The New Tech


Digital natives, stock-picking robots and the challenge of legacy systems in the digital age

By Rakesh Khanna

Mr. Khanna is CEO and President of Syntel, consultants to the financial services industry for digital technologies. Visit

Are robo advisors the answer, or another challenge to overcome?

The prevalence of mainframe, or “legacy” systems still in operation at many financial services companies brings with it a range of risks and limitations in today’s digital economy. Once the gold standard in computing, these outdated systems are now unable to keep up with consumer expectations, new forms of data, digital competitors, and a rapidly evolving marketplace.

As the millennial generation enters the workforce and acquires increasing assets, they have many choices available to them when it comes to managing their finances. Amidst this backdrop, financial institutions are dealing with the growing challenge of adapting to serve this generation of “digital natives” while positioning themselves to stand out among the competition.

In adapting, companies must walk a tightrope that involves meeting the needs of both digital-savvy millennials as well as older customers like the Baby Boomer generation, who are more comfortable with traditional, in-person interactions and may be skeptical about managing their finances digitally.

Serving a two-speed world

To achieve this balance, financial institutions must prioritize the needs of all their customers by efficiently combining offerings on both sides of the traditional and digital spectrum. At Syntel we call this the challenge of the “Two-Speed World,” and our goal is to become an extension of our clients’ enterprises, navigating them through a business landscape being shaped by digital technology.

One of the most efficient ways to adapt and thrive in this environment is to integrate a comprehensive approach driven by automation, that can not only reduce the cost of running the business but redirect those savings into digital modernization initiatives.

The key to accomplishing this task is to fully integrate and utilize the wealth of information at their disposal to create a comprehensive range of multi-channel services that can efficiently serve all demographic groups. One way that leading wealth management firms are finding this balance is by leveraging automation to build a hybrid advisory service, offering human financial advice combined with automated investment capabilities. Clients receive ongoing support and financial planning from a human advisor, while asset allocation may be handled by an automated platform.

A blend of rich web and mobile-based tools and accessibility combined with a human touch enables customers to track their portfolios and see progress made towards their investment objectives.

This sort of hybrid offering requires a level of technology and process maturity in order to be efficient while delivering an optimal customer experience – in particular on the “back end” of the technology stack. In today’s competitive market, virtually all enterprises are using technology to some degree, so standardized systems and processes that can support automation technologies like RPA are less a choice than a need.

The Robo-Solution

Another approach that features a higher level of automation is the implementation of a “robo advisor.” Many independent financial advisors, insurance companies and asset managers have implemented robo advisory to expand the client base and distribution channels for their financial planning services.

For millennials, the self-service nature of digital robo advisors is very appealing, and they deliver the type of on-demand, no-hassle customer experience they have come to expect.

However, there are additional benefits to robo advisors beyond their appeal to a new generation of customers. Most feature low fees, quality advice, and the ability to constantly and dynamically rebalance client portfolios on the fly.

Because it does not involve human intervention, the process is impartial and unbiased, which increases transparency and improves customer trust. Another plus is that by taking humans out of the loop, the cost of advice decreases.

Robo advisors also make it possible for firms to dramatically expand their client base by offering wealth management services to clients with smaller investments. The reduced cost of managing and advising portfolios has made it possible for robo advisors to take on low net worth clients that were previously excluded from the traditional marketplace.

In addition, many robo advisors provide automated tax loss harvesting – a complex process that increases investment performance by offseting capital gains taxes by selectively selling underperforming investments .

When it comes to implementing the systems that power robo advisors, it is key that businesses have a thorough understanding of the technology behind them – such as process automation, artificial intelligence, Big Data analytics and others

In today’s volatile and often unstabile market, a diversified portfolio can often become imbalanced in as little as one week, making consistent portfolio monitoring and rebalancing quite a difficult task. A well-designed robo advisor has the advantage of being able to automatically rebalance a portfolio based on the customer’s financial goals, appetite for risk, and expected returns.

Anytime, Anywhere

Another noteworthy benefit is the “anytime, anywhere” reporting and servicing that these automated platforms can provide. This aspect, in particular, is very appealing to people whose schedules do not always allow for an in-person meeting with an investment advisor during the business day, as well as for those who want to track and manage their finances on a more frequent basis.

When it comes to implementing the systems that power robo advisors, it is key that businesses have a thorough understanding of the technology behind them – such as process automation, artificial intelligence, Big Data analytics and others. This digital age technology delivers a rich set of features that outdated legacy systems are simply not equipped to provide.

In fact, a majority of the features that make robo advisors so attractive are beyond the capabilities of the legacy systems still in use at many traditional firms. Advanced analysis tools such as Big Data and predictive analytics make it possible to predict market movements, track and respond to changes in client behavior, and process information from a wide variety of sources to assemble a more precise, individualized client profile.

However, the powerful software that makes these insights possible is incompatible with legacy systems.
Thus, in order to offer these new products and services, financial institutions must make a move to modernize. At Syntel, we believe that the key step on this path is the implementation of an enterprise-wide automation program that encompasses infrastructure, processes and product engineering.

Our clients have found that automation offers the ability to not just run the business more efficiently, but to increase agility to respond to changing business conditions and provide the modern technology underpinning to change the business for the future. Syntel offers our clients a next-generation automation platform, SyntBots, that eliminates repetitive tasks to enable their employees to direct their efforts towards more valuable tasks that support business growth.

The goal is to create a fully automated end-to-end operational model that runs smoothly across all business areas. By attempting to overlay poorly-integrated digital services on older infrastructure, you are simply adding to the issue of front office and back office systems that do not interact coherently. Because speed is of utmost importance, organizations operating legacy systems need to look for quick wins, rather than costly, long-term transformation projects.

Customer Centricity

In addition to smoother system operations and reduced costs, automation also provides an additional level of customer centricity. The work done behind the scenes in automating the on-boarding and customer service processes makes the entire experience smoother and easier, providing clients with a feeling of true proximity and immediacy.

Clearly, robo advisory services have many benefits to offer both financial institutions and their customers, but although wealth management firms have the right business knowledge, efforts like these require a level of skill and technical expertise that is not present at most firms.

With an emerging and somewhat fragmented market, investors have yet to give a clear sign regarding the robo advisory model that will best suit them for the future. However, the demographic shift is unmistakable and irreversible — there is a burgeoning generation of busy, mobile, tech-savvy investors entering the marketplace who will demand a new breed of investment advisor.

It is essential that wealth management and investment firms invest in robo advisory platforms and digital wealth management services in addition to traditional human advisors.

Over the course of the next decade, as these services become increasingly mainstream, the traditional firms that have the most exposure to outdated legacy systems will face growing stress and competition from financial institutions that have successfully modernized their enterprises.

It is incumbent upon these businesses to seek out partners like Syntel that have expertise in digital modernization and automation in order to equip themselves with the ability to offer new digital services and remain competitive in tomorrow’s marketplace. ◊