Avaloq Blog

Why automation in the wealth advisory process is becoming critical

Managing investments using automated technology can have clear advantages for both providers of investment solutions and investors. We will explore some of them in this blogpost.


There is a huge potential for automation both on the investment factory (CIO Office) and in the client advisory process if automation systems are set up and used in the right way. Modern wealth management solutions like Avaloq with portfolio construction and optimization tools like SwissQuant or EdgeLab offer the ideal basis for a highly automated investment process.

The process is further described in the whitepaper "Achieving 'Value at Scale'"
from Luxoft (a DXC Company) and Adviscent.

The process for portfolio health checks can also be fully automated, including health check reporting, alerting and the creation of notification issues when action by the client or client advisor is needed. Restriction violations caused by false data or by market volatility are identified by business rules and will trigger the necessary actions.

Increased efficiency

Clearly an algorithm can analyze data more quickly than the human brain. The data can also be gathered over time and show more accurate trends. This improved efficiency is helping advisors focus less on investment management — much of which can be automated — and more on building client relationships.

Increased automation lowers the overall costs of investment and thus has the potential to increase net performance for the client. The total expense ratio can be kept down by utilizing cost-effective instruments such as ETFs, which also increase risk diversification. An automated risk-based approach can also support the portfolio in tracking to benchmarks while limiting the asset shelf to a chosen set of instruments. Such an automated process can compare favorably to the often high costs of human advice, which, for some, are too high to be worthwhile.

Compliant investment proposals

Machine-generated investment strategies ensure compliance as well as objectivity. In line with the regulatory principles of ensuring transparency and investor protection (e.g. the EU's MiFID II), they facilitate an automatic validation of regulatory compliance, implement alerting for breaches and document the process to handle the breaches. In other words, they allow an audit trail for compliance reporting. They also ensure compliance with internal regulations and business rules.

Increased reach to new client segments

More cost-effective investment solutions can reach clients that have traditionally been out of reach at relatively low acquisition costs. According to a recent report by Boston Consulting Group (Reigniting Radical Growth), the average book of global wealth managers comprises of roughly 65% of clients with accounts of less than $1 million. So the risk of losing a majority of their clients if they do not get this affluent segment right is high. Particularly today's emerging investors - the future high-net-worth individuals from the millennial generation - are already becoming attuned to the self-service aspects of automated advice.

Testament to this development is the success of robo-advisory platforms which have proved how easy it is to onboard new clients. These make investment advice more accessible and investing easier. Algorithms do the hard work, and they do not differentiate between the affluent and less affluent, thus opening investment to a much larger client base.

Evidently, by lowering the entry threshold, expectations on how to interact with financial advisors are changing. The digital transformation of the consumer goods sector has spilled over to other sectors, including financial services. Fintech has jumped in to cater to this demand, resulting in online customer engagement quickly becoming mainstream.

Achieving 'Value at Scale' with Digital Advice and Enhance Client Engagement

This joint working paper from Luxoft (a DXC company) & Adviscent looks at how technology innovations could help provide clients with better investment options and service.

cover excelian luxoft whitepaper

Download whitepaper

Learn more about:

  • improving efficiency
  • how to overcome the challenges of using digital advisory models
  • establishing a dialogue between the advisor and the client