FEDERAL POLYTECHNIC OKO

ATANI CAMPUS

A SEMINAR PAPER

ON
TOPIC: TECHNOLOGY FOR INVESTMENT AND WEALTH MANAGEMENT

COURSE CODE: COM42

COURSE TITLE: SEMINAR

PRESENTED

BY

ABUDU GODSENT O.
FPOCSHA21044

SUPERVISED BY

ENGR. DR. AMAKA CHIJIOKE

COURSE LECTURER

IN PARTIAL FULFILLMENT FOR THE AWARD OF HIGHER NATIONAL

DIPLOMA IN COMPUTER SCIENCE

OCTOBER,2023
 ABSTRACT

Technology is playing an increasingly important role in the investment and wealth

management industry. This paper provides a comprehensive overview of the
different technologies available for managing investments and wealth, as well as
the benefits of using these technologies. The use of technology in investment and
wealth management offers a number of benefits to investors and wealth managers
alike. For investors, technology can make it easier to manage their investments
and wealth, reduce costs, and access a wider range of investment options. For
wealth managers, technology can help to automate tasks, improve efficiency, and
provide better services to clients. The paper also delves into key themes such as the
democratization of investing, the rise of robo-advisors, and the importance of data
analytics in decision-making. It also highlights the need for investors and
professionals to embrace technology for better financial outcomes. This paper
emphasizes that technology will continue to be a driving force, fundamentally
altering the way we invest and manage wealth in the future.
 INTRODUCTION

Technology for Investment and Wealth Management is the use of technology to

improve the efficiency, effectiveness, and accessibility of investment and wealth
management services. This can include a wide range of technologies, such as
artificial intelligence (AI) and machine learning (ML), big data and analytics,
cloud computing, and blockchain (Kozińska, 2019).

Technology is transforming the investment and wealth management industry in a

number of ways. For example, robo-advisors are using AI and ML to provide
automated investment advice and portfolio management services to investors at a
fraction of the cost of traditional wealth management services. Digital wealth
platforms are also using technology to make it easier for investors to manage their
own investments.

Technology is important for investment and wealth management because it can

help investors to Make more informed investment decisions. It can also help
investors to achieve their financial goals more efficiently and lastly, it helps
investors to access investment and wealth management services at a lower cost
(Kolesnik,2021).

Technology is also important for wealth managers because it can help them to:

a. Improve the efficiency of their operations

b. Provide better services to their clients

c. Attract new clients

Technology is playing an increasingly important role in the investment and wealth

management industry. Investors and wealth managers who embrace technology
will be better positioned to succeed in the future (Folwarski, 2021).

Global wealth has been increasing significantly over the last 20 years from 80
trillion USD to 220 trillion USD, despite several global setbacks (dot-com bubble,
subprime crisis, COVID-19 pandemic). Wealth management industry that
contributed towards maintaining such pace of global wealth increase during this
time period, has been under significant pressure. However, it seems to be facing
even more challenges than in the past. Not only industry trends, such as rapid
digitization, significant pressure on cost management, ongoing generation wealth
transfer, rapidly changing customer profile, Big Tech entry threats, but also
external factors such as political stability, natural events (such as pandemic) or
threat of economic downturn, all play an important role in shaping the wealth
management industry. As a result, Wealth Tech has been on the rise and seems to
address several of the key challenges in whole Wealth Management industry.

Wealth Management can be defined as conducting tailor-made strategy in

managing assets (both liquid and non-liquid) for the client, within the previously
agreed financial plan, as well as strategy execution with different degree of
involvement from the client. Key services in wealth management include the
following: financial and legal advisory, asset management, tax planning, offshore
services, retirement planning etc., (Ślązak, 2018).

Wealth management providers, such as multinational banks, specialized banks or

investment banks, often offer private banking services. These services, apart from
offering financial services, also provides art banking, wine banking or investments
in luxury goods, commodities, real estate, gems, numismatics or even condohotels.

