WealthTech is creating digital solutions to transform the investment and asset management industry. Startups have arrived offering wealth management advise based on AI and big data, trading solutions based on social networks and micro-investment platforms.
Digitalisation has produced a democratisation of services. This means that opportunities, tasks and processes, previously exclusive to experts, are now directly in the hands of users and consumers.
WHAT TYPES OF WEALTHTECH PRODUCTS AND SERVICES ARE BEING DEVELOPED?
The WealthTech ecosystem is composed of initiatives and companies across both B2B and B2C.
ROBO-ADVISORS
The best-known products in this field are robo-advisors. Robo-advisors are automated services that use machine learning (ML) algorithms to offer customers advice. The advice is based on the most profitable investment options available in the market. This information is combined with customers risk aversion profile and other variables such as income and age.
By replacing human interaction, experience and expertise with AI, Robo-Advisors significantly decrease costs. Consumers who previously could not afford a financial advisor are therefore granted access to the market.
MICRO-INVESTMENT PLATFORMS
Micro- Investment Platforms enable consumers to invest a small amount of money, with a very low or 0% commission rate. Consumers with limited capital are therefore able to enter the market. They can generate small incremental savings. Historically these customers would not be a viable market segment. The consumer wouldn’t be able to afford the commissions / management fee. Or the commissions would be prohibitively low for the advisor to make a profit.
PORTFOLIO MANAGEMENT
Some WealthTech startups are developing portfolio management tools that allow investors to manage their investment portfolios in a single platform. Investors can analyse their investments performance and optimise how they allocate between different portfolios.
SOCIAL TRADING
One of the largest growing areas are social trading platforms. The business model is based on allowing customers to ‘follow’ investments. Customers can copy the investment decisions of other investors who they ‘follow’ in the network, aiming to replicate their successes.
B2B SOFTWARE PROVIDERS
A large number of startups are specialising in providing digital solutions to professionals in the investment, savings, wealth and trading sectors. They’re developing disruptive software and applications whilst providing technical and technological support to traditional investment firms.