INTRODUCTION TO THE WEALTHTECH JOB MARKET
Personal wealth management has always been a fast-moving sector. Everyone is looking for the best ways to grow wealth and financial security while minimizing the risks. Thus, the sector is always on the lookout for new innovations. Recently, this means utilizing the latest in technology to gain insights that weren’t previously possible. This new “wealth technology” (wealth tech) now offers financial advice through artificial intelligence and big data, micro-investment platforms, or trading solutions based on social networks.
What is WealthTech?
Generally, WealthTech is any technology used in wealth management as well as the financial technology (fintech) companies that developed around them. Its goal is to provide innovative digital solutions for the investment and asset management industries. A great way to discover the many facets of WealthTech, are TED Talks. This sub-category of fintech has reached more than 120 financing agreements worth over $972 million, in the last two years, with a steady growth for the past five. Experts are already predicting the sector to expand from the current 50,000 to a million users within the next five years, with the majority residing in the United States and the remainder spread among Europe and Asia. These companies come in six different categories: robo-advisors, robo-retirement, micro-investment, digital brokers, investment tools, and portfolio management.
By far the most popular wealth tech, robot-advisors automate financial investments. These tools develop profitable investment options and yield targets through machine-learning algorithms based on the user’s risk aversion profile and other variables such as age and income. They replace traditional financial advisors and portfolio management, reducing the costs of wealth management. This, in turn, allows people with fewer resources to access these services and enter the market. While most robo-advisories are from the United States and Asia, there are a few in Europe, including the 20 known providers operating out of the United Kingdom, such as Nutmeg, RiskSave, and MunnyPot.
A variation on robo-advisors, robo-retirement solutions manage retirement savings. While popular in the United States, they are almost non-existent in Europe.
Micro-investment platforms allow users to invest small amounts of money with no commission, alleviating the need to have large estates to earn a profit. They make investment simple, convenient, and accessible. They are effectively self-service transaction management systems.
From online platforms to software tools, digital brokers bring stock market information and opportunities within anyone’s reach. The latest innovation is “social trading”, which allows users to follow their investments like “Facebook status updates.” For instance, eToro, a platform available in 140 countries, puts users in contact with one another and allows them to replicate portfolios of the most successful investors in their network.
Investment tools are wealth tech solutions that do not fall into the other categories. These tools provide extra information to investors through digital tools, either from buyers, research, or access to advice.
Portfolio management solutions allow customers and financial advisors to unify and manage their investment portfolios under a single platform. With these tools, investors can see how their investments evolve so they can optimize their portfolios. For instance, the French startup, Grisbee, provides personal advice and financial health monitoring.
Why Use WealthTech Solutions?
Although technology has been always important in the financial sector, it was not always obvious to banking customers. This is slowly changing as fintech innovations filter down to the mass-market. Wealthtech is leading the charge.
A part of this advancement is the banks looking for more revenue streams. Traditional financial advisors are expensive, forcing most people out of the market. However, banks are hoping wealth tech will bring them new customers. In 2018, most physical financial institutions will offer automated financial advice in some form. Many already provide robo-advice as a new revenue stream for their asset management departments. Others are hoping that these new tools will encourage customer engagement and repeated sales.
Another reason for the current trends toward wealth tech are the regulatory agencies. Regulators, such as the UK’s Financial Conduct Authority (FCA), are investing as much as £500,000 per year into wealth tech development, expansion, and education. These agencies want to deliver financial advice and service to people that might not otherwise receive it, which can be as many as 16 million people in the UK alone.
M any investors already use wealth tech tools as their go-to investment platforms, and just about everyone rates these platforms much higher in satisfaction than their traditional counterparts. For instance, Nutmeg has a customer InvestCloud satisfaction rating of 9/10.
These investors find the customization that wealth tech brings with it as their key reason for using them as well. While the features of each wealth tech solution vary with the provider and other factors, most come with a modular design. The user chooses the processes and financial services they need. On top of that, they are free to mix and match services from different providers. For instance, they can combine white-label cloud solutions from InvestCloud with investment, and regulatory compliance management solutions from RiskSave.
Other commonly used wealth techs in the banking and financial sector include:
- Client onboarding – helps anti-money laundering (AML) efforts and combats terrorist financing
- Suitability – ensures financial products are FCA-suitable for clients
- Investment process – Streamlines the investment process regardless of platform
- User experience (UX) – FCA-compliant front-end and digital engagement
Future WealthTech Trends
However, financial regulations and risks are moving targets. Future wealth tech might be smooth as more companies turn to it to improve their business. New issues will still crop up from time to time, creating new challenges for the financial industry. In turn, new innovations will be created to deal with these risks, such as the General Data Protection Regulation (GDPR) in 2018, and health tech will lead the charge.
To meet the financial challenges of the future, finance firms are looking for ways to deliver cost benefits, and to improve efficiency and productivity gains, while keeping their fees low. According to Cap Gemini Top Trends in Wealth Management for 2017, many are turning to WealthTech solutions to solve these issues. Some of the more popular are AI and analytics solutions, such as robo-advisors and the automatization of repetitive tasks. Experts are already saying these developments will affect the entire industry and its customer base, including private banking and high net worth (HNW) individuals.
Other major developments underway in the sector include:
- Robo-advisory and automatization
- AI, machine learning, data mining and other analytics
- Customized services
- Cryptocurrencies and blockchain
Each of these developments will offer new ways to invest and manage personal wealth. Investors can use them directly or they can opt to use them in conjunction with a relationship manager. In turn, these trends will allow newcomers to enter the market while offering improved satisfaction for existing customers.
