The cost-of-living crisis has encouraged more people to engage with their finances. However, it is hard to know what to do when starting out. Kidbrooke has urged wealth managers to use financial simulation to inspire clients.
These simulations help customers to simulate various scenarios, get detailed insights and become more engaged with investing.
Kidbrooke has outlined how wealth managers can make the most of financial simulation.
Initially, it outlined that most wealth management organisations have tried but failed to digitise their operations. It states that many spent years trying to upgrade their existing systems and invest into new technology, but employees are unenthusiastic about digital transformation initiatives. Kidbrooke stated that financial simulation can be that inspiration.
Next up, Kidbrooke stated that many wealth managers are too reliant on flogging products to customers, rather than trying to serve them. It said, “ The products are divided into silos, and each product – equities, fixed income, alternatives – is then sold on a standalone basis. What clients need and want is an integrated, holistic framework for viewing their financial situation.
“By offering a simulation framework that is product-agnostic, wealth advisers can build trust with clients who can plug in their own data to ascertain the best product mix for their situation.”
It continued to state that wealth advisors need to provide advice based on a customer’s specific circumstance. A simulation engine would allow advisers to add intelligence gathered from population statistics and their institutions’ research department to their decision-making. This means better analysis depending on what phase of the financial lifecycle a client is in.
A data simulation allows managers to go further. Clients can engage with clients with relevant information about the value of their portfolio within the context of their overall financial planning process. This could be like imagining what life will be like in 20 years’ time.
The report states that engaging with clients and introducing them to simulations of various scenarios can improve the engagement. This leads to better loyalty and retention. While many people are currently unengaged with their finances, a tool like Kidbrooke’s OutRank can take the client on a journey of discovery: to understand appetites for risk and reward, attitudes towards saving, affinity for certain asset classes, and scenarios that are possible.
It concluded, “How can using a simulation engine help wealth advisors engage with clients? We believe that even sophisticated investors are overwhelmed with information and keen to consolidate their investments across providers and asset classes. Some banks and fund managers offer planning tools, but these may be biassed towards a particular product such as funds. Clients need tools that are objective, fact-based and neutral.
“At Kidbrooke®, we keep our technology transparent, with assumptions articulated, data enumerated, and processes made clear. There is no “black box”; clients understand which data goes into the framework and which data comes out of it. They can interrogate the simulation and reformulate it with different sets of assumptions.”
Read the full report here.
Kidbrooke recently released a report on how its API solution can solve financial planning woes.
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