Top 5 Trends in Wealthtech

Wealth-management has been undergoing a revolution. And like many industries in 2019, disruption is the name of the game. The methods with which our finances have traditionally been managed are undergoing a profound metamorphosis – and we’re all going to feel the impact. A millenial with a few quid to spare after a busy weekend? Maybe you’re a multi-million pound investor managing your own portfolios. Either way, financial planning just got a whole lot easier. What’s more, when it comes to wealth management trends, it’s Wealthtech (wealth technology), that’s at the wheel. Today we’re exploring the Top 5 Trends in Wealthtech.

Wealthtech is one of the hottest trends in the financial services sector. With funding for Wealthtech ventures reaching an eye-watering $4.6bn last year, this year’s first quarter saw industry innovators raise nearly $2.5bn. The only way is up – and it’s not just the entrepreneurs that are benefiting. This burgeoning fintech playground has brought the once secretive world of personal and business finance out into the open, and everyone’s invited to play.

So what are the top 5 digital trends that are making finance fun again? Read on, and start planning your financial future!

Micro-investing

Banking via digital channels is now the norm for many of us, and with this greater visibility across our finances, investment was always going to be next on the digital hitlist. No longer the domain of the sophisticated, affluent customer, the burgeoning digital landscape has made sure that not only are we all more aware of our finances and the options for our financial future, many of us have been exposed to investment opportunities. As such, minimum investments have been drastically cut – so whether you’ve got £100 or £1m, a variety of investment options are now possible via new Wealthtech innovations.

This ‘micro-investing’ sees this savvy saver investing small sums of money into one (or more!) of the many investment accounts available today – minus the minimum balance requirements and trading fees they could expect to encounter via the traditional routes. Best of all, micro-investing can be done quickly, easily via your phone – most micro-investment services are offered via mobile apps. Savers can micro-invest as little and as often as they like, powering us to save small amounts of money whenever it becomes available. It’s flexible and it’s convenient, and best of all, customers love it.

Micro-investment companies:

Acorns
Stash Invest
WiseBanyan

Digital Brokerage

Making leaps and bounds across the Wealthtech industry, digital brokerage is growing steadily, ruffling feathers and leaving the traditional players dragging their heels. Driven in part by the growing interest in cryptocurrencies and new digital assets, we’ll see digital brokerage going from strength to strength over the coming months. Like many of its digital cousins, disruption is the name of the game, and these new kids on the block continue to make headway by opening up a whole new space to interested investors.

Digital brokerage platforms and services provide investors and businesses with access to investment opportunities and stock market information, opening up new financial opportunities never previously available.

The good news is that trading is now more accessible than ever, meaning anyone that’s interested can access the Wealthtech tools needed to make informed investments. One of the exciting trends in digital brokerage is the rise of social trading, “a form of investing that allows investors to observe the trading behaviour of their peers and expert traders and to follow their investment strategies using copy trading or mirror trading”. One of the big appeals of social trading is that it doesn’t require users to have any specialist knowledge about financial markets (good news for me!). What’s more, it’s low-cost (bypassing the usual high commissions) and users can do it from the comfort of their armchair.

Digital brokers are there for both businesses and individuals. One that I’ve played about with is eToro, and I can confirm that it’s easy to use, flexible, and kind of addictive (which I guess is great app design!). It puts users in contact with each other and enables them to replicate the investment strategies of the network’s most successful investors. Verdict? I’m doing something that feels productive and worthwhile with my finances, which I didn’t feel was an option just a few short years ago.

Digital brokers:

Nutmeg
MoneyFarm
CrowdCube

Hyper-personalisation

In a world gone digital, the expectations we all have from service providers have changed beyond recognition. We’re all connected now, and with that connectivity, demands for ever-increasing personalisation, enhanced customer service and a seamless experience (whatever we’re doing) are expected from everyone from health to energy to retail to finance.

With today’s consumers taking greater control of their finances, we’re all a lot better equipped, and informed, to take an active part in managing our wealth. The result is a demand for better, more personalised products and services that can support with a whole range of needs – from finding the optimum way of rebalancing a portfolio to supporting children through education to estate management and planning. A focus on providing the products and services needed to allow flexible and transparent financial management is where the savvy Wealth Management enterprise will be focused.

As an industry, Wealth Management has enjoyed the many opportunities delivered by the aforementioned robo-advisors. When it comes to lifelong fine-tuned financial management however, consumers are rightly seeking out the personalised, easily accessible and value-add offering. It’s no longer enough to provide services that focus purely on assets and liabilities when today’s savvy customers are seeking advice that covers everything from personal healthcare to leisure and education, and retirement to care. That’s where hyper-personalisation comes in.