These non-financials offering is tailor-made, subjected to negotiations with

particular client and usually involving higher cost and higher degree of risk
(Dziawgo, 2021). While considering risk, wealth management/ private banking
providers need to take into account five main categories of risk:macroeconomic
risk (influence of macroeconomic factors), business risk (internal factors in
particular bank), reputation risk (image of particular bank), model risk
(implementation of wrong financial models) and non-compliance risk (Niedziółka,
2018). Wealth management and private banking services are offered primarily for
affluent clients (Koleśnik, 2018), which are divided for two main categories: High
Net Worth Individuals (HNWI) or Ultra High Net Worth Individuals (UHNWI).
HNWI are households with financials assets valued at least 1 million USD, while
UHNWI are households with financial assets valued at least 100 million
USD(Global Wealth Management Report, 2020; Ślązak, 2018).
Concept of Wealth Tech in Wealth Management

Due to heavy digital transformation in global financial market, Fin Tech sector has
been on the rise. Fin Tech (Financial Technology) refers to business entities using
advanced technology for providing digital solutions on the financial market. The
key of Fin Tech is developing products and services that are more automated and
customer friendly than existing offering. Fin Tech experienced boom post sub-
prime crisis due to following reasons: damaged reputation of global financial
system, layoffs of experienced financial professionals as well as potential synergy
with largest banks. Moreover issues with banking system in particular country may
often lead to public finance collapse (Koleśnik, 2021). There is also Fin Tech
companies also have strong impact on the improvement of the financial inclusion
in innovative countries . Fin Tech companies focus mainly on the following
sectors: investment services, risk management, payment services, data privacy
management and digital client servicing platforms (Kondraciuk aand Zaleska,
2019; Ślązak, 2018).
Wealth Tech can be defined as sub-sector of Fin Tech, which is focused on
investment and client portfolio management using digital technologies as well as
tailor-made products and services. WealthTech changes how individuals and
companies manage their finances. It incorporates a set of technologies to automate
and increase the efficiency of the processes associated with wealth management
and investments. Currently, India has approximately 4 Mn WealthTech investors
FY20 (Source: redseer), who are expected to grow by 3x to reach approx. 12 Mn
by FY25.

The term WealthTech was coined in the early 21st century – referring to the
technologies that help personal and professional institutions manage finances.
Today, the focus of these technologies has shifted towards improving consumer
services. WealthTech has had a massive effect on today’s businesses, allowing
people to manage their wealth in a way that traditional financial institutions do not
offer.
With the recent advancements in big data, machine learning, artificial intelligence,
software programs can now offer users personalized advice on wealth
management.

The WealthTech ecosystem

It incorporates technology for both investment management professionals as well

as individual end-users. WealthTech companies focusing on B2B provide their
services to banks and independent consultants, allowing them to scale their
businesses. For example, Motif Advisor allows registered investment advisors or
RIAs to create, monitor, and rebalance their customer’s portfolios as per the needs
of customers. The idea is to assist professionals, and not replace them (Amoroso
and Andrew,2022 ).

Similarly, VestmarkONE Robo Solution is a digital advisor that helps with ETF
advisory and mutual funds by providing enhanced advisor-investor interactions.

B2C WealthTech companies provide portfolio management tools for the standard
user. Wealthsimple, a Canadian company, for instance, offers automated
investments for individuals. Similarly, Folio Investing allows online investors to
make money on ETFs, mutual funds, and stocks.

Thus, financial services that were previously unavailable are now reshaping the
wealth management sector. The WealthTech ecosystem consists of various types of
services. These are as follows:

1. Online Marketplaces

Marketplaces are online platforms that aggregate information on different types of

investment funds and assets. Marketplaces allow investors to compare products
and make decisions accordingly.

2. Investment Tools

WealthTech companies provide a suite of digital tools. These tools include

software programs to monitor portfolios, manage investment planning, and
automation software for investing. Many software products also employ artificial
intelligence to do the heavy lifting for the investor.

3. Portfolio Management Tools

Portfolio management tools allow investors and financial advisors to manage all
their investment portfolios from a single location. Companies such as Eigencat
provides multi-asset class portfolio analysis platform for wealth managers.

Customer experience: an essential guide for managers ebook

4. Compliance management

Along with WealthTech, a rapidly developing area in finance is RegTech. RegTech

applies technological solutions for regulatory control. WealthTech and RegTech
work together to ensure that all financial activities abide by the regulatory
compliances.

5. Robo Advisors

Robo advisors are digital tools that often use machine learning-based methods to
perform operations for the user or the client. They can automatically invest across
different types of instruments depending on how the user has configured the
software. The goal of such software is to allow investors make smart investment
decision in a short time.

