WealthTech
Before WealthTech arrived, anyone looking for wealth management services (like asset structuring, estate planning, or tax management) would speak to a financial advisor (FA).
The objective: to increase and protect wealth.
In the same way the convergence of finance and technology created fintech, the convergence of wealth and tech has created new ways for individuals and businesses to understand and manage their capital.
WealthTech has revolutionised the way we think about wealth – and the costs involved in effective wealth management. It leverages game-changing technology such as artificial intelligence (AI) and big data to enable efficient and profitable decision-making for everyone.
What is WealthTech?
WealthTech describes the use of innovative technologies such as artificial intelligence (AI) and big data to provide digital solutions that help manage wealth.
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How Artificial Intelligence is Transforming WealthTech
How Artificial Intelligence is Transforming WealthTech
As one of the more popular verticals in fintech, WealthTech has gone from strength to strength – and AI is a big deal in this space. It’s taking WealthTech to the next level of what’s possible.
AI creates better experiences for customers across the fintech industry. And that enhanced user experience comes at a lower cost, as companies don’t need as many human advisors to provide fast, accurate, and actionable insights and advice. At the backend, AI and machine learning algorithms can collect, analyse, and generate intelligence on immense volumes of datasets in a very short space of time. This data can then be presented to customers as simple and actionable advice. And generative AI tools like customer service chatbots can communicate that advice directly to customers – answering queries at speed.
The use of AI in WealthTech isn’t niche – and it’s not reserved to digital-first fintech startups. Investment banking giants including Morgan Stanley and JPMorgan Chase have embedded generative AI tools to help financial advisors and customers make investment decisions. This shows that the big names in finance recognise AI as a crucial competitive differentiator today – it’s becoming integral to wealth management services, and organisations that don’t invest in integrating AI will lose a competitive edge.
This leads to the question: are traditional wealth management firms at risk of being replaced by digital-first alternatives?
The wealth management segment is looking to AI to analyse market trends, investing options, portfolio options and give reliable advice for financial decisions. But given the key objective (to increase and protect wealth) there’s understandable hesitation to completely step away from legacy wealth management firms.
There’s a direct correlation between data quality and the performance of artificial intelligence. If data being relied on is compromised, this runs a real risk for WealthTech services and their customers.
Case Studies: Real-World Applications of WealthTech
The wealth industry is growing – and the next generation are thinking ahead to build, manage, and protect their future wealth.
It’s anticipated that Millennials and Gen X will inherit more than USD $50 trillion in the coming decades. And with a lower barrier to entry for everyone to grow their wealth, more people are gaining valuable knowledge that will enable them to invest their money and benefit from greater returns.
There’s never been a better time for WealthTech innovators to position themselves in the market and drive customer loyalty for the future.
Stash
Stash is an investment app for beginners. They make it easy to invest small amounts of money in a range of options including stocks, EFTs, and cryptocurrencies. The app also provides financial planning tools including budgeting and saving tips for users.
Robinhood
One well-known WealthTech provider, with a focus on accessibility, is Robinhood. Robinhood. A friendly approach has solidified the company as a popular choice for younger investors, and it offers commission-free trades.
Acorn
Acorn is an accessible WealthTech service with an alternative approach – helping users grow their wealth by rounding up purchases and investing the difference.
Betterment
Betterment is a robo-advisor that helps people reach their wealth goals. It focuses on giving clients access to low-cost and tax-efficient portfolios to help investments go further.
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Key Benefits of Adopting WealthTech
Key Benefits of Adopting WealthTech
Those looking for wealth management services want to protect or increase their bottom line. So cost-effective WealthTech has become an appealing solution, with a competitive advantage over traditional wealth management firms and financial advisors who charge much higher rates.
Wealth management is an important element of financial planning – but it hasn’t been accessible or relevant to much of the world’s population. WealthTech is democratising wealth management and opening opportunities to the masses; including those who don’t have access to human-to-human financial support, or who don’t consider themselves to be ‘wealthy’. The rise of WealthTech is supported by the explosion of valuable financial information online – with YouTube channels and podcasts that provide free knowledge to anyone who’s interested in improving their financial well-being.
WealthTech tools enable users to easily build their own personalised wealth and investment portfolios, with tailored risk-comfort levels and an understanding of their individual circumstances and financial goals. Once set up, those portfolios can be adjusted in real-time by AI-powered tooling – giving people control and visibility over their financial decisions, and equipping them with easy-to-understand interpretations of data so they can track their financial progress.
And keeping an eye on that data, and the decisions that AI tools and individual users make as a result, is key. Combined with AI and machine learning, data science and biometrics help analyse portfolio performance, keeping the data integrity rich and aiding future investment options.
Ultimately, WealthTech takes the mystery out of financial well-being. Instead of being the hidden domain of already wealthy individuals, it has the potential to enable everyone, from all socio-economic backgrounds, to take control of their financial future.
Challenges and Risks in the WealthTech Sector
For high net worth individuals (HNWIs) there’s one element of WealthTech that appears to be missing. Human-curated personalisation. At a certain level, HNWI want more than a data-led personalised portfolio, and they value relationship-building that can support them through the very real emotional challenges and insecurities that come with complex financial decisions.
In cases like this, WealthTech alone just isn’t enough (or at least, not yet). There are limitations when it comes to intellectual and emotional decision-making, and some wealth management customers require a human approach.
Although not unique to WealthTech, given the sensitivity of portfolios and information security, data breaches pose a very real risk to regulated sectors, especially with business and personal assets at stake.
And for individuals at all stages in their wealth journey, the quality of decision-driving information provided by WealthTech tools is only as good as the data inputs that the tech is working from.
WealthTech tools, including robo advisors and machine learning algorithms, rely on data to formulate insights and offer actionable advice. So the quality of data can hugely impact the quality of support that a customer receives. If data is compromised or lacks sufficient context, actions taken as a result have the potential to result in financial losses or below-market-average gains.
The Future of Wealth Management with WealthTech
Although some market factors caused some segments of the wealth management sector to dip in 2022, the future of WealthTech is promising – with more of the global population gaining knowledge about the value of investing, and interest in affordable, accessible wealth management tools on the rise.
Reaching USD $5.9 trillion
By 2027, it’s predicted that the value of assets managed by robo advisors will reach USD $5.9 trillion. (source: PwC)
Grow at a CAGR of 25.23%
The 2023 Global Wealth Market Survey report forecasts that WealthTech will grow at a CAGR of 25.23% until 2028, reaching $37,746.2 million.
Shifts in demographics
There will be shifts in demographics too. With another billion people expected to own a mobile phone by 2027, there’s opportunity for WealthTech providers to grow their user base. (source: Ericsson)
Women are set to control approximately $30 trillion
Of the liquid investable assets in the US by 2023. WealthTechs will need to consider how this trend affects risk behaviour, as research shows that women are typically more risk averse and have a different set of financial goals to men. (source: Investopedia)
Going forward, investing will become a part of everyday life for a growing number of people. There’s now more opportunity than ever for anyone, regardless of background, to embrace the power of financial planning and take control of their wealth.
We’re excited to host global leaders in WealthTech development at Saudi Fintech Week, and provide a platform for industry players to collaborate over the latest research and most innovative novel technologies – to shape the future of global wealth.