Wealth

A mortgage may be the most tangible way many of us deal with financial risk on a day-to-day or more accurately month-to-month basis. The risk of interest rate rises and the effect they can have on mortgage obligations can be acute unless they are considered properly and meaningfully. Also, most of us buy the property based on the axiom that prices will drift upwards inexorably. Over the long term, this is probably true. However short to medium term fluctuations can have disastrous implications, for example, if your risk analysis does not prepare you properly for unforeseen events like the global pandemic. Again, few tools available on the market offer an all-encompassing ‘holistic’ framework that can contextualise how we can make such decisions to lead to optimal outcomes but let us try to imagine how such a tool could look.

The digitalisation process in finance is rarely linear and intuitive, therefore, it might be challenging to find a tool that best suits one’s vision. While there are not (yet) any established criteria to consider when building cutting-edge analytical capabilities within digital financial planning, we have identified a few that we frequently use to secure efficient product development on a day-to-day basis. From model quality and granularity to transparency, we believe these elements to be beneficial when one is planning their digitalisation journey.

For British people age 55+ with a defined contribution pension, being able to access the first 25% of your savings tax-free can be liberating. They can control how they spend the remainder with an income drawdown scheme. Annuities are no longer the only option. Regular payments can be taken from a pension fund and taxed as income. It is also possible to take the entire amount as cash and be taxed at the appropriate nominal tax rate. People who have assumed that an employer’s pension scheme or a financial planner will take care of their finances now wish to manage their own money. However, what they really need to do is manage three kinds of risk:  market risk, longevity risk and inflation risk. Given the three types of risk that retirees need to manage, how can technology empower people to manage their pension assets in a strategic, systematic and safe way? A financial tool grounded in transparency of assumptions is the way forward.

Every quarter, we summarize the most important trends in WealthTech in a video summary. However, we are very mindful that some of you might prefer to have the text at hand! Therefore, we share its transcript for your convenience as well. In the fourth quarter 2020, we identified three trends that were most prominent in our emerging field. First of all, open banking technology has inspired many wealth managers to think about their offerings creatively and review the customer journeys that they were providing at the time. Secondly, we have seen an increased adoption and visibility of sustainable finance within the wealth management communities. Third, we noted that the pandemic has become a catalyst for more social media use among wealth managers.