6. Robo-Retirement

Robo-retirement platforms are an extension of Robo-advisor platforms. Here, the

platforms employ algorithms to manage a client’s retirement plan. The Robo-
retirement platform helps the client create a retirement portfolio. It allocates and
manages different assets using artificial intelligence and machine learning
algorithms.

7. Quant advisors

Quant advisors are also an extension of Robo advisors. These systems actively use
artificial intelligence to manage investment strategies.
8. Financial advisors

These companies specialize in offering financial advice over the internet based on
extensive data analytics. Big data applications, as well as artificial intelligence-
based decision-making, allow companies to provide accurate financial advice.
However, these companies do not carry out any operations on behalf of the user.

9. Analytics and Big Data services

WealthTech companies can provide specialized analytics services for B2B clients.
Earlier, because of insufficient and unstructured data, financial services lacked
reliable insights and relied on manual analysis for suggesting investments.
However, with analytics and big-data services, investment decisions have become
much simpler.

WealthTech and traditional wealth Management

According to James et al.,(2022), Wealthtech and traditional wealth management

differ in their approaches to the wealth management process. While wealth
management relies on human advisors and financial institutions, wealthtech
leverages advanced technologies to offer personalized and automated services.
This approach reduces costs and gives investors diverse investment options and
greater portfolio control. Furthermore, these solutions are often more accessible to
investors, including those with lower levels of wealth or limited investment
experience.

Roles of Artificial Intelligence and Machine learning in WealthTech

A 2022 survey by Gartner revealed significant investments in technology within

the finance sector, including general ledger technology, financial close solutions,
and workflow automation, with deployment across more than half of the functions.
In addition, the influence of AI and ML extends to Wealthtech, where these
technologies are revolutionizing wealth management practices (Barbara, 2020).
These platforms utilize AI and ML to deliver personalized, data-driven solutions
for investors and wealth managers. AI and ML analyze financial data, including
market trends, client profiles, and investment opportunities, to offer valuable
insights and recommendations. They also empower wealth managers to make
informed decisions, optimize returns and minimize risks. Additionally, AI-powered
chatbots and virtual assistants enhance customer service by addressing client
inquiries, providing financial advice, and facilitating seamless communication
(Andrew,2017).

Importance of WealthTech to Financial Advisors

Wealthtech enables financial advisors to provide more personalized services to

their clients by leveraging advanced technologies and data-driven insights. In
addition to this, it offers innovative solutions and tools that streamline and enhance
the wealth management process (Bill,2019). Let’s explore some key ways in which
it helps financial advisors:

1. Enhanced Data Analysis

Advisors gain deeper insights into client profiles, investment preferences, and
market trends, enabling them to offer tailored advice and recommendations.

2. Personalized Investment Strategies

Wealthtech tools automate portfolio optimization, asset allocation, and risk

assessment, creating personalized investment strategies aligned with clients’ goals,
risk tolerance, and time horizons.

3. Streamlined Communication

These platforms facilitate real-time interaction and personalized engagement

through secure messaging, video conferencing, and document sharing,
strengthening the advisor-client relationship.

4. Financial Planning and Goal Tracking

Comprehensive financial planning tools track progress toward clients’ financial
goals, provide projections, and allow adjustments to strategies. This ensures
ongoing monitoring and addressing of objectives.

Overall Benefits of Technology for Investment and Wealth Management

According to Angel (2018), Technology is transforming the investment and wealth

management industry, offering a number of benefits to investors and wealth
managers alike. Some of the key benefits of using technology for managing
investments and wealth include:

Convenience: Technology makes it easier for investors to manage their

investments and wealth. For example, investors can use online platforms to trade
securities, view their portfolios, and access investment advice. This can save
investors time and hassle.

Cost-effectiveness: Technology can also help investors to reduce their investment

costs. For example, robo-advisors offer automated investment advice and portfolio
management services at a fraction of the cost of traditional wealth management
services (Michael,2018).

Access to a wide range of investment options: Technology gives investors access

to a wider range of investment options than ever before. For example, investors can
now invest in digital assets, such as cryptocurrencies, and tokenized securities,
such as fractional shares of real estate.

