WealthTech Growth: Reasons and Prospects for Digital Transformation


Guest Post By Vasyl Soloshchuk, INSART

Evolving needs of end customers and RIAs, and the need for reliable digital channels of communication and access to portfolio-management tools, have created an opportunity for WealthTech trailblazers. These days, tech companies are helping the asset-management industry embrace the digital transformation to lower operational costs, become more tech-savvy, and add more personalization to stand out from the crowd.What changes is WealthTech facing nowadays, and what are the key drivers behind those changes?

Overall Automation of Financial Advising

The need to automate financial advice emerged from the necessity to make collaboration faster and more efficient to reduce operational fees, which were too high in conventional operating models.For example, the client onboarding process used to be time-consuming; filling in papers and waiting for the account to be opened was a standard procedure that took a while. By outsourcing some of the manual tasks to machines, and further adopting a robo-advisory component, asset-management firms have been able to enhance operational efficiency by cutting down expenses on rule-based routines and diversifying customer experience. Apart from customer onboarding, automation use cases include the following:

  • custom-tailored portfolio reports;
  • background checks;
  • account rebalancing (elimination of manual Excel spreadsheet analysis).

Industry experts insist that robo-advisory is likely to be a great add-on (rather than a full-time alternative) to traditional human consultants.When it comes to millennials, for example, they are more tech-savvy compared to previous generations. Min Zhang, CEO and Co-Founder of Totum Wealth, thinks that millennials are used to interacting via smartphone and obtaining digital advice, and is less reliant on classical human-to-human interaction. They’re likely to go for automated solutions when it comes to managing their wealth.automationAccording to Cindy Taylor from FintekNews, both millennials and Gen X are more used to technology. However, Cindy feels that money is such a touchy subject that the majority of customers need to know they can direct their query to a human consultant at any time. Jeremy Floyd, CEO of Finworx, is confident that “bionic advisory” is the future of wealth management. Such a combination of technology and conventional business models will allow humans to be part of the relationship, while outsourcing everything mechanical to robos. Jeremy emphasizes the important role digital solutions play in advising, but from a trust point of view, there is still a need for human financial advisors.Lex Sokolin, Global Director of Fintech Strategy at Autonomous Research, suggests that, nowadays, humans are continuing to use technology to enhance their relationships with other humans; however, taking into account wealth transfer to younger generations, more and more potential wealth-management clients are going to prefer chatbots to meet their needs.Darren Duffy, Head of Wealth Management Business Solutions at Thomson Reuters, agrees with the above experts that future wealth-management firms will incorporate both digital and human advice. Technology will complement what advisors do to enable CFAs to focus more on value-added services than on daily routines.

Big Data and Artificial Intelligence to Rewire

Another gap filled by WealthTech start-ups has been efficient utilization of big data. Artificial intelligence (AI) and machine learning have become the tools tech players use to help aggregate, process, and differentiate piles of data that “legacy” infrastructure was not capable of doing. As a result of big data and AI infusion, wealth management has seen more dashboards with real-time analytics for RIAs and custodians that help experts identify the bottlenecks in workflows and sources for further growth based on the existing portfolio of clients.Min Zhang, Totum Wealth, states that the short questionnaires completed by clients mean there is a need for bigger data to process the insights and to define the “risk capacity” prospects are comfortable with.Darren Duffy, Thomson Reuters, finds companies that deal with AI and cognitive computing to be the most fascinating because these technologies touch every aspect of the wealth-management industry, allowing market players to gain operational efficiencies.Jeremy Floyd, Finworx, thinks that using data across a broad range of the population is necessary to really hone in on not just the risk factor but also the behavioral or economic biases that are present in people’s minds. According to Jeremy, it is important for financial advisors to be able to give the very best advice. Instead of filling in a traditional risk survey, it’s vital to really drill into all the factors at play in someone’s mind when they make decisions.April Rudin, President of Rudin Group, concludes that when applied correctly, the technology will remove the mundane and routine tasks that can be better executed by an algorithm, or using AI where applicable. The expert feels, however, that AI or any other tech implementation in WealthTech is not a question of replacing B2B professionals, but rather a future of work and landscape changes, of what skills are there.John Logan, Founder of SafeGuard Guaranty Corporation, states that the company does not use any algorithm-powered software to automate processes yet, as it is not in the market yet, but once it is that aspect will become highly salient. It is logical that SafeGuard wants benefit from outsourcing as much as possible to reduce costs and pass that value along to consumers. John states: “What we’ll probably do is to find a very smart group that does that kind of investment for a living and outsource it to them. Obviously, we would be very, very interested, again, in companies that leverage that kind of AI, for obvious reasons.”big dataApplication of predictive analytics will result in additional insights into customers’ behavior. This will include mining the information from historical datasets to define and model possible future scenarios and trends.

