What Is Wealth-Tech And How Is it Changing Finance?
Although it falls under the much broader ‘Fin-Tech’ umbrella, wealth-tech is the combination of technology for wealth management, which is about creating tools to help manage investments.
Like the rest of the finance world, wealth-tech is rapidly evolving. New apps, solutions and technology are bringing a wave of innovation to challenge current practises. This article will break down some of the changes it is bringing to finance.
Changing business model
Even if AI tools such as robo advisors only represent a fraction of overall wealth management, they will still have a deep impact on the current advisor business model. Not only do more clients expect these tools to have slick user experiences and customisation options, but we’re seeing younger investors than ever before. The demand for having their finances available through the palm of their hands, on the go anywhere from their mobile phones, is driving the pull in wealth-tech innovation.
There is a new focus on maximising savings that can be day to day savings with investment opportunities. Traditional banking is shifting, and alongside this lies the real market power which is understanding that each individual has unique financial needs.
Self Reliance
Another big change in the industry is how financial clients think. There is a generational shift in expectations from service providers to be transparent and personable.
Younger investors in particular no longer feel comfortable letting someone else manage their money. They want to be in the driver’s seat controlling the future of their wealth. Luckily, new technology is helping the self-reliant individuals manage their wealth on their own for the long term. From educational pages and communities, to investment apps, this is the age of making your money work for you.
Changing Advice
In the past, the one-size-fits-all model was the most common amongst financial advisors, with a select few options into which they could group their clients. The rise of robo advisors and technology which allows for personalisation to be at the heart of the process, means that this is no longer enough. Advisors need to play an increasingly active role in order to integrate their advice into all divisions of their clients’ lives.
Personalisation is now possible with wealth-tech, in order to ask and answer important questions such as: ‘Can we differentiate service based on clients values?, ‘Can we integrate my clients goals on a deeper level?’, ‘How can we customise information clients receive?’. As wealth-tech takes a bigger load of the management process this level of personalisation is now possible.
Smart Data
Client data, which is creating smarter analysis, is now more important than ever. This data needs to be protected and made sure it is secure, particularly in wealth-tech. Financial information will stretch beyond just the management of stocks and bonds. It will include data relating to liabilities, long term plans, projections and future obligations, even legal papers.
Similarly to healthcare and how a diagnosis is made, a financial advisor needs enough information to make a decision, and impart the best advice. The more data they can access, the smarter the strategy fit for their clients they will be able to offer.
Low Cost Access
Traditionally, wealth technology has only been accessible to high earners. Having a financial advisor was only a thing for the wealthy. But these walls are being broken down as technology overcomes these previous limitations. It is bringing greater access to financial advice for everyone, from automated tools that do the heavy lifting, to advisors who are able to offer a wider array of services, the cost to have access to the service is becoming drastically lower. This means wealth-tech will be opening to new socio-economic statuses, changing the industry forever.
Subscription Model
‘Freemium’ services are already popular amongst banking apps, including traditional branch type services and those offered by neo-banking apps. While the free version often has high functionality, the real benefits come into play in their paid subscription tier.
Although it is still tricky to grasp treating investment management like a commodity, it is where the future is leading. The rise of Netflix saw the rise of streaming services, completely turning the industry on its head, and what is so different about financial services? For as little as £15 a month everyone can have soon have access to what usually would have only been available to the financial elite.
Voice Technology
We’ve seen big improvements in voice technology over the past few years, through the growth of Alexa, Siri and Google. It has begun to show its value in wealth-tech as it provides both the message content and the distribution, adding a level of personalisation. Voice is also not easy to replicate, which gives it the opportunity to offer an extra level of security for wealth-tech in the future.
Advisors Get Freedom Through AI
Since the cost to access is rapidly lowering, financial advisors are finding ways to diversify their revenue streams and client base. AI offers a potential solution to this. AI offers the option to streamline their financial planning process from beginning to end. It gives an option of digital only, and hybrid digital offerings for different types of clients depending on their needs.
Since AI makes the work considerably less labour intensive, advisors and wealth managers can spend more time working with clients in new ways. The human touch will always be demanded at a level, AI is simply able to develop the insights available.
Blockchain And Digital Assets
The digitalisation of investment assets is also on the horizon, as today’s clients are already accustomed to using apps and SaaS style platforms to manage, track and allocate their investments. The way these digital assets are being transferred is changing, and one of the biggest challengers is blockchain. Not only is this more secure, but it is undeniably paving a new and interesting future.
Decentralised lending is able to become a part of the new financial infrastructure. Until then, wealth-tech could remain behind other aspects of the financial technology sector. But only with time and innovation will we see if this is to be the case for wealth-tech progress!
Looking Forward at Stratiphy
We’re excited to bring our app to the wealth-tech digital revolution. The way advisors, banks and individuals operate is changing dramatically, and it’s time to face those challenges head on, and hopefully enter the second wave of roaring 20’s… which we’re all eagerly awaiting in a post pandemic reality!