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Wealth management as a practice has traditionally been reserved for high-net-worth individuals mainly due to the entry barrier most traditional institutions boasted, along with awareness about the service being restricted to the crème de la crème.
However, the onset of the COVID-19 pandemic turned the tables of wealth management for the better.
Today, an increasing number of people are still suffering from the economic downturn of COVID-19, meaning they have less cash in hand. As a result, more people are actively looking out for ways to expertly manage their finances, and with more time on their hands (read work from home 😊 ), awareness about wealth management is steadily on the rise.
In contrast to traditional wealth management which often requires individuals to interact with a plethora of investment brokers, bankers, and consultants, WealthTech and associated digital platforms of today have changed the face of wealth management for the better.
Not only are an increasing number of people actively making the switch to online wealth and investment management platforms but also actively benefitting from its wide catalog of advantages.
Starting from easy and real-time access to increased safety and security, modern wealth management empowers all stakeholders with equal advantages. Additionally, the combined curiosity of the masses is steadily fueling the rise of investments in alternative asset classes such as cryptocurrency, all of which has catalyzed the popularity of wealth management in recent years.
But the question remains, what is WealthTech, and how is it redefining the traditional ways of wealth management all of us are accustomed to?
What Is WealthTech?
In simple terms, WealthTech can be understood as a subsector of the fintech industry which specializes in creating platforms and technologies which empower users to expertly manage, analyze and build their wealth. Ranging from online trading platforms and investment dashboards to crypto marketplaces and expert advisors, WealthTech empowers stakeholders with a wide array of services.
While traditional wealth management was restricted to one or two services, modern WealthTech features a plethora of different branches, right from retail to robo advisor, and shared below is a rundown of the most significant.
- Online Marketplaces – One-stop shop for various investment vehicles, asset classes, and aggregated information from various verified sources.
- Portfolio Management Tools – Single window holistic portfolio management tools featuring everything from instant trading to expert analysis.
- Robo Advisors – Machine learning & artificially intelligent expert advisors equipped to automate preset functions based on dynamic market conditions.
- Algorithmic Trading – A new breed of automated real-time advanced trading algorithms for meeting dynamic market demands.
While each of these platforms features unique advantages, a common hamstring which binds them together is that they connect directly to banks and online payment platforms, empowering users to buy, sell and cash out investments in real-time without needing to rely on a broker.
How Popular Is WealthTech?
Although new, WealthTech has garnered a significant amount of popularity among patrons, and this is evident in the fact that WealthTech funding benchmarked a new high of $20 bn in 2021. As per latest metrics by Statista, the share of WealthTech investments skyrocketed from $2,226 million in 2017 to more than $5,562 million in Q1 2021, just among venture capital backed WealthTech institutions.
This and other similar metrics show the immense popularity, and potential WealthTech enjoys due to the unique advantages it brings to the table.
But, Why is Wealthtech in Such High Demand?
The popularity of WealthTech among global consumers can not only be traced back to the unique advantages it brings to the table but also in how our modern, digital world operates.
Our modern, digital world doesn’t sleep. We’re always on the go. Investors on one side of the planet buy, sell, and hold stock from companies on the other side of the world. Time zones are no longer barriers, and people choose their investments based on their projections alone and thus, geographical boundaries no longer hold any meaning.
Thus, it is a given that with increased mobility, relying on traditional platforms is a stretch as most of them demand either to enlist the professional assistance of an expensive wealth manager or they are overall difficult to access for the average consumer.
On the other hand, modern WealthTech solutions arrive with a plethora of solutions, right from ease of use and instant access to knowledge banks all the way to a user-friendly UI designed with intent to ease the process of trading. Above all, WealthTech solutions are instant and real-time and thus empower us to accurately arrive at decisions regardless of our investment capacity and geographical boundaries.
WealthTech offers all these advantages and more, which underlines its wide-reaching popularity among consumers, additionally earmarking it as one of the fastest-growing tech sectors globally.
A Case in Point: The Rise of RobinHood
To better capture the true impact of modern WealthTech solutions, let’s analyze the growth of RobinHood. Founded in April 2013, RobinHood reported its peak in 2020 with 13 million monthly active users. In just 7 short years, RobinHood went from being a minority player in the US investment industry to one of its pioneers simply by empowering their customers with features they demanded. As CNBC explained in an article on the company, “the beginning of 2020 created a unique moment for retail trading,” and RobinHood led the pack on this movement.
In simple terms, the exponential growth of RobinHood can be summarized in five main factors – reducing the initial cost of investment for the average consumer, adopting a digital-first investment approach, empowering the customer with a wide catalog of investment choices, educating the consumer and increasing overall financial awareness.
As a result, RobinHood today boasts of hosting millions of first-time investors, as they have made it possible for everyone to invest their hard-earned money, and that is the true power of WealthTech.
Tailored Tools for the Future
One of the most important trends in WealthTech is the realization that different customers require different tools. Small investors and people who are just getting started need the ability to make small trades and practice accounts. On the other, specialized WealthTech users such as those in MENA require solutions that comply with religious and cultural requirements.
Thus, it is the need of the hour that companies leverage forefront technologies like AI, blockchain, and machine learning to offer not only smarter and more secure tools but also tools that meet the unique requirements of a larger diaspora.
WealthTech and other allied technologies are steadily radicalizing the traditional ways of wealth management, and thus it’s only a matter of time before we are all investing using WealthTech.
Tagged:
- digital transformation, global
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Raheel Iqbal, Managing Partner
Experienced Board Member with a demonstrated history of working in the financial services industry. Skilled in Business Planning, Management, Employee Training, Financial Accounting, and Product Development.