The nuts and bolts for any wealth management company today is to be relevant to the customers you’re serving. Hyper-personalisation in the WM industry is driven by the need to stay relevant to the needs of the vast range of investor types. It’s simply no longer a one-size-fits-all service. As investors, our plans and preferences are shaped by all kinds of forces – from our life stage to our household setup, to where we see ourselves 10, 20, 30 years down the line.

Driving hyper-personalisation for the future-focused wealth management company will be the colossal amount of data and the machine learning technology that can work with it. That data – age, location, income and spending, along with investment data such as transactions and risk appetite will increasingly drive micro-targeted, personalised interactions and outcomes with each customer when incorporated with markets and other external financial data.

We’re already seeing wealth managers collaborating with tech enterprises to investigate the possibilities of personalisation tools like virtual assistants, as well as looking at where machine learning can provide that much needed personalised investment advice. Others still are working to explore customer behaviour across the financial landscape, with the aim of enhancing investment outcomes. With the enormous (and rapid) strides being made by AI & ML technology, we can all expect to be managing our financial futures with far greater clarity than we’ve ever been used to.

The Robo-advisor

On the Wealthtech radar for several years, robo-advisors aren’t new, but they’ve struggled to deliver on their promises. Costly customer acquisition, rising regulatory costs and the negative impact on revenues have seen relatively new players such as Nutmeg struggle to break even, despite their popularity. The appeal of robo-advisors to millennials demographic is evident, but the more experienced, affluent investor has more complex needs, and developments in this space are showing signs of starting to catch up.

Last year’s report by Juniper Research told us that robo-advisors “under full control of AI systems” will be close to $987bn per annum in assets under management (AUM) come 2022. Across Europe, these robotic helpers are currently managing around €14bn. If you’re in any doubt about their popularity, these figures should assuage that doubt pretty quickly.

Do a quick Google search and you’ll see no shortage of organisations offering a robo-advisor service – and for good reason. For one, a user can get up and running with robo-advisor services pretty quickly. I just downloaded the Nutmeg app to see what all the fuss is about, and it’s clear that a) a novice could participate, and b) it’s cheap. A digital advisory service, for example, charges around a quarter of that you’d expect to pay for the same advice delivered by a human.

This makes the robo-advisor market very appealing to novice investors, as well as a younger audience, an audience that hasn’t been the idea of the typical investor in the past.

Robo-advisor services:

MoneyFarm
Munnypot
Nutmeg

Robo-retirement

Robo-retirement really falls under the robo-advisor category, but given that we’re already knee-deep in the new digital pensions landscape we think it deserves its own place on the Wealthtech podium.

Essentially, robo-retirement platforms are aimed at retirement investments as opposed to the plethora of other investments we could be making across the course of our lifetime. With a veritable bonanza of robo-retirement startups positioning themselves at the starting line to take on the incumbents – along with the $27.3tn worth of assets held across retirement accounts – this one’s gonna be big.

In much the same way as robo-advisors, robo-retirement platforms employ algorithms to drive smart investments that are based on risk profile and desired outcome. Sure, users can’t customise their investments to focus on specific companies, and of course, there’s no personal human interaction with a one-on-one advisor, but that doesn’t seem to be putting investors off. Ease of use, flexibility and visibility of our pensions whenever we need it (I check my PensionBee app regularly) has taken the confusion out of pensions – and we like it.

Traditional retirement planning options are still vastly under-used – and vastly misunderstood – by employees. Whoever went to a work pensions meeting and left optimistic, confident, and buoyed up to start saving? It’s little wonder that these pensions startups offering a flexible, easily understood, and dare we say ‘enjoyable’ pensions experience, are gaining a considerable edge of the pensions dinosaurs of yore.

What’s going to be interesting is how the traditional pension providers respond to these pensions revolutionaries. Like robo-advisors, the incumbents were slow to respond, but most now have a business strategy that includes such a service. Will they be similarly compelled when it comes to robo-pensions? Watch this space!

Robo-retirement services:

PensionBee
Fintastico
Smart Pension

The final word

Like so much of the world around us today, Wealthtech will be driving the future of wealth management, allowing both business and consumers to navigate their way through a rapidly changing financial landscape. Wealthtech is here for the long-haul, powered by some of the most exciting technologies – machine learning, artificial intelligence, and that crucial element, big data. This brave new world of wealth management will give us more personalised products, provided data-driven investments advice, and deliver on our increasing demands as customers. Customer satisfaction, as ever, is the real driver here.

Sure, there are the inevitable growing pains – such as regulatory requirements, and truly value-add personalisation, but the bright new startups bursting onto the scene are not shy of bringing new opportunities to the industry. These innovations, combined with the personal touch, is where the magic will happen. I don’t know about you, but suddenly I’m excited about finance. Interested in seeing where innovative technology can take your business, you can bank on us.


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