Company overview
Ortec Finance is a leading provider of technology and solutions for risk and return management. It is our purpose to enable people to manage the complexity of investment decisions. We do this through delivering leading technologies and solutions for investment decision-making to financial institutions around the world. Our strength lies in an effective combination of advanced models, innovative technology and indepth market knowledge. This combination of skills and expertise supports investment professionals in achieving a better risk-return ratio and thus better results.
Our main solution, OPAL
OPAL enables financial institutions and advisers to translate their clients’ personal goals into an optimal investment plan and monitor these goals over time. It is a software solution based on proven asset and liability management techniques from the world of institutional investments; our world-class institutional scenario engine is at its core.
Ortec Finance is headquartered in Rotterdam and has offices in Amsterdam, London, Toronto, Zurich and Melbourne. We have over 500 customers across 20+ countries representing total AuM of €3 trillion and are proud of our 96% retention rate.
For more information visit: www.ortecfinance.com/OPAL
Thought leader: Iwan Schafthuizen, MD Business Development Goal Based Planning
Email: iwan.schafthuizen@ortec-finance.com
Iwan studied Econometrics at Erasmus University in Rotterdam, The Netherlands. After graduation and some years at Procter & Gamble, Iwan moved into the financial services industry in 1996. Iwan co-owned several financial planning advisory organizations before joining Ortec Finance as a partner in 2008.
Ortec Finance is the leading provider of technology and solutions for risk and return management. OPAL facilitates goal-based planning and monitoring of goals. OPAL enables financial institutions and advisers to translate clients personal goals into an optimal investment plan and monitor these goals over time.
Since 2008 Iwan has been responsible for business development in Europe of ‘OPAL’, Ortec Finance’s Goal Based Planning Solution, and is managing Ortec Finance’s global partnerships such as: Salesforce, Deloitte, Ohpen, Wealth Dynamix and many others.
Challenges: What do you see as the main technology and technology-related challenges for the wealth management sector through 2021?
Without question, COVID-19 disrupted most wealth managers’ IT plans. Solutions to support remote work and remotely connecting to clients became the top priority. Wealth managers had to make sure their people could collaborate with each other from home, while also trying to maintain high standards of client service. Investors also needed a lot of attention since the start of the pandemic. Without the benefit of faceto-face meetings, wealth managers worked extra hard to calm client concerns and maintain confidence. This was the main priority in the first few months of COVID-19.
I believe wealth managers face the following challenges right now:
Fee Compression
How to manage more clients per Relationship Manager (RM) and what parts of these processes/services can be automated? Also, how to create more revenue per client and how to automate these services?
Regulation
How to comply with regulation and legislation, and how to provide a consistent advisory framework with the right monitoring?
Digitization
How to optimize and digitalize the advisor-client experience given increased client expectations and limited knowledge of clients?
Firms are continuing to spend on technologies that boost advisor efficiency and enhance the user experience. The question is how these wealth managers can build the advice delivery model of the future today with RMs firmly at the center.
COVID-19 highlighted the constraints of the existing advice delivery model. The extraordinary levels of uncertainty and severe market turmoil prompted by COVID-19 have highlighted the importance and value of high-quality human advice. Clients have sought increasing levels of reassurance during this turbulent period and clients still appreciate the ability to talk with an advisor. Many of them still prefer human advice as opposed to advice delivered via robo-advisors.
COVID-19 also represented a forced transition to remote ways of working and required advice and information to be delivered through multiple channels. Video conferences have replaced face-to-face meetings for client discussions and goal-based planning. Clients have also increasingly engaged through digital ‘selfserve’ channels such as apps, websites and live chat to access information.
The COVID-19 crisis has also exposed the current advice model’s limitations. Wealth Managers need to design the advice delivery model of the future, which will have to be omni-channel, marrying the expertise and emotional reassurance provided by an RM, with the efficiency, convenience and scalability of digital. Furthermore, it will need to be flexible according to client preferences and with seamless handoffs between channels.
Areas of emphasis include digital client communications (e.g. chatbots for advisors and clients), goal based planning/financial planning software, and digital marketing and prospecting capabilities.
Opportunities: What do you see as the main technology and technology-related opportunities for the wealth management sector through 2021?
Besides digitization I have experienced the following two main technology-related priorities of wealth managers for 2021:
- Future-proofing the advice delivery model: RM-centered, but omni-channel/hybrid
- Scale the advice proposition with goal based planning and monitoring
Omni-channel / Hybrid advice – buzzword?
'Hybrid Advice' has become one of the latest buzzwords in the financial industry. Is it just a fad or is it going to stay forever?
