Wealth managers look to robo to help smaller clients: KPMG

Robo-adviser offerings and platforms are a source of significant focus for wealth management firms, according to KPMG, as well as how technology can improve the value and delivery of advice.

KPMG’s global Pulse of Fintech H2’2023 report found investors in wealth technology (wealthtech) are specifically looking at how robo offerings can develop products to help consumers at the lower end of the wealth market.

This could be a way to give lower-balance consumers access to the wealth products traditionally only used by high-net-worth investors.

Late last year, HUB24 launched an offering called Discover which encompasses a range of passive, active and ESG managed portfolios. Designed for lower-balance clients, the firm said it suits “advised clients seeking simplicity and affordability in their investment options”.

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Another area of interest for wealth managers is artificial intelligence (AI) and, in particular, using it to develop wealth solutions that are focused on environmental, social and governance (ESG). This was particularly the case in Asia Pacific, it said.

“Over the course of 2023, AI was an incredibly hot area of interest for global investors – and the wealthtech space was no different. In particular, investors showed interest in the applicability of AI and machine learning to data analytics and resource-intensive tasks such as product checks/recommendations and source of wealth checks. Wealthtech solutions focused on improving and managing ESG investments also garnered some attention during 2023,” KPMG said.

Speaking to Money Management in November, Jono Broome, associate director - head of client advisory at Morningstar Sustainalytics, said the industry is only scratching the surface of what AI can do in the ESG space.

“Given much environmental and social-related information exists in unstructured, often qualitative forms, the ability to synthesise these masses of unstructured data into meaningful insights presents great opportunities for the responsible investment industry.”

Looking ahead, trends that the consultancy identified in 2024 include a greater focus by regulators on investor protection, using technology to improve the value and delivery of wealth advice, and how AI can be leveraged in wealth management.

Leon Ong, partner in financial services advisory at KPMG, said: “The opportunity for wealthtech right now is around offerings where the cost to serve isn’t as high as it is for the ultra-rich or traditionally rich. So that means a real focus on AI and machine learning, with companies and wealthtechs both looking at how to use it to make wealth management processes simpler. 

“Robo-advisory also continues to be hot, although it’s been a quiet year from an investment point of view. There are a number of very successful robo-advisors out there that have growing brands with concepts that appeal to the masses – in particular, giving individual investors access to financial instruments they wouldn’t normally have access to.”