The financial industry is seeing “WealthTech”, a similar technology change as every other industry right now. New technical advancements have altered the way businesses and individuals handle their resources. Everything from banking operations to payments for purchases and other financial transactions has been simplified with the help of a wide variety of digital solutions. Even wealth management businesses have started to leverage technology to their benefit.
Aside from that, these modern solutions help individuals manage their assets by delivering them more constructive and data-driven advice on how they should manage their wealth assets.
If you want to understand more about WealthTech, then continue reading this post. In this post, we shall discuss everything about WealthTech, including what exactly WealthTech is and what the near-term future holds for WealthTech.
So, let’s get started…
What exactly is WealthTech?
The word “WealthTech” is making huge rounds these days. Wealthtech is an amalgamation of the words “wealth” and “technology.” The term “WealthTech,” also known as wealth technology, refers to the application of cutting-edge technology, such as artificial intelligence and Big Data, to give an alternative to traditional wealth management organizations. The overarching goal of this technology is to make wealth management and investing services more efficient and automated.
Wealth technology assists financial planners and asset management businesses expand more quickly and profitably.
Today’s financial advisers and wealth management businesses can choose from a plethora of innovative technological solutions that promise to centralize client information, boost marketing ROI, enhance portfolio performance, and automate administrative tasks.
The financial technology business is always evolving; hence, it is crucial for businesses to choose the right WealthTech partners to achieve their long-term goals.
WealthTech has become increasingly popular over the past few years as it helps asset management companies make better decisions.
WealthTech Services and Solutions
WealthTech is a subset of FinTech, but it is also an umbrella word that encompasses a wide variety of technologies that are geared toward wealth management. Some examples of WealthTech technologies are as follows:
As the name says, Robo-advisors are a type of WealthTech that provides financial advice or investment management online. This is one of the most popular types of WealthTech today.
This automated service uses machine-learning algorithms to determine the optimal investment portfolios for customers, taking into account their individual levels of comfort with various types of risk.
More and more traders these days use Robo-advisers in order to earn revenues. Robo-advisors can earn revenues via lower margins and higher transaction volumes than traditional wealth advisors because they can drive down prices and pursue a far wider audience than traditional wealth advisors.
Robo-advisors help bring a great deal of precision and systemization to the process of portfolio management. What began as a fad in the 2010s has become an integral part of personal investing, with most leading financial institutions offering an automated investing account, with billions of dollars in assets under management.
2. Robo Retirement
Robo retirement is yet another WealthTech that is designed to manage retirement savings for people. It is one of the variants of the Robo-advisors that have already established themselves as extremely popular in the industry.
Robo-retirement services are distinct from human financial planners. Rather than humans, machines are responsible for the creation of retirement portfolios in this system. Aside from taking care of retirement savings, Robo Retirements also take care of the management of assets.
3. Digital Wallet
Digital wallets, also known as e-wallets, have become increasingly popular among people. It is also one of the WealthTech that enables individuals or organizations to conduct financial transactions digitally.
It keeps users’ payment information for various payment options on numerous websites. The user can access these payment details at any time. A digital wallet is most commonly carried around in the form of an app on a smartphone; however, it can also be carried out online on a computer or desktop.
However, because of its portability and versatility, the mobile app version of the digital wallet has become the most popular choice among consumers.
Using a digital wallet is not only more convenient than using a traditional wallet, but it is also safer. Also, it saves a lot of time for people, which they may spend on regular banking otherwise. Users need to download relevant mobile applications developed by banks or reputable third parties in order to take advantage of this wealth technology.
Micro-investment is yet another popular WealthTech. In contrast to traditional types of investment, users of platforms that facilitate micro-investments only need to deposit very small sums of money.
Typically, micro-investing applications are a type of Robo-advisors that help investors invest in small amounts. For example, an investor can begin purchasing stocks, exchange-traded funds (ETFs), or any other type of security with as little as $100 or even less.
These applications round up the total amount charged to a user’s credit card to the next dollar and then invest the difference. These solutions provide investors with recommendations and explanations that help them make informed decisions.
Micro investing has recently seen a surge in popularity, particularly among millennials. It is because millennials are accustomed to using online banking and e-trade.
Micro-investing helps millennials participate more frequently in the investment market as a result of the increased options made available to them. Micro-investing start-ups typically use a subscription-based or flat fee payment model.
5. Digital Brokers
The term “digital broker” refers to online platforms and software tools that give people and companies access to the stock market as well as investment opportunities. These solutions help traders and brokers make financial investments in a wide variety of projects and assets without the assistance of licensed brokers.
A greater number of people now rely on the advice and projections of digital brokers rather than traditional brokers without having to pay the very hefty trading costs that brokers charge.
Digital broker has altered the way people used to trade in the stock market. Previously trading was only the cup of tea of those who were able to invest significant sums of money. Moreover, brokers used to charge a hefty flat fee for each trade. However, using WealthTech, even novice traders can benefit from the analyses and selection of financial products made available by digital brokerage platforms.
6. Algorithmic Trading
Algorithmic trading, also known as automated trading, is a computer program that follows a predetermined set of instructions (an algorithm) to place a trade. It makes earning profits for traders feasible. The other names for Algorithmic trading include black-box trading and algo-trading,
In addition to providing possibilities for the trader to make a profit, algorithmic trading makes markets more liquid and trading more methodical. It is because it completely removes the chances of emotional trading that traders usually do in the process and lose money.
7. Investment Software and Portfolio Management Solutions
WealthTech solutions are also meant to be used by businesses is investment software and portfolio management. It includes a wide variety of software and services that give users access to a network of advisors, research tools and options, comparisons and so on.
These software solutions provide people with real-time updates on the financial markets, assist customers with financial planning, and research and evaluate investment opportunities.
Portfolio management solutions not only assist financial institutions in performing asset class analyses but also boost the efficiency of the majority of tasks via the use of automation and organizational strategies.
Portfolio management solutions help investors and financial advisors streamline their investment processes by centralizing all of their assets in one place. With the use of these tools, wealth managers and individuals may analyze their portfolios across several asset classes, allowing them to make more informed choices and exercise greater control over their assets’ risk and performance parameters.
8. The Road Ahead
The future of WealthTech is bright as more and more businesses and individuals are now using technology to manage their wealth assets. There is no doubt that there will be many new and interesting advancements in the industry in the years to come.
Over the past few years, there has been a huge increase in investments made in Wealthtech companies, and this trend will continue to grow in the coming years. The value of the worldwide WealthTech solutions market was estimated to be $4.8 billion in 2021. It is anticipated that it will reach $18.6 billion by 2031, expanding at a compound annual growth rate of 14.8%.
Seeing these figures, it is safe to say that wealth management technology will one day completely supplant the role of financial counselors.
The technology of predictive analytics should also be considered a priority for the future survival of a WealthTech company. This is because it enables the company to gain insights into the requirements and behaviors of its customers, which in turn enables the company to provide better services and products to its customers.
The emergence of blockchain technology has resulted in the creation of new asset classes, and this trend is expected to continue. In addition, cloud computing will also likely continue to be a significant development in the financial technology industry because it enables steady expansion.
All in all, WealthTech will continue to be of great assistance to wealth managers and individuals as it will help them make better investment decisions and make profits.
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