The Future of Wealthtech: Trends and Predictions
As technology progresses at an unparalleled pace, it is evident that it remains crucial in shaping the future of wealth management. Wealthtech firms concentrate on assisting individuals to increase and preserve their wealth rather than merely consume it. Despite being a newcomer, the wealthtech sector is swiftly gaining traction. As outlined in a PwC report, the forecast for Global Assets Under Management (AUM) indicates a trajectory towards reaching $145.4 trillion by 2025, with a Compound Annual Growth Rate (CAGR) of 5.9%. The increase is propelled by escalating requests for wealth management services, notably from affluent individuals and families. Wealthtech stands at the forefront of addressing this surge in demand, playing an indispensable role in catering to these evolving needs.
The global investment in the wealthtech sector dropped to less than $200 million in 2023. However, both the total deal value and the number of wealthtech deals remained relatively consistent with the levels observed in 2020. Like other fintech sub-sectors, global geopolitical uncertainties and macroeconomic pressures, including elevated interest rates, prompted investors to exercise caution in making substantial investments. The most significant wealthtech deal in the second half of 2023 was a $73 million funding round secured by the US-based investment firm Edward Jones.?
Types of Wealthtech Start-Ups and Companies include:
Digital advisory: Digital advisory wealthtechs provide investment management technologies such as robo-advisors and various automated services. The expansion of this sector mirrors an increasing global enthusiasm for cost-effective, passive investment approaches. Established industry leaders have introduced robo-offerings, exemplified by Vanguard’s Personal Advisor Services, which have accumulated hundreds of billions in AUM.?
Investment tools and platforms: Wealthtech firms complement the role of financial planners by offering services that bolster individual portfolio management. These services include sharing financial data, research materials, educational resources, and various investment tools.? An example of this is? Clarity AI , a developer of a sustainability technology platform aimed at providing environmental and social insights. Utilising machine learning and big data, the company's platform assists investors in comprehending and enhancing their social and environmental impacts.
Advisortech: Advisortech solutions leverage software to enhance the efficiency of advisors and financial planners, enabling them to better serve clients and expand their practices. These innovative tools impact every aspect of the advisor-client relationship, spanning from marketing and financial planning to billing. An example of this is? Altruist , an investment platform tailored to assist financial advisors in serving their clients. The platform automates research and optimises operations for financial advisors.
Brokerage: These wealthtech companies develop self-directed online trading platforms, providing retail investors with the ability to trade stocks, bonds, and options. Acting as intermediaries, online brokerages facilitate transactions between investors seeking to buy and sell shares. Wealthtech firms have spearheaded innovative business models aimed at broadening the target demographic. For instance, Interactive Brokers , an online brokerage that earns trading commissions by facilitating trades across a diverse array of products, such as equities, options, futures, forex, bonds, mutual funds, and ETFs. Interactive Brokers (IBKR) leads the list of the most comprehensive investment platforms.?
领英推荐
The chart above represents the total equity held by clients of Interactive Brokers in billions of dollars over the years from 2019 to 2023. It shows the financial health and growth trajectory of the client's investments with Interactive Brokers during this period. The increasing trend in equity from 2019 to 2023 suggests potential growth in the assets managed by Interactive Brokers for its clients, indicating a positive performance or influx of new investments over time.
Retirement planning: Some wealthtech firms specialise in savings management and retirement planning. These companies assist investors in preparing for retirement by establishing financial objectives, assessing risk tolerance, and formulating investment strategies. Companies such as Guideline employ automated investment technology to aid users in maximising their retirement planning and saving endeavours for the future.
Artificial Intelligence (AI) became a coveted area for global investors, including in the wealthtech sector in 2023. Investors showed particular interest in AI and machine learning for data analytics, product recommendations, and source of wealth assessments. Wealthtech solutions focused on ESG investments also gained attention.?
Wealthtech investors maintained a strong focus on robo-advisory platforms, especially those catering to lower wealth market segments. Backed by financial institutions, these platforms democratised access to wealth products previously reserved for high-net-worth individuals. Interestingly, the Middle East is also gaining interest as an emerging target for wealthtech investment.
The outlook for wealthtech appears bright, poised for sustained expansion in the forthcoming years. Expectations anticipate ongoing innovations from wealthtech firms, delivering enhanced and streamlined financial solutions to investors. The incorporation of AI, machine learning, and big data analytics is projected to exert substantial influence, furnishing investors with instantaneous insights and tailored investment guidance. Additionally, the integration of blockchain technology is also anticipated to herald a transformative era in the wealthtech sector, fostering heightened transparency and security in investment management processes.
Are you a fintech CFO, professional, or firm looking to utilise the services of a forward-thinking research team? Kindly reach out to us at [email protected] for our research, copywriting, and financial analysis services.
References?
??2024 Migasuto, All rights reserved.