondsThe advisor can focus on the needs, wishes, and financial status of the client. You tease out what the client needs, manage the relationship, and the software calculates the right portfolio, the right products, gives you the right story with every possible recommendation and handles all regulatory aspects for you. 

“Humans lack efficiency and Robos lack humanity. Give advisors super-human capabilities by supporting them with software in a hybrid advice model. Give them the power of software efficiency with a human touch 

How to save 10 weeks per year for every advisor

Imagine you offer your advisors a tool that frees up 10 weeks of their time every year. 10 weeks focusing full time on the client. Establishing and caring for better client relationships. Here are practical ideas on how to get there: 

1. Be clear about your investment philosophy and set up a clear investment structure and process that contains:

● Categorization of Risk Profiles (How do you categorize your client’s risk profiles?)
● Risk and Strategy Offerings (What investment strategies or risk levels do you want to offer?)
Mapping of risk profiles and risk levels
Asset Allocations and Time Horizons

2. Set up a regulatory compliant advice journey that includes:

Sufficient Regulatory Information
Regulatory Restrictions

3. Define your investment universe

Set up a set of securities that you wish to use as possible investments for your clients
Include buy/sell/hold recommendations from your research

4. Define bank restrictions on the allocation

Have a blacklist containing, e.g. non-ethical investments
Have certain risk boundaries for asset classes or single investments

5. Give your client and advisor the possibility to include their wishes

Ask if the client wants to limit exposure to an asset class or investment
Ask if the client has a blacklist or darling stocks  

6. Connect for a seamless and efficient process

Integrate the advice software to your core banking system to process orders directly
Automate regulatory reasoning to have a compliant and transparent decision process 

All of these proposals can be configured and extended to your business model.  With our hybrid Advice Softwarefinancial advice gets more reliable and transparent without losing individuality and gives you the edge in a competitive market space.

 


How Software Can Close the Retirement Gap

Fintech on Fridays

 

Challenges of an aging society and how we can use technology to win the game 

It is one of the most pressing financial concerns for most of us: how do I ensure that my savings are sufficient to maintain my standard of living during retirement? 

Yet this concern remains heavily disregarded by most individuals, particularly in Germany where over 90% of retirees rely mainly on public pension schemes¹Several developments related to our society and its economy, such as the demographic shift in the population towards older generations as well as the sustainably lowinterestrate environment, lead to the unsuitability of public pension to provide sufficient coverage for retirement. 

Raise Awareness

Despite several additional savings products other than public pensions, such as company or private pensions, the main challenge of converting cash assets into suitable investment products remains. 

For most people, the challenge starts with awareness. The majority of future retirees are not even aware of their existing retirement gap. Also for the case of retirement planning, the simple logic prevails: the sooner one is aware of existing retirement gaps and the earlier one starts investing, the higher the expected returns and hence the lower the risk of facing such gapsThe issues resulting from retirement gaps can be severe and may very well result in poverty. Already today, 20% of the German population live in or are at risk of old-age poverty²The issue of existing and widening retirement gaps thus requires urgent attention from both the public and private sectors. The governments in countries like Norway, Sweden, and Denmark have already identified the issue and provided their citizens with the necessary tools to understand their current state of pensions. These tools allow citizens to access a holistic online-view on their earned pension and also supply them with useful forecasts to simulate changes to their pension income. Although there are ongoing government-driven initiatives in Germany, the task of increasing awareness remains with the private sector for nowNevertheless, the subsequent step of closing identified gaps remains.

Provide comprehensive tools 

With our digital solutions, Fincite provides the necessary toolset for users to become aware of existing retirement gaps and derive the right actions to close them. During this process, we not only take into account the user’s existing pensions but additionally consider their aggregated wealth in a holistic view. This might include additional assets, such as real estate, which can significantly impact the financial situation during retirement. By analyzing a user’s current and planned living and financial conditions, our software enables them to determine their required retirement savings and identify existing gaps. A workflow could look as follows: 

1. Understand the client  connect current pensions, cash & investment accounts, real estate, and other assets to develop a 360° view of the client’s wealth 

2. Determine financial needs  develop financial goals for retirement by exploring all incomes and expenses

3. Identify existing retirement gaps  determine existing gaps by comparing the expected returns of current assets with the client’s financial planning

4. Provide suitable products  choose suitable products to close the retirement gap, taking into account the client’s financial and risk-bearing capacity 

5. Keep track – employ algorithms to monitor and realign the investment strategy during the saving and withdrawal period 

With this approach, you’re able to provide your clients with investment solutions to address the most pressing financial concern and at the same time generate useful insight into the client’s state of wealth.  

Find out more about our Financial Planning Software or contact us directly, our experts are happy to help you.

 

  • ¹ Bundesinstitut für Arbeit und Soziales, 2017
  • ² Süddeutsche Zeitung, Artikel „Rentner stärker von Altersarmut betroffen als gedacht“, Februar 2019