You’ve probably been hearing the word “WealthTech” a lot lately.
Well, there’s a reason for that.
In a fast-changing finance world with new apps every day, we have pieces of technology and services that we once didn’t have. This introduces us to a golden age of innovation.
The words “wealth” and “tech” merged and started rapidly to rise, creating a new generation of financial technology companies.
You might be wondering what is the difference between FinTech and WealthTech?
Well, through WealthTech, companies are given digital solutions by creating tools for the management of wealth and investments.
Before we continue, however, let’s look at this new technology’s origin, and break down why it’s so important for businesses.
Here we go!
WealthTech: A Definition
So, WealthTech is a combination of wealth and technology, and it lies under the known FinTech umbrella.
In the case of FinTech companies, finance unites with the word technology in order to organize, spend, and receive money both as individuals and as companies.
Similarly, when it comes to WealthTech, the aim is to provide digital solutions to enhance personal (and professional) wealth management and investing.
Services & 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-advisors 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-advisors will manage around $1 trillion by 2020, and around $4.6 trillion by 2022.”
Additionally, Juniper Research stated that robo-advisors “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-advisor companies registered in the US alone.
Similar to the robo-advisors, robo-retirements also offer a platform but one that specializes in managing retirement savings.
Usually, a robo-advisor 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 for 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.
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 advisors, 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.