At the dawn of the previous decade, the market was put in turmoil by a new class of upstart financial services firms. Promising quick and easy AI-assisted money management and retail investment, companies from Wealthfront to Affirm were muscling into the market in a big way. Any fintech that could cut out the middleman in lieu of robo-advisor services saw vast returns on their investments.
Ten years later, the market is a very different place. Nowadays, being purchased by industry stalwarts like UBS—the ultimate fate of Wealthfront earlier this year, after accumulating $1.3 billion in assets under management—seems to be the best that those disruptors can hope for.
Financial advisor Josh Brown sees the issue not as a turn in the market, but as a tactical error on the part of fintech upstarts. “They are spending for customer acquisition that cannot be recouped for years and years and years out into the future and they don’t have organic growth,” said Brown on CNBC.
Ultimately, that sort of dramatic growth in customers but not in revenue is unsustainable, particularly at a time when traditional financial institutions have put a lot of money into developing their own tech. “They are not lying down, not sitting there eating glue while these companies are building apps,” said Brown of traditional financial institutions. “They are building apps of their own that are extremely competitive.”