In every market downturn there are winners and losers.
Over the last decade, the world has deprioritized buying technology due to the stability of the market, but when the market loses 10% on a given day, the clients of wealth managers want answers on what steps have been taken, and they want those answers immediately. How much have they lost? What’s their exposure? Which managers are driving profits? Which managers are driving losses? Who hedged and made money, and who was caught by surprise and lost 20 million dollars?
The wealth tech industry thrives during financial crisis because wealth managers realize they don’t have the proper tools to provide the answers their clients seek. Driving them to either upgrade or purchase new systems.
In 2008, the financial crisis created a surge in demand for state-of-the-art wealthtech reporting software that promised clear, concise data management and analytics with transactional level transparency. However, many systems that were developed and pushed to the market during this period lacked fundamental analytic tools, only focusing on design and usability. Understanding the root drivers and causes of performance gains or losses such as income, expenses, fees, even market exposure, is important tool in any managers pocket.
The boom for the wealth tech industry is exploding again as COVID19 has rocked the world sending us into a global recession. Shipping and international trade is down, business remain closed, and workers are applying for unemployment at a staggering rate. The companies that can position themselves and turn a profit will see a boom in business.
A beautiful example of this is Perishing Square Hedge fund. They were able to take out hedges after seeing volatility coming thanks to their investments in wealth technology. Those profits were able to be quickly reinvested in rock-bottom prices because they had the insight and information at their disposal. As a result, they were able to turn a $2.7 billion dollar profit.
To get that level of detail, you need a properly structured consolidated reporting system that enables managers identify risks and exposure to various industries, like US pharmaceuticals, China or even German manufacturing. Not having the right technology or analytical tools will drastically limit the wealth manager’s insight – causing reactive investment decisions that may ultimately lead to losses. With major advances occurring in the wealth tech space, there is an abundance of new generation reporting services available. Having detailed information at their disposal, wealth managers will be equipped to gain the insight they need and provide those details and answers to their clients, who in some cases, pay thousands if not millions of dollars in fees.