Common Technologies Used In Investment And Wealth Management

I. Artificial intelligence (AI) and machine learning (ML): AI and ML are being
used to automate tasks such as portfolio management, risk assessment, and
investment research. This can free up wealth managers to focus on higher-value
activities, such as building relationships with with clients and developing
personalized investment strategies.
2. Big data and analytics: Big data and analytics are being used to gain insights
into market trends, investor behavior, and other factors that can inform investment
decisions.

3. Cloud computing: Cloud computing is providing wealth managers with access

to scalable and affordable IT resources. This can help them to reduce costs and
improve efficiency.

4. Blockchain technology: Blockchain technology is being used to create new

investment products and services, such as digital assets and tokenized securities.
For example, some wealth managers are now offering their clients the ability to
invest in cryptocurrencies and other digital assets.

Challenges of Technology for Investment and Wealth Management

The use of technology in investment and wealth management comes with several
challenges that need to be addressed. One of the biggest challenges is the risk of
over-reliance on technology, which can lead to investors neglecting to monitor
their investments actively. Another challenge is the need for financial literacy, as
technology can be complex and difficult to understand for some investors.
Cybersecurity is also a significant challenge, as asset and wealth management
firms are prime targets for cybercriminals due to the significant funds they manage.
Additionally, the technology itself can be a challenge, as many firms have rigid
legacy systems that are implemented piecemeal to address particular problems
rather than as part of a holistic transformation (Valliere and Joe,2020).

Finally, the increasing competition in the industry is putting pressure on individual

organizations to survive, incentivizing criminal behavior. To overcome these
challenges, firms need to adopt a strategic approach to digital innovation, with a
focus on building a secure remote workforce, adopting automation, and making use
of data to turn it into actionable insights. Additionally, firms need to prioritize
digital innovation, focus on enhancing their digital capabilities, and ensure that
their technology is flexible and adaptable to the changing market.

Future Technologies In Wealthtech

According to Matt(2018), WealthTech has evolved a lot from the simple predictive
analysis. Firms are now using data from various sources, including client behavior,
to improve their services. Here are some of the technologies that can disrupt the
wealth management sector soon.

1. Extensive adoption of cloud technologies.

Cloud computing has always been an enabler of wealth technologies. Almost all
WealthTech platforms are internet-enabled cloud-hosted services. Moreover, with
the changing global regulatory environment, cloud-based services make it easier to
maintain the platforms. Presently, wealth management firms are trying to make
their services available via mobile apps to increase engagement at an individual
level.

2. Introduction of Quantum Computing

Quantum computing, even though at a nascent stage, will help model complex
business situations in the future. We have now solved most of the critical
roadblocks with quantum computers, and such computers may be commercially
available by 2025 (Source: Financial Times). At present, the mathematical models
used for analysis often make overly simplistic assumptions. However, quantum
computers will help the wealth management sector overcome challenges associated
with financial research (Brown and Gemma,2017). This progress will directly
affect WealthTech and FinTech platforms.

3. Technologies for social impact

Social impact is an emerging trend in wealth management. With the rise of social
media, multi-channel service delivery is becoming increasingly important. The
future of a business will depend on how the younger generation adopts them.
The new generation of investors is now more concerned with the social and
philanthropic impact of their investments. It also means opting out of companies
whose business practices hurt society and the environment. However, simply
digitization will not help. WealthTech firms will also need to track the impact of
these social investments.

4. Use of automated advisors

As mentioned before, Robo-advisors have become quite popular in the wealth

management sector. US-based services such as Wealthfront and Invest.com allow
investment management with a minimal fee. However, this technology is still at a
very early stage, and people usually opt for professional financial advisors.
However, a lot of firms still use Robo-advisors for their ease of use.

5. Integrating blockchain in WealthTech

Investment and property management companies around the world are extensively
researching the viability of blockchain technologies. Blockchain can not only assist
in asset management but can also create multiple new classes of assets.

CONCLUSION

Technology is transforming the investment and wealth management industry. By

offering a number of benefits to investors and wealth managers alike, technology is
helping to make investing and wealth management more accessible, affordable,
and efficient Technology has also revolutionized the landscape of investment and
wealth management. It has empowered investors with access to real-time data,
automated portfolio management, and improved decision-making tools. The future
of this industry will undoubtedly continue to be shaped by advancements in
technology, making it imperative for both investors and professionals to adapt and
leverage these tools for optimal financial outcomes.
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