Investment Curation – The Last Mile of Wealth Digitization
The advent of digitization and automation has ushered in a new era in wealth management, revolutionizing client facing areas such as robo advisory, order management, and reporting. Yet, the domain of investment selection remains one critical sector that has yet to capitalize on these technological advancements.
This area, which encompasses product research, due diligence, and decision making, largely depends on manual processes predominantly conducted by human driven investment committees. However, the traditional approach isn’t without its challenges and constraints.
The Inherent Limitations of Manual Investment Selection
One of the most significant obstacles to manual investment selection is limited bandwidth. Even the most adept investment committee has a finite capacity. They can only scrutinize a certain number of investment products at any given time. This limitation inherently narrows the scope of potential investments, potentially sidelining high performing options that might be overlooked due to time and resource constraints.
Another challenge is the introduction of human biases into the decision making process. Cognitive biases like confirmation bias can unwittingly skew the selection process. For instance, a committee might harbor a preference for known fund managers or familiar products. This inclination can limit the diversity of the investment portfolio and potentially overlook emergent opportunities that lie outside the committee’s familiar sphere.
External influences also play a role in manual investment selection. Prominent personalities in the investment world, through their high visibility on media platforms, often instill a presumption of credibility and superior performance. This influence can disproportionately tilt the decision making process in favor of these high profile funds or managers, regardless of their actual performance or suitability to the investor’s objectives.
Lastly, the allure of financial incentives tied to certain products can affect their selection. In some cases, the prospect of a handsome rebate or commission might overshadow the actual investment merits of the product, introducing a conflict of interest that can skew the selection process.
The Promising Potential of Digitizing Investment Selection
To counter these limitations, the digitization of investment selection, or ‘investment curation,’ presents itself as an innovative solution. With digitization, each product can be assessed solely on its investment merits, effectively eliminating biases from the equation. This approach ensures an equitable and objective evaluation process, with decisions driven by data rather than predispositions or external influences.
Moreover, digitization significantly expands the scope of analysis. Unlike human teams, a digitized system can analyze a virtually unlimited universe of investments, enhancing the likelihood of identifying the most fitting and promising investment opportunities. This increased bandwidth doesn’t just mean more options but increases the chances that the best possible option will be chosen.
One of the most compelling advantages of digitization is dynamic monitoring. Investments aren’t static, but their viability fluctuates over time. Digitization allows for continuous, real time monitoring, a capability often beyond the reach of traditional committees. This enables swift and proactive responses to changes in investment performance, protecting investor interests and maximizing returns.
Digitization as the Final Mile
As crucial as it is, the digitization of investment curation represents the final, and perhaps most challenging, frontier in the digitization journey of wealth management. By bringing this critical process into the digital fold, wealth management firms can maximize returns, safeguard investor interests, and build a more robust, scalable, and efficient system.
Ultimately, the digitization of investment curation goes beyond mere automation. It enhances decision making, fosters transparency, and aims to deliver superior investment outcomes. While challenging, this final mile of digitization heralds a new era in wealth management. By aligning the critical process of investment selection with investor interests, digitization promises to transform how wealth is managed and redefine investment success.