For the last decade or so, the wealth management industry has been witnessing digital transformation. The old concept of a personal advisor providing customized advice to high-net worth clients has been replaced by digital, low-cost alternatives; opening wealth management to a broader base of retail, affluent, and mass affluent customers.
While most of the definitions of hybrid advice focus on a combination of human and digital interaction in the client journey, I like to make my own, more client-centric definition. In my view, hybrid advice is not by definition a combination between a human or digital advisor, but most of all the option for a client to choose in whatever way he or she prefers to receive advice. As a result, clients are in the driver’s seat themselves to optimize their client journey in line with their preferences or goals.
Scale the advice proposition with goal-based planning and monitoring
A combination of recent market turbulence and the continuing evolution of the investment industry has focused attention on the value of advice and how advisors can help clients achieve a range of financial goals, from retirement to home purchase, or funding a child’s education.
Unfortunately, the traditional methods for planning a portfolio and managing and monitoring its progress towards a client’s financial goals have inherent blind spots. These traditional methods include widely used models based on fixed-return and historically based assumptions, as well as simplistic and non-realistic Monte Carlo simulations. Recent market developments have once again underscored the shortcomings of these traditional methods, illustrating that they provide, at best, an incomplete picture of the full range of uncertainties an investor actually faces. This requires a sophisticated scenario-based approach that paints a realistic picture of the full range of uncertainties that lies ahead.
Advisors need a better toolkit for long-term wealth planning that can dynamically adjust itself according to changes in the macroeconomic and market environment while delivering the benefits to their practices. Areas like better client engagement, linking individual clients’ goals to actual products, monitoring these goals over time, and generating alerts when clients are off-track from achieving their goals, are becoming more and more important in a world with real-time information.
Our clients of the OPAL solution for goal-based planning and monitoring all monitor increased client trust and a higher share of wallet. Morningstar research showed that using a goal-based framework in financial planning led to an increase in investor wealth of more than 15%. Beyond returns, investors get a sense of motivation and satisfaction with their financial plans when advisors focus on a client’s personal goals versus arbitrary benchmarks.
Client Focus: When considering your wealth management clients and prospects, where are they currently focusing their technology investments and resources: clients, advisers/staff or their business infrastructure?
The current pandemic made the importance of digital channels and capabilities crystal clear, spurring wealth executives to prioritize digital transformation. Face-to-face interactions between advisors and clients became nearly impossible and only firms with digital channels could deliver seamless advice and service to their clients. Furthermore, severe margin pressures further intensified the importance of digital transformation throughout the value chain.
As the demand for goal-based financial planning and advice increased, firms quickly evaluated their ability to digitally engage with prospects and clients. COVID-19 revealed the competitive edge that digital platforms provide when it comes to the online distribution of wealth products and services. So, wealth management firms no longer have the luxury to postpone digital transformation and need to increase spending in digitization.
Wealth managers need access to the right tools, software and technology to manage their clients’ products and provide seamless digital service holistically. Client interactions are quickly becoming fully digitally enabled. Critical business workflows are being digitized to enable changes in both client behavior and accommodate personnel working remotely. Remote onboarding of new clients has become increasingly important for advisors but onboarding clients isn’t where the story ends. The next challenge will likely be in providing differentiated experiences through the integration of interactive goal-based planning and performance reporting tools, in either a virtual or in-person setting. Incorporating visual representations of real-time scenario planning can provide for a richer client experience. Firms investing heavily in designing and implementing these interactive experiences may be able to deepen their relationships with their clients.
An opportunity for advisors to expand their value proposition
Realistic and time-dependent risk and return projections enable investors to make high-quality investment decisions. This means an advisor’s practice can offer an enhanced value proposition, a key differentiator in an increasingly competitive investment advice industry. One of the challenges of growing a practice through differentiation, however, is scalability: providing a growing number of clients with an increasingly customized value proposition, but still in a cost-effective and/or profitable manner. On one hand, the traditional onboarding processes – of standardized client questionnaires, know-your-client rules and selection from a list of portfolio products – may not be enough to manage the complexity of today’s markets and client objectives. On the other hand, offering customized and comprehensive service to a growing number of clients can strain the resources and margins of a practice. The growth of digital solutions also requires an increase in the quality of the engines powering these digital solutions, in order to deliver more added value to the client and manage a practice’s reputation risk.
A dynamic portfolio projection model can empower an advisor to offer an enhanced, customizable and holistic solution in an efficient manner that allows a practice to grow without a commensurate increase in work hours and resources. A powerful yet intuitive solution that helps position the advisor as a genuine value-adding service provider at a lower cost by automating (parts of) the advice. This represents a win-win situation for the practice.
Excite: When you look at the technology capabilities and resources now available to the wealth management sector, as a solution provider, what excites you most in 2021?
