Asset & Wealth Management players are experiencing pressure from new industry entrants powered by financial technology. As a result, traditional AWMs firms risk losing direct clients interested in low-cost options.
Furthermore, the quality of the service will drop if wealth assistants ignore the best practices of Fintech companies. On the other hand, new technologies give mindblowing instruments such as AI, ML, and blockchain to improve AWM services and win the market.
As a design agency, Arounda is closely involved in transforming financial services. Recently we have developed UI/UX design for several fintech projects like Sage Express AI-driven tool and Klasha app. These projects inspired us to investigate the financial landscape deeper. And in this article, we discuss fintech wealth management.
Before we dive deep into the technical innovations in Asset and Wealth Management, let’s briefly clarify the difference between these two services.
Asset management focuses on your investments in the first place. The advisor will define which investments best suit your situation, including stocks, bonds, mutual funds, ETFs, and other types of asset allocation. The service price is mainly calculated as a percentage of the assets under management (AUM).
Wealth management has a broader perspective and considers an individual or family’s financial situation. This includes planning tax, education, legacy, estate, retirement, insurance, etc., to maximize and protect wealth. Typically there is a one-set fee paid for the advisor services.
Both wealth and asset management technology are transformed by innovations and grow rapidly.
Over the past years, The positive Fintech effect has developed a sustained consumer appetite for technology-driven financial innovation. Moreover, according to recent Allied Market Research, the global wealth tech solutions market will reach $18.6 billion by 2031, growing at a CAGR of 14.8% from 2022 to 2031.
Let's take a closer look at the main wealth tech novelties.
Robo-advisors are digital platforms and applications that provide automated investment services based on algorithms. As robo-advisors need minimal human supervision, they are not expensive. Another advantage is the low opening balance, which is attractive to retail investors.
The main drawback is that robo-advisors have a limited area of application. They work well with traditional investing but will not suit more complex tasks, e.g., estate or education planning. Other disadvantages are that robo-advisors require a lot of analytical thinking and lack the empathy of a human wealth manager. Nevertheless, they remain the most widespread asset management fintechs.
These firms present robo-advisors as the leading service. They are often pioneers of digital advisory technology and offer the most competitive fees. Binance and Betterment are the two leading robotic investment apps in 2023, according to the Forbes report.
More and more AWMs are launching robo-advisors as an advanced tool for their customers. Often these platforms have higher fees. But they remain attractive to the firm's clients by proposing more sophisticated wealth management in combination with other services and personalized support.
For example, Vanguard Personal Advisor Services gives the choice of a digital adviser, a personal adviser, and a personal adviser select. According to Investopedia, the company has $206.6 bn assets under management.
This subcategory of robo-advisors focuses on retirement investments only. Like other digital advisors, these algorithms calculate and propose investments based on clients’ desired objectives and acceptable risks.
A great example of fintech and wealth management is the NewRetirement platform. The popular PlannerPlus plan offers over 100 planning inputs, real-time net worth monitoring, digital coach suggestions, scenario comparisons, live Q&A sessions, and planning classes for $120 a year.
Another way to achieve your retirement goals or improve overall wellness is to invest small amounts of money early in life and continue doing so slowly and deliberately. Micro-investing gained popularity among all generations, including Gen Z and Millennials, not to mention High Net Worth Individuals (HNWIs), because it helps to generate significant financial rewards without a big initial investment, great risk, or deep knowledge of financial markets.
Micro-investment apps have comparatively small subscription fees. Some of them offer to buy a fraction of a share. Others need to be linked to a bank account or credit card to accumulate savings funds. Plynkinvest is one of the most popular representatives of micro-investment apps that demonstrates how fintech asset management works.
As we all know, stocks, bonds, currencies, commodities, and other financial assets periodically rise and fall in price. These cycles create opportunities for individual or collective market traders who understand financial market processes. Fintech tools give great freedom to those users who want to invest their money as they see it best.
Digital brokerages are the most widespread tool for self-investment. The best-in-class online brokers like Fidelity Investments offer portfolio analysis, direct indexing, and trading platform for fractional shares, stocks, and ETFs. Unfortunately, Fidelity is not yet accessible to non-U.S. citizens.
New solutions such as marketplaces, crowdsourcing, and blockchain allow investors to build connections, share insights, and act as a community, led by a common purpose. The most vivid example is the decentralized autonomous organizations (DAOs). These are self-governed communities with a shared mission but without centralized leadership. Members holding DAO tokens like ERC20 can vote for the project development. As you can see, alternative business models create brand-new fintech wealth management opportunities.
Wealth management is a prospective investment for fintech start-ups because of the relatively low cost of entry, competitive fees, and unlimited opportunities for scaling. Nevertheless, the success of the affair depends on developing competitive tools based on the most effective technologies.
AI algorithms. Leveraging AI technology to process behind-the-scenes operations such as data entry or active investment management is inevitable to build personalized and seamless financial services.
Data analytics. The ability to capture, transform and analyze data is the fundamental competitive advantage, as it improves trading efficiency, reduces risks, and supports compliance.
Security measures. FinTech promises robust methods to protect sensitive financial data. This is one of the main advantages for customers and a crucial priority for the developers. Facial recognition, multi-factor identification, and other safety measures should not be taken lightly.
Human support. Nowadays, customers value interaction with the live assistant, and combining the advantages of robo-services with the warmth of the human touch is essential.
Fintech improves and automates financial services, presenting both an opportunity and a threat to traditional AWM firms and consultants. The main innovations of fintech wealth management include robo-advisors, micro-investing tools, digital brokers, and alternative business models. There is no doubt that the future of asset and wealth management is intertwined with the Fintech adoption.
Arounda team observes the growing interest in Fintech projects among our clients. We are excited to contribute to improving financial services with cohesive branding, quality designs, and a thorough business strategy.
If you are looking for a design team with experience in Fintech solutions, just drop us a line!
Technologies change services in different areas of finance, including payment methods, personal finance, savings and investment, insurance, and wealth management. The main impact of Fintech is the convenience and clarity of money management.
Wealth tech is the implementation of innovative technologies such as artificial intelligence and Big Data for assets and wealth management. The technology improves AWMs’ services, making them more efficient and automated.
Blockchain opens new opportunities for investments and trading. Digital assets, NFT tokens, and the practice of smart contracts can broaden and personalize AWMs services.
Sign up to our newsletter to get weekly updates on the trends, case studies and tools