The financial technology startups are coming for the wealth management market.
Just like they disrupted banking and empowered the masses to buy and sell stocks, they are going after the wealth management industry, launching digital services to help individuals and professional investors better manage their money and that of their clients.
It’s not being lost on venture capitalists and investors. Wealthtech startups raised $2.5 billion in funding last year. For the first three months of this year, they have already raised that amount. The wealthtech industry is poised to break its record and have another strong year in terms of fundraising in 2019.
When it comes to wealthtech, it’s all about those digital tools that enhance and improve upon managing wealth for all sorts of people. An early example of wealthtech is the crop of robo advisors that have burst on the scene in recent years. They are automating the investment process, providing all types of investors with access to low-cost investments. Using technology they can gauge the risk tolerance of an individual investor and create a tailored portfolio to meet the person’s unique needs without human intervention.
The robo advisory space has evolved since the early days. Today robo advisors exist to help people with specific aspects of investing. Take robo retirement fintech companies. With this wealth management service, the companies are helping people manage retirement savings whether its a 401 (K) or IRA. They are going after consumers as well as small and medium-sized businesses with the offerings. Meanwhile, micro-investment and alternative investment platforms are emerging to give regular investors and accredited ones access to investments outside of stocks and bonds.
But it's not just automating investing. Fintechs are creating digital tools and platforms to help wealth managers better serve their customers and find new ones. They are employing a laundry list of new technology to solve the problem including artificial intelligence, natural language processing, data analytics, machine learning, and even biometrics. They are also leveling the playing field, making investing and wealth management accessible to consumers who would typically be shut out. Mobile trading apps such as Robinhood and Acorns are two examples of fintech companies that are bringing wealth management to the masses.
Outside of the robo advisors and mobile trading apps, challenger banks are also adding wealth management services to their portfolio They are slashing the costs to bank, save and invest. MoneyLion out of New York is one example. Billed as a financial membership, the fintech offers consumers a one-stop-shop to bank, invest and borrow money. With technology expected to continue to disrupt the financial services industry, it's only a matter of time before these wealthtech startups become the new norm.