PFM tools may have been beacons of hope for the retail banking industry but their untapped potential left many underwhelmed. But wealth managers have learned from the mistakes of retail banks and are turning the volume up on PFM apps, writes Nicole Douglas, wealth management analyst at Verdict Financial


Personal financial management (PFM) first made a name for itself in retail banking, but with many banks failing to provide anything more than categorisation of spending, the potential was not fully realised. PFM tools are making a comeback though, this time in wealth management.

PFM tools are designed to help both wealth managers and their clients monitor facets of financial performance. High Net Worth Individuals (HNWIs) expect world-class customer service, and the composition of their wealth is often complex. As such, wealth managers require sophisticated platforms to effectively communicate and provide custom reporting for their clients through secure channels.

PFM providers can learn from the experience of robo-advisors. They enhance automation-based investment management services and digital interactions with a more human touch (think chatbots). With the ability to price competitively and offer more than just execution-only platforms, it is possible for robo-advisors to bring PFM capabilities to the next level.

Competitors such as Personal Capital are already combining the capabilities of both robo-advice and PFM, at the same time allowing access to human financial planners. Not only does this create a holistic offering, but it also fills in the gaps of robo-advice with PFM.

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It is clear that the wealth management industry has learned from the mistakes made by many retail banks. PFM tools work best when they are linked with decision-making services, and by treating PFM as an afterthought, it cannot expand beyond the basic features of budgeting and reporting. At the end of the day, clients and wealth managers should be inspired to engage with PFM tools.

Clients will appreciate PFM capabilities because of the ability to view their wealth in its entirety and to have a greater amount of touch points with their wealth manager. For clients who prefer to communicate with a wealth manager prior to making a decision, PFM platforms provide the space for collaboration.