Fintech Robos Release ‘FR Transact’ allowing financial providers to offer diversified investment products
“Automation enhances control and risk management of investment business”
If there was one trend or challenge that has really shaken up the asset management and wealth management industry in the last ten years, it would certainly be the alarming rate of margin erosion in the industry. The relentless downward pressure on fees would be at the top of the worry list for any wealth management CEO.
According to Fitch Ratings, traditional investment managers around the world faced pressure on margins in 2021 and beyond due to fee compression driven by fierce competition. The customer preference for lower-cost, passively managed funds is likely to continue as these funds outperformed the majority of their active counterparts in 2020, despite market volatility.
The operating costs of wealth management businesses have continuously increased in recent years. By contrast, asset management product prices have dropped across almost all asset classes both in retail and institutional business within the same period.
The reasons for this are numerous and will further pressure margins:
• The continued low yield environment means that fees eat away a larger proportion of investment returns
• The below-average performance of some active managers
• The need for higher cost transparency due to regulation
• The ever increasing competitive pressure driven by the many companies offering low-cost passive investment strategies.
With average cost-to-income ratios (CIR) at 70% and a wide variation ranging from 40% to 115%, the race is on for wealth managers to find new revenue sources and better control costs. There are external challenges too; CEOs have been troubled by the threats to business continuity posed by COVID, the ever-increasing service expectations of clients and the need to retain high performing advisors.
Trends in falling fees are not going to pass. Plain economics says that if you can’t increase your revenues, you should then cut your costs to be profitable. But can wealth and asset managers afford to cut costs? Maybe not! This is nowhere more evident than in traditional retail wealth management. If you put together the revenues of all business brought by a financial advisor during the year, that will not cover half of his annual salary! On the other hand, to manage the back-office flow of that traditional investment business, where trading, transactions and reporting need to be administered flawlessly and in a timely manner, the firm would need tens of accountants and analysts chasing it on a daily basis. Hence, it’s a heavy cost on the frontend, and a heavy cost on the backend, rendering the business model unfeasible.
The solution? Look no further than the Fintech space
While there is unlikely to be one solution for the myriad of problems wealth managers face, having a scalable, adaptable technology platform as the foundation on which to build their business is a crucial factor for success. According to Boston Consulting Group, wealth managers should ensure their operating model is fit for purpose, to help with this squeeze on margins. Fintech solutions have demonstrated that it is possible to build a bridge between offering innovative and good services while taking a low-cost approach. This is how investments starting as low as US$ 1,000 can be managed successfully while charging less than 1 % in management fees. This is unprecedented for the traditional wealth management industry. This is also why Robo advisers are achieving a rapid growth of more than 9 % p.a. in Assets under Management (AuM).
Fintech is the one factor that can help increase efficiencies at all levels. This could include automation of repetitive processes. It also introduces new technologies such as artificial intelligence (AI) for processing customer communications, which enables improved focus for managers on their core specialties. Greater efficiencies will enable wealth management firms to be nimbler in their response to changes, whether in products or regulation. Technology can help speed up the transferring and processing of data through the investment cycle. Streamlined, efficient and automated processes mean quicker response times to client requests, from the smallest investor to the largest institution.
Fintech Robos excels in investment backend automation
Fintech Robos W.L.L. a regional FinTech firm, has released a new financial app to run on its digital platform. ‘FR Transact’ enables wealth managers and financial institutions to automate trading, accounting and middle-office workflows, creating a new era in regional portfolio management that is secure, accurate and completely frictionless.
One of the reasons people in the region are not investing is that they don’t have easy or affordable access to quality investment products. This is obviously one of the things that are hindering wider financial inclusion across the Arab world. The incumbent providers, banks and insurance companies, lack the technologies and systems that enable them to efficiently administer the backend of investment operations. To overcome this hurdle and expand regional fintech innovation, Fintech Robos has engineered and produced this sophisticated, world-class investment trading engine to integrate with capital market players and custodians to trade mutual funds, ETFs, fund-of-funds and modular strategies.
This is a high-end, proprietary data management system, encompassing digital warehouse, multi-provider APIs and interfaces that allow financial providers to offer a diversified array of investment products. It supports institutions to start building big data and getting deeper insights into their business. The digital backend engine handles:
- Automated end-to-end trading cycle including trade aggregation, disaggregation and request tracing.
• Delay trade management.
• Customized strategy configuration.
• Rebalancing level options (Client/ portfolio/strategy).
• Individual and advisor client record management.
• Multi-bank record management.
• Flexible charging structure.
• Reconciliation of currency conversion, cash, trade, units and positions.
• Compliance, Tax data management and Reporting.
• Trading across all asset classes.
• Multi-product, multi-currency and multi-custodian platform.
• Rich API library.
With full backend automation capability, the solution supports making wealth management feasible and profitable. It enhances operational control and risk management due to speed and comprehensiveness of data reporting. Furthermore, in addition to delivering higher accuracy/efficiency due to minimizing manual work, it provides financial providers the flexibility and resilience to be proactive rather than reactive to managing both risks and opportunities in the business. For wealth managers, investment banks, life insurers and brokers that want to create or distribute financial products and are looking to use a single platform, ‘FR Transact’ is a digital, regional, cloud-based marketplace for investment solutions.
With this, Fintech Robos builds on its regional vision of delivering digital savings and wealth management solutions – a truly personalized and mobile-first client experience underpinned by inspirational UX. It enables wealth managers and financial distributors to leverage Fintech Robos’ experience with pioneering savings and pension services in the region. Fintech Robos has delivered a series of digital savings and wealth management solutions including a Robo Advisor, a mobile app, a client portal, a group savings product amongst a complete stack for running a wealth management business. In turn, clients are granted access to an online portal featuring all relevant account information, updated in real-time. The platform also provides mobility apps, allowing clients and distributors to access information, and communicate at any time, from any place and through any device.