How Wealthtech’s revolution benefits you
There is a digital revolution happening right here right now. It’s called Wealthtech. Before you ask what it is you’ll probably be surprised to discover you are almost certainly already using it in one way or other.
So what is Wealthtech?
Wealthtech derives from the words wealth and technology and it comes under the umbrella of Fintech (finance and technology).
The term Wealthtech refers to those digital solutions that aim to enhance the wealth-management process. Wealth managers are, therefore, increasingly looking towards technology to enhance existing solutions—or alternatively, create new solutions altogether.
Fintech is a term used to describe financial technology, an industry encompassing any kind of technology in financial services – from businesses to consumers. Fintech describes any company that provides financial services through software or other technology and includes anything from mobile payment apps to cryptocurrency.
So what’s the distinction between Wealthtech and Fintech?
Wealthtech is about providing digital solutions to enhance personal and professional wealth management and investing for individuals. Whereas Fintech relates to companies that provide the software or other technology.
Services and Solutions
In 2018, Wealthtech ventures reached approximately $4.6bn, and in just the first quarter of 2019 industry innovators raised nearly $2.5bn. Many sources claim that this is one of the hottest trends in the financial sector at the moment.
Here are some of the services and solutions Wealthtech provides to companies.
Robo-advisers are automated services that use algorithms and machine learning to offer investment advice and management to their users. Additionally, they not only consider investment opportunities, but they also respect a user’s goals, income, marital status, and risk aversion, among other factors.
The Business Insider stated that “robo-advisers will manage around $1 trillion by 2020, and around $4.6 trillion by 2022.”
Additionally, Juniper Research stated that robo-advisers “under full control of AI systems” will be close to $987bn per annum in assets under management (AUM) come 2022.
Currently, there are more than 200 robo-adviser companies registered in the US alone.
Companies such as Nutmeg offer robo-advice in the UK.
Similar to the robo-advisers, robo-retirements also offer a platform but one that specialises in managing retirement savings. Usually, a robo-adviser collects information from each client regarding their financial situation and future aims. The platform will then offer advice and automatically invest the customer’s assets.
“But I’m not a millionaire, so why should I care?”
You don’t have to be a millionaire or have a big fortune in order to be involved with WealthTech. One of the expected applications of WealthTech is micro-investing, and it seems like this trend is here to stay! These platforms give users the ability to invest small sums of money on a regular basis without paying a commission. This will potentially generate large savings over the years by making little regular investments without difficulty. Although many providers might charge a small monthly subscription fee, the platforms often are in the form of simple apps that are free to use. A good example of this is Moneybox.
Digital Brokerage platforms and services will give retail investors and businesses easy access to stock market information and investment opportunities. This way, many individuals or businesses won’t necessarily need certified investors. A well-known format in digital brokerage is social investing, which according to Forbes “lets you see the investments of people in your trading network that you follow, just as you follow people on Facebook”.
The Future of WealthTech
It is safe to say based on the above, that together with the new decade, we are also entering a new digital revolution. WealthTech has been evolving in recent years, creating platforms and solutions that use technologies like Big Data and Artificial Intelligence. This is why big businesses have created their own proprietary tools or have collaborated with fintech businesses to have them developed.
It is possible that WealthTech will eventually replace financial advisers, but there are improvements still to be made. However, the technology and innovation currently available in the WealthTech industry make the future look very promising, whether you are a venture capitalist or a small-scale investment enthusiast.
So do check out the Wealthtech companies that have proliferated in recent years. You know it makes sense*.
*The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. The contents of this blog are for information purposes only and do not constitute individual advice. You are recommended to seek competent professional advice before taking any action.