Retaining and growing existing client relationships
There’s an old advisor saying that often after you print a financial plan, it dies. There is truth to this statement as it pertains to financial plans based on limited assumptions that are rarely ever dynamically adjusted and become outdated quickly. As plans atrophy, so too does the advisor-client relationship, reducing future opportunities to build upon this business.
While a variety of technological solutions have been marketed as tools for plan construction, in practice few wealth managers perform plan monitoring for their clients. That suggests that advisors are generally either doing time-consuming, manual monitoring, or doing it infrequently or maybe not at all. A lack of automation and other technological efficiencies in portfolio monitoring may be leaving some clients underserved or at risk from their investment plans and goals going off track.
A comprehensive dynamic portfolio projection model can monitor thousands of client portfolios and goals on a daily basis, manage risks and alert the advisor as to which clients, or segments of clients, in their book require a closer look. This gives the advisor’s practice the capability to proactively address client needs and to provide suggestions to improve the plan on a scalable basis and prioritizes client to contact. When considering the very real possibility that a single day’s worth of market activity and/or global geopolitical developments can throw a client’s portfolio off track, the ability to monitor client plans efficiently on a daily basis becomes increasingly important to both current and prospective clients.
Moreover, enhanced portfolio and goal monitoring and a personal follow up enables the advisor to better fulfill their fiduciary duty to clients, with a comprehensive platform to ensure objectivity, disciplined analysis and alignment with client interests.
The technology is there, why wait?
Recent turbulence of the financial markets and the current uncertainty around the global economy highlights the necessity for frequently updated plans and goal-based strategies. The prevailing practice of providing a static plan and generic questionnaire to help clients reach their financial objectives, based on past performance only, is outdated. During challenging times, the need for changing the way we operate becomes very clear. The technology is available to empower your advisors to deliver demonstrable added value and to improve the investment decision-making of 100% of your client base – and all while reaping the rewards of immaculate compliance and greater operational efficiency too.
Ortec Finance’s proprietary solution OPAL provides a comprehensive answer to the needs of the modern advisor practice: realistic, time-dependent risk and return projections that enable advisors and their clients to make high-quality investment decisions and to provide advisors with capabilities for planning and managing client goals. Our underlying forward-looking, ESG-powered simulation models overcome the limitations of current market practices, offering an institutional-quality solution to advisors and precluding the need to develop these complex capabilities inhouse. It supports the real-time monitoring of suitability.
Focus for 2021: As a solution provider to the wealth management sector, what will you be doing in 2021 to help your clients and prospects meet their main technology and technology-related business needs?
Ecosystems and partnering with other providers
I believe ecosystem models will be the norm in the future. Large and small providers will coexist, providing access to the broader platform and addressing clients’ specific needs. Ecosystem models will allow wealth management providers to offer a more diverse set of services without having to build the required capabilities organically, thus satisfying clients’ desire for an integrated experience without incurring the risk and expense of serving the full value chain on their own.
With our OPAL solution Ortec Finance is already part of major (global) ecosystems like Salesforce, Deloitte Digital Bank wealth accelerators and works together with CLM providers like Wealth Dynamix. In 2021 we want to further explore cooperation with portfolio management system vendors and front-end organizations.
ESG
Sustainable investing was gaining ground even before COVID-19, forcing wealth management firms to build capabilities to cater to the rising demand. Recent trends such as environmental change, greater client awareness, and regulatory changes have heightened investor preference for generating returns sustainably. Clients are demanding more data around sustainability for comprehensive investment decision making.
Advisors need capabilities to determine precise client portfolio and ESG scores to recommend products that align with client preferences and risk appetite. Wealth managers should not let near-term challenges such as the lack of scoring models or data prevent them from developing a thoughtful ESG portfolio. They need to offer investments that generate measurable social or environmental benefits. They should encourage RMs to discuss values and sustainable development goals in detail with their clients.
Therefore, we will work on the ESG integration in our Ortec Finance solutions and have different solutions available to improve the quality of advice and comply with legislation.
Personalized Value Propositions
COVID-19 may offer wealth management providers a useful stress test. Did advisors meet their client needs? Were clients prepared for what happened to their portfolio, or could advisors have been more proactive? The ability to answer yes to such questions, even during periods of volatility, will be critical in the years ahead. Personalization will be key to success. Winners will be able to reach each client at the right time with the right offer or advice, manage the next best action. They will know how frequently a client wishes to be informed and what interaction is preferred. Personalizing consistently and at scale in these ways will require a 360-degree understanding of the client, superior data and data analytics, automate the advice as much as possible and the ability to move easily between personal and digital channels.
This article is from The Wealth Mosaic's WealthTech Views: Looking into 2021 Report. Access the full report here.
