Even financial professionals can struggle when adopting the right technology solutions to deliver results for their clients. It’s fair to assume that private and institutional investors are much further behind the curve, particularly considering most financial technology is tailored specifically for investment professionals. In fact, according to a Nasdaq survey, just 38% of advisors say their firm is definitively focused on the right tools to stay competitive.
1. Aggregate your entire investment portfolio:
Many investors utilize different investment account types to achieve a variety of different investment objectives; such as retirement, college savings, or general savings. Married couples typically have a more complicated investment picture as each couple may have a different array of investment accounts. Utilizing financial technology allows investors to centralize their investment accounts and group those accounts by any means they’d like. This solution is two-fold: 1) It provides investors a better tool to understand how each investment account may be impacting the entire portfolio and 2) The level of transparency it provides allows users the ability to make more informed decisions around their investment approach per account and their portfolio altogether.
2. Automate your investment selection:
We estimate the average investors spend approximately 5-10 hours of research per week to determine their asset selection. To make matters more daunting, those hours spent often don’t yield fruitful results. What are the alternatives? Well, investors could farm out their financial planning and investment selection process to a financial advisor; however, investment management fees can range anywhere between 0.20% to 2.00% of assets under management. The alternative is adopting a financial technology solution to automate your investment selection process. In this case, you can assign your investment accounts into portfolio models that best align with your financial goals and risk tolerance.
3. Automate tax management:
Understanding and managing your investment tax consequences can be tedious and onerous. Tax management is often an overlooked and neglected piece of the investment process. Investors pay capital gains taxes on realized gains that could have been reduced or offset with unrealized capital losses, resulting in a higher tax burden. Leveraging financial technology can allow investors to have their investment portfolio’s tax outcomes strategically managed throughout the course of a calendar year to better reduce the performance drag capital gains taxes may have on their portfolio. This automated process allows the investor to take advantage of tax management without the burden of actively managing the tax liabilities themselves.