Thus, knowing your customer and catering to their needs is at the heart of these wealth tech trends. Modern investors want transparent, personalized services designed for their financial goals and risk appetite. To provide these services, companies look towards machine learning and artificial intelligence within blockchain applications, often reducing stock trades from about two days to a few seconds and milliseconds. This, in turn, allows those companies to serve more transactions and customers than they ever could before.
Robo-advisory and Automation
Among these applications are robo-advisors and investment automation tools. There are currently over 100 robo-advising companies in the world offering custom portfolio and wealth management. Some of them also offer auto balancing, which regularly re-valuates investments and reallocates them based on current market conditions.
Through it all, industry experts already claim that wealth tech and robo-advisors are the future of wealth management and investing. While the industry still has some challenges to overcome, many believe the sector will follow the success of social media, where the founders failed but set the groundwork for every player that followed them. Whatever the future brings, investors will benefit from it. The interesting question is how the wealth tech industry and the greater fintech sector will look, when all is said and done.
WealthTech Employment and Education Opportunities
With its bright future, wealth tech will only grow to meet growing demands. This means new firms, innovations, and opportunities will open up to anyone with the right skills. Over the last ten years, the industry has seen a massive growth of new startups with digital business models. All of them leverage digital platforms and technology to give investors the right advisors, investment opportunities, strategies, and connections with their peers.
Top WealthTech Companies in Europe
Here are nine of the most important wealth tech companies in Europe, as of 2017.
The Moneyfarm online investment advisor uses digital wealth management to offer independent investment advice for small investors at reduced costs from their offices in London, Milan, and Cagliari. Regulated by the United Kingdom’s FCA and Italy’s Banca d’Italia, Moneyfarm creates unique customer profiles to deliver portfolio targets and risk propensity.
This London online investment manager has low minimums. Customers can invest with them with as little as GBP 1,000 (US$1,400) with fees as low as 1% per year. The company makes all investment decisions on behalf of its customers in listed securities, debt, cash, commodities, and other investment assets, but in line with their customers’ goals and allowed risks in mind. It provides an inexpensive alternative to stockbroker platforms where the customer must make all trading decisions for themselves.
The social trading and multi-asset brokerage firm eToro, uses a community-powered network to give its customers insight, and the ability to imitate, what other investors are doing in real time. They even have an open Guru program that allows customers to earn recognition and monetize their trading expertise and experience.
Zen Assets (UK)
Designed for the more well-off private investor, the Zen Assets online wealth management system looks to increase its yields by 40%. It combines a world-renowned portfolio management platform with investment products to create tailor-made, cost-effective, well-diversified, and highly liquid investment portfolios.
Cashboard provides personal, tailored, and scientifically diverse retail investment portfolios. Each portfolio includes modern asset classes, social lending and trading, and traditional investment opportunities under one account. Investment decisions are automated using modern portfolio theory, and there are no platform, account, subscription, or commission fees. Investors only pay if they make a profit. The company already manages several million euros for its customers.
True Wealth (Switzerland)
The True Wealth Swiss independent, online asset management system provides cost-effective, highly-transparent investment solutions to its private Swiss investors. The company uses automated investment solutions to reduce client costs while yielding bigger returns.
Scalable Capital (UK/Germany)
Scalable Capital’s proprietary digital investment platform dynamically optimizes its customers’ portfolios, with a focus on risk management. Their state-of-the-art wealth tech puts first-class investment products and services to smaller investors at a fraction of the cost charged by larger financial institutions.
This list is just a small sample of the variety of wealth tech providers operating in Europe. Many of them already have over €100 million in assets for customers around the globe. If you have the skills and desire to grow wealth and innovative investments, you can join them. As the market continues to grow, wealth tech companies like these will need more employees to manage their systems and customer demands.
WealthTech Educations and Career Profile
Fortunately, you have several options for gathering the skills and experience to join the wealth tech revolution. While there are no dedicated wealth tech university programs, there are several wealth tech course workshops for those that already have a background in finance management and technology, as well as high-quality online courses.
Regardless of your route, your wealth tech education will show you how to use technology to enhance and manage personal wealth. Most of this skill set is easily transferable to every variant of fintech, including RegTech and fintech proper. You will find these courses held in several cities across Europe, so you should have at least one near where you live. Furthermore, most standalone courses are only two days long.
They also include
- Expert instruction in disruptive finance and digital innovation
- One on one sessions with company CEOs about their real experiences and fintech solutions
- Lessons taught by industry professionals and faculty with latest insights
- Strong networking opportunities and internships within the industry
After completing these courses, you should have the following skills and knowledge:
- Peer 2 peer lending
- Asset management
- Insurance Technology
- Fraud management
- Blockchain technology and distributed ledgers in financial services
With these skills, you will be able to find employment in any fintech field, giving you the advantage when applying for jobs in the industry.
How Do I support WealthTech Advancements In My Area?
While wealth tech is expanding throughout Europe, it is not as widespread as in other corners of the globe. If you want to see investment technology grow, you will need to go out there and introduce it to people. Weath tech works because it brings investments and wealth management to people who might not otherwise try it. You can spread it by introducing the concept to your friends and family that might have use for these services. You can also petition your local government to enact policies that support financial innovation.
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