Supporting Human Wealth Managers in a Digital Age

The scope of Refinitiv — one of the world’s largest providers of financial markets data and infrastructure — provides a unique view of evolutions in wealth management around the world.

The company recently released a report that draws on insights from working with more than 40,000 client companies in 190 countries: “The Transformation of Wealth Management: Five Trends for 2020 and Beyond.”

Joe Mrak, global head of wealth management at Refinitiv, talked with us about how data and analytics will allow the next generation of tech-savvy wealth managers to add value and remain relevant. 

How do you see wealth management changing in the U.S.?

Brokers are evolving. The average age of a broker in the U.S. is 59. These are the old-school, cigar-smoking guys, still trading bonds, stocks, and securities. There are still plenty of those, but they are retiring. 

The new generation are tech-enabled and thinking about the predictive nature of data — ESG (environmental, social, and governance) and different things that impact society. The next-generation advisors are trying to be close to their clients socially by understanding their values and helping them to invest accordingly. 

They are moving away from just trading stocks like brokers used to in the 70s and 80s and instead looking to build diversified and intelligent portfolios. That trend will continue. 

What does Refinitiv bring to the party?

Refinitiv is strong in sustainability and ESG. The next generation of investors are more concerned and focused on things like the environment, and they want to know that what they are doing is somewhat impactful in a positive way. We have the right data and ESG indices to facilitate the next level of customization. Beyond looking at liabilities, you can build something that a client is proud of and connected to. 

Are investors giving away the upside when they go with passive investing?

Some advisors believe they are alpha generators. You have those who believe they can beat the market. Sometimes they do, but we have done the studies, and it’s only about 3% that beat the market. Nowadays advisors can provide a very good customized and diversified product with a passive portfolio. ETFs have really taken off because they are cheaper, easier to trade (versus mutual funds, for example), can be chosen based on client values, and are easier to monitor and explain. 

Are advisors changing?

I think advisors are starting to look at liabilities and not just assets for a more holistic view on their clients. 

Take Credit Karma — if you go on there and put in a social security number, it can pull every liability, every credit card, loan, and mortgage an individual has had. 

With that, advisors can provide holistic advice to clients such as, “Pay down your mortgage since it isn’t a tax break any longer.” 

This is an area Refinitiv continues to evolve on its digital portal. The more information derived from client data advisors can put on the dashboard, the better the advice. It’s the power of data; it is all data-driven.

“AI can look at trends, patterns in spending and life events. It can build out scenarios and inform recommendations. This is also a major contribution toward advisor efficiency. Advisors can think ahead based on data facts to build true, deep digital concepts. We see huge demand in this field.” 

Where can you use AI in this?

AI can look at trends, patterns in spending and life events. It can build out scenarios and inform recommendations. This is also a major contribution toward advisor efficiency. Advisors can think ahead based on data facts to build true, deep digital concepts. We see huge demand in this field. 

This is sort of what robo advisors do, isn’t it?

No, this is a way for AI- and advisor-driven solutions to help clients. I believe in the personal touch. You use tech to make it efficient and smart, but it doesn’t take away from having somebody on the other end of the line. They could do some customized advice, such as put a bond in there, use muni bonds for the tax impact, prepare for market shifts, etc.

Is this for retail customers?

No; it’s all focused on wealth advisors, workflows, and their customization. We have a client-centric view where we can combine data in a client’s portfolio with what’s going on in the markets. For example, in October we launched Workspace for wealth advisors, which is our first-ever HTML-zero footprint product. It is focused on wealth advisors, their workflows, and their relevant customization. We can pair our data into individual client portfolios for ease of monitoring. 

The next phase that we’re working on is an additional data layer, where we start to aggregate all of the additional data to take our client-centric view to the next level while bringing the AI elements into what we do on a holistic basis.