Modules for Traders
India's fintech journey
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Fintech and asset management
3.0


If you thought that fintech is useful only in banking, insurance, and payments, then you’re in for a surprise. Fintech is also used extensively by companies involved in asset management. You’re probably wondering what asset management is, right?
To put it simply, asset management is an approach through which the wealth of individuals is increased over time by investing and trading in a wide range of investment options. And fintech, with its unique combination of finance and technology, has the potential to completely change the way asset management is conducted.
The many ways in which fintech is transforming asset management
Just like every other industry that we’ve seen fintech disrupting in the previous chapters, asset management is also being transformed. In fact, in a survey that was conducted in 2016, 60% of asset and wealth managers feared losing part of their business to FinTech companies.
The asset managers strongly believe that fintech and asset management are meant to go hand in hand and that they can deliver a more holistic experience. And in the years since 2016, financial technology has only evolved further and is poised to disrupt the practice of asset management. Here are some of the many ways in which fintech is helping enhance the industry.
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Improved access to asset management services
Asset management services, like insurance, have traditionally been delivered through offline channels. However, with millennials and younger investors preferring to conduct their business online and through mobile applications, they’ve been missing out on the wealth of investment advice that asset management services can provide.
Such a situation is not only not ideal for investors, but also for the entities providing the service as well since they’re effectively missing out on serving a large chunk of the populace. That said, fintech, with its efforts of making asset management services available online, is trying to bridge this gap in access. Many fintech asset management companies have smartphone applications that investors can use to gain access to their services whenever and from wherever they want.
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Increased personalization of asset management advice
Another great advantage that fintech and asset management brings in is enhanced personalization. Every investor is unique; their goals, needs, requirements, and risk appetites vary from one individual to another. Here’s where asset management companies come in. They provide personalized advice that’s relevant and tailor-made for a particular investor.
However, through traditional delivery of asset management services, personalization can only go so much. But combined with the power of fintech, asset management companies can deliver deeply personalized advice that can help enhance the efficiency of wealth creation.
Many fintech asset management entities utilize data analytics and machine learning to understand and quantify risk, enabling them to deliver services that are more in-tune with the investor’s expectations.
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The use of robo advisors in asset management
Automation in asset management was something that was unheard of until just a few years ago. As you’ve already seen above, wealth management has always relied on providing services manually and through human advisors. While this method of providing asset management services has worked traditionally, it isn’t flawless.
Firstly, since human advisors are involved, there’s bound to be bias in the advice provided to investors. And secondly, asset management is expensive since it has to account for the cost of providing human advisors. Fintech, proposes to solve both of these issues by providing investors with robo-advisors.
Robo-advisors are specially designed programs that utilize cutting-edge technologies such as data analytics, artificial intelligence, and machine learning. Through the use of such technologies, robo-advisors can provide unbiased advice and at a fraction of the cost of traditional asset management services.
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Easier access to a wide variety of investment options
With traditional asset management methods, investors had access to only limited investment options like stocks and bonds. However, with the rise of fintech asset management companies came several online investment apps that gave investors access to an extensive range of investment options that included ETFs, mutual funds, commodities, and currencies.
That’s not all. Online investment applications created by fintech majors also help investors invest and trade in these investment options at ultra-low costs. For instance, several fintech asset management companies levy a flat fee per every trade made by investors.
This is in stark contrast to the percentage-based charge that was levied for every trade. By switching over to a flat-fee structure, the trading volumes and participation has increased multi-fold. It has also led to investors saving a lot of costs as well.
And finally, thanks to robust and sophisticated online investment apps, investors can also track their investments and holdings in real-time right from their smartphone itself, which was previously not possible.
Wrapping up
We’ve come to the end of this chapter on how fintech has managed to transform yet another industry in India. In the penultimate chapter of this module of Smart Money, which we’re going to take a look at next, we will be diving into some of the key regulations surrounding the fintech industry.
A quick recap
- The asset managers strongly believe that fintech and asset management are meant to go hand in hand and that they can deliver a more holistic experience.
- Fintech, with its efforts of making asset management services available online, is trying to bridge this gap in access.
- Many fintech asset management companies have smartphone applications that investors can use to gain access to their services whenever and from wherever they want.
- Many fintech asset management entities utilize data analytics and machine learning to understand and quantify risk, enabling them to deliver services that are more in-tune with the investor’s expectations.
- Robo-advisors are specially designed programs that utilize cutting-edge technologies such as data analytics, artificial intelligence, and machine learning.
- Online investment applications created by fintech majors also help investors invest and trade in these investment options at ultra-low costs.
- Thanks to robust and sophisticated online investment apps, investors can also track their investments and holdings in real-time right from their smartphone.
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