Wealthtech is one of the divisions of fintech. It integrates wealth management and technology to improve personal finance decisions and investing, much like fintech unites finance and technology to transform how people organise, spend, and receive their money, buy insurance, legal advice or cryptocurrency.
The use of wealthtech has changed how consumers and advisors approach wealth management. New opportunities as well as new concerns have been brought to the industry. This calls for new technological applications while concentrating on data security, predictive analytics, and other areas for wealthtech startups. It entails financial advisors delivering value that goes beyond what algorithms are capable of.
The wealthtech ecosystem fosters financial process efficiency by democratising some tasks that were previously reserved for experts. It has changed the investment landscape and altered how people perceive modern finance.
Here's a look at the pursuits and offerings that make up the wealthtech ecosystem:
Marketplaces
Financial advisors can use third-party investment models on wealthtech markets while still maintaining control over allocation, trade execution, and rebalancing. Wealth management marketplace models are a new type of hybrid business model that combines digital and human engagement, allowing advisors to concentrate more on client acquisition and retention tactics at a reduced cost while maintaining discretion.
Trading Platforms
Any user can use trading platforms for wealth management, regardless of their level of experience. They include advanced financial chart comparison tools, research-based analysis on financial markets, as well as investments from renowned analysts, and are accessible on a variety of devices. They also let users trade in a variety of financial asset classes.
Investment Tools
This subcategory comprises a variety of programmes and services that offer research resources, comparison tools, and access to a network of opinions. For instance, these applications provide updates on financial market data, assist users in finding and connecting with the services and products that meet their needs, assist users in financial planning, as well as research and analyse assets.
Social Trading
With the use of mirror trading or copy trading, social trading is a unique form of investment that enables individuals to watch how their peers and trading experts behave and adopt their trading tactics. Although customers can still open a trading account, it's a well-liked method of accessing the financial markets because it needs little prior knowledge of them and costs less than engaging traditional wealth managers.
Financial Advisors
These businesses focus on providing online financial and investing advice based on in-depth data analyses obtained via Big Data applications and Artificial Intelligence-based decision-making. Moreover, the conventional wealth management method of financial advisors is being gradually displaced by Robo-advisors.
Future Technologies in Wealthtech
The wealthtech industry is constantly developing and goes well beyond predictive analysis. Technology has changed how wealthtech businesses establish relationships with potential customers and quickly reach huge audiences. Additionally, it has affected how current relationships are handled. Wealthtech businesses, for instance, can monitor customer investments. This is helpful when a client has numerous assets being managed by various institutions. Here are a few technologies that could eventually overtake wealthtech industry.
Automated Advisors: People still choose to work with licenced financial advisors today. However, the outcomes achieved by robo-advisors are satisfactory enough to make them the main provider of all types of financial advice.
Cloud Technologies: Today, nearly all wealthtech platforms offer cloud-hosted services. These services make it simple to sustain such platforms when the worldwide regulatory environment changes. Furthermore, to boost engagement, wealth management companies often provide their services through mobile apps.
Quantum Computing: Future models of complex business issues will be aided by quantum computing. Many times, overly simple assumptions are made in mathematical models used for analysis. Thus, the wealth management industry will be able to overcome difficulties with financial research due to quantum computers.
Blockchain: This technology not only helps with asset management but also enables the creation of new asset classes. The ability of blockchain to operate as a digital wrapper around any asset and enable the trading of that item over decentralised networks makes it crucial for the wealth management sector.
The Road Ahead!
Wealthtech has made the wealth management market more digitised and open to a wider range of customers. It is advancing in the direction of supplying more individualised and client-centred services, as well as enhancing the services provided by wealth managers and advisors. Globally and in India, Wealthtech has accelerated due to the increased adoption of digital platforms. In fact, before Covid-19, India was home to numerous wealthtech businesses that catered only to retail investors, and digitisation will enable these startups to increase the scope of their business.
— The author, Kunal Shrivastav is the Founding Partner at Centricity Wealthtech. All views expressed are personal.
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