The Rise of Blockchain

After all the buzz around Bitcoin and Ethereum, tech pioneers cannot escape thinking about the use cases of distributed ledger technology (DLT) to come up with offerings for the WealthTech industry. According to Deloitte, after banking, wealth-management companies are the next in line to benefit from using blockchain. Possible use cases for DLT vary: smart contracts, real-time settlement mechanisms, as well as single point of truth (“SPOT”) are just a few applications of this technology. As per EY insights, DLT can be used to create client profiles that will enable storage of personal information and preferences, account details, digital footprints, and net worth, and making all these details available on demand with distinct access levels for different users (edit, read only, etc.).Florian M. Spiegl, Co-founder and COO at Hong Kong-based FinFabrik, discussed with us the “power shift” from large banks to innovative tech companies, which can adopt new technologies much more easily. DLT has potential to go far beyond just cryptocurrency in wealth management, creating room for more players to change the industry infrastructure. Florian is positive that blockchain will completely reshape the post-trade world. It will be a trade in real time, as it should be. There will be no settlement risk anymore because it will be t+0, it will take no time for an electronic transaction to settle. The large machinery that we now have in the back of all trading activities, which is attached to wealth management, will disappear after more and more companies start utilizing blockchain. As soon as big players understand this technology from both the process and the regulations points of view, blockchain will be used broadly.John Logan thinks that DLT is going to be more of a B2B-type use case than B2C, because blockchain is still evolving and there aren’t many people who, even being experienced, understand the best use for that kind of thing on an individual basis. From a company standpoint, it is possible to easily reduce the transaction fees and encounter errors in terms of where data is or isn’t in terms of sending money back and forth and getting things done with blockchain.Lex Sokolin points out issues of timing and of operating stack. In the US, there’s a separation between where the money sits (the custodian), how investments are traded (the broker), who’s providing the advice (the registered investment advisor), and other consumers. Each part is fairly isolated. Blockchain, in its logical application, would mean that everything—all money, all equities, all bonds, an exchange rate of funds, an asset allocation, digital assets, all trading from start to finish, every ETF rebalancing, every money movement, every single thing to do with the client portfolio, retail or institutional—happens on a shared ledger.


I am certain that there are ways in which the technology can be implemented to improve practice management. The reality is that many advisors are already doing one of two things. They are either investment professionals with very deep understanding and expertise in something specific, whether it is fixed income or some kind of specific equity. Although they’re doing that type of investing, they’re using portfolio-allocation tools for other things. When you look at advisors’ side, the portfolio performance is not negligible—it’s important, but the differences are small. The biggest difference is in the relationship that they’re offering. From the company’s perspective, it is about efficiencies.In this digital era, the efforts of WealthTech players are mainly aimed at risk reduction and compliance increase, higher operational efficiency and productivity, as well as the creation of a more client-centric ecosystem in the niche. Market players that are able to synthesize innovations and create solutions that utilize the best use cases of leading technology will lead the field in the long run.

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