In the not too distant past, it would have been hard to believe that we would trust a machine to manage our life savings. But in today’s digital world, millions of investors now do exactly that. Robo-advisors are digital platforms that provide automated, algorithm-driven services with little to no human supervision. Robo-advisors make a lot of sense for investors with passively managed accounts who can be segmented into broad groups based on: age, projected retirement date and risk tolerance. For these clients, wealth management firms can leverage robo-advisors to efficiently balance and rebalance portfolios for thousands of passively managed accounts. They can then pass on the resulting efficiencies to their clients in the form of lower fees.
However, the broad-brush algorithms that drive robo-advisors are not a strong fit for actively managed accounts. Nor are they effective for investors with sophisticated strategies and highly individualized goals, tax considerations, weighting parameters and instrument preferences or restrictions. For these clients, wealth managers adjust portfolio positions on a one-by-one basis. If the wealth management firm has hundreds or even thousands of these clients, the process is resource intensive and may hinder the ability to optimize client portfolios when the firm buys or sells large positions on an opportunistic basis. SS&C’s Global Wealth Platform (GWP) offers a solution to this challenge.
Introducing Tailored Investment Automation (TIA)
GWP addresses the needs of both passively and actively managed accounts. It's highly sophisticated rules-driven engine is called Tailored Investment Automation (TIA). TIA allows wealth management firms to make macro changes in investment strategies that automatically trickle down to individual client portfolios. When the firm trades securities, GWP executes them across all appropriate portfolios in strict compliance with the investment strategy, risk profile and restrictions of each individual portfolio model. The platform also manages custom-designed solutions for those clients with unique investing needs. While we are not suggesting that TIA replace a top-notch portfolio manager, it does bring the exceptional efficiency of robo-advisor to firms with significant numbers of actively managed accounts.
