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Looking beyond and growing above the conventional

May 3, 2018 - Saurabh Kamble


Most of us are already aware how FinTech companies are disrupting the banking marketplace and how their innovative business models are posing a threat to even the large traditional players. While some products/services offered by these FinTech firms are right out of the box, others are a reincarnation of traditional financial products based on today’s technology landscape. An example of the former is the advent of P2P payments and P2P lending by firms such as Venmo and Lufax whereas the latter consists of products such as Time Deposits by firms like Deposit Solutions. So far, FinTech penetration had been the highest in Retail Banking owing to a large customer base and subsequently higher transaction volumes. However, in recent times a new class of FinTechs has emerged with focus on Wealth Management. This class is popularly known as Wealth Tech.

Evolution of Wealth Tech

Some traditional wealth management firms are of the view that the rise of Wealth Tech does not really have an impact on their businesses and margins. The underlying belief is that FinTech firms mostly cater to the mass affluent group of investors with relatively small-ticket investments as compared to HNIs with minimum investment size of $500K-$1 M. In the initial phase, Wealth Tech revolved mainly around robo-advisory, which is about providing investment advice/recommendations to customers digitally without an actual financial advisor. However, Wealth Tech has evolved many fold and currently encompasses not just robo-advisory but other areas as well, such as portfolio management, micro investing, digital brokerage and investment tools.
As investors get more tech savvy, they expect to have more visibility and access to their investment portfolios and their performance in real time. Clients want to see the real time market value of their portfolios and have value added insights apart from the investment advisory relationship they have with their advisors. In view of this, underestimating the potential of new and independent Wealth Tech firms might prove to be a costly affair for traditional firms.
Wealth Tech includes products and services directed towards retail investors as well as wealth management market participants such as portfolio managers and investment advisors. Examples of these include firms such as Wealth Front in the US and Money Farm in the UK which offer digital wealth management services to retail clients and automated wealth management platforms such as AdvisorEngine and Trizic, purpose-built for financial advisors.

Emerging market for Retail Wealth Tech?

For retail investors, some of the most important factors for adoption of a new financial product or platform are its relevance, usability and convenience. The phenomenal growth of hand-held devices and network connectivity over the last couple of years provides a tremendous opportunity to tap not just the mass affluent but also the mass market segment. The fact that today’s investment products such as mutual funds are targeted at lower income groups further strengthens the argument that a new market is emerging and Wealth Tech has a crucial role to play in catering to this segment.

Advancements in Enterprise Wealth Tech

For advisors and portfolio managers, Wealth Tech provides platforms and tools to assist them in financial planning activities such as client onboarding, risk profiling, goal planning, portfolio construction, portfolio management and wealth analytics. However, apart from the standard processes, advisors would be greatly benefited by advanced functionalities such as:

  • Integration with social platforms for value added customer analytics

  • Integration with trade analytics platforms to get real-time market updates, specifically related to products in investor’s portfolio

  • Capabilities for portfolio simulation through multiple parameters and scenario comparison

  • Forecasting market trends through AI and Big Data

  • Automated order execution and client communications

Future Outlook:

Wealth Tech firms have created an important place amidst the traditional wealth market through some differentiated offerings. Initially, Wealth Tech was viewed as a direct competitor to traditional wealth management. However it’s not expected to displace advisory business any time soon. Industry experts believe Wealth Tech will rather complement the existing business through in-house technology adoption and partnerships. At the same time technological advancement has created an opportunity for Wealth Tech to break into the untapped mass market segment and will ensure that Wealth Management is not limited just to the “Wealthy”.





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