Bite Investments is featured in Wealth Management‘s 2024 Market Outlook, discussing the transformative impact of technology on wealth management.
With the retail segment accounting for half of all global wealth and heavily under-allocated to private markets, alternative asset managers are targeting the wealth management channel in search of growth and investor diversification. Simultaneously, there is a growing investor demand for private market investments, as they can help lower market volatility, diversify portfolios, and support a unique investment objective with a different risk-return profile compared to public markets. This shift not only responds to market volatility but is also an opportunity for advisors to harness technology, provide access to alternatives, and gain a competitive edge.
Accessing alternatives through technology
Investors nowadays are demanding a smooth and seamless omnichannel experience with access to new services and products, such as alternative investments. To cater to this, wealth managers are turning digital-first to enhance distribution and their product offering. Although wealth managers can proactively build personal relationships with alternative asset managers, the operational burdens and volume concerns with investing makes it near impossible to do so.
As a result, technology solutions creating efficiencies have come at the forefront with intermediary platforms becoming the most well-known avenue. Still, they have big limitations. They only cater to well-known alternative asset managers with big pockets to pay fees and the more affluent upper echelons of the wealth management industry, excluding the vast majority of the market. It’s true that intermediaries can help curate products, but the main problem remains; most alternative investment opportunities out there are unable to go on to one of these intermediaries. The wealth management channel is therefore missing out on top quality funds only offered to institutional investors.
We have learned that collaborative approaches are essential for efficient access to alternatives. Remember that advisors are not alone in this; alternative asset managers are mutually benefiting from the retailization of private markets. We have built a wealth management ecosystem, with technology that includes features facilitating direct connectivity between asset managers and wealth managers, eliminating the need for costly intermediary fund platforms. This collaborative model essentially allows wealth managers to become distribution partners to the asset managers, benefiting from the technological resources of asset managers, with the option to have their own digital marketplace and centralize their operations.
Considerations for digital tools
When going digital-first, it is crucial to select a tool which will also consider the user experience, compliance requirements, and operational capabilities. Some key considerations include:
- A system that digitizes onboarding and subscriptions, reducing friction and increasing accuracy in KYC and AML workflows.
- A user-friendly interface, ensuring that investors and advisors can seamlessly navigate the platform.
- Aligning with compliance and regulatory requirements, ensuring products only cater to jurisdictions and types of investors the advisors work with.
- A secure end-to-end system, minimizing the need for users to navigate multiple systems and reducing potential vulnerabilities.
- If this is not possible, aim for tools built in a low code, open architecture way that are adaptable to or complement existing systems.
The untapped market of retail investors
There is a clear growing demand from investors to invest in alternatives. To help provide this service, asset managers and wealth advisors must take advantage of the latest technological innovations. Legacy systems don’t cater to high volume and low-ticket sizes and more importantly, the investor journey is disjointed. Wealth management 4.0 is here and the only way to provide value enhancement and efficiency is through digital-first.
Source: WealthManagement.com
