Innovative Products and Services Emerging in WealthTech Space

The transformation of wealth management from traditional to digital and now to a hybrid model over time has fueled the creation of innovative products and solutions to meet the changing investor needs.

Today investors are seeking to invest in diverse products and solutions that can give them exposure to the increasingly volatile and complex investing world. EY’s Global Wealth Research Report published in 2023 gives insight into wealth clients’ willingness to explore new products and their likelihood to shift investment approach. As per the report, 68% of the surveyed clients are satisfied with their actively managed funds, while 29% of them are satisfied with the performance of digital assets. Also, virtual collaboration is sought as the most preferred interaction method for account management. 

Whether it is technological advancements, a shift in business models, or changing client needs, transformation can drive the development of newer products and services. 

Let us look at some of the innovative products and services emerging in the WealthTech space:

• Robo-advisory services

Robo advisory services are an automated digital platform that provides algorithm-based financial advice and investment management services. Digital financial advisors recommend diversified investment options to help in building a cost-effective investment portfolio with no/minimal human involvement. Here is how robo-advisors work:

Step 1: Client Profiling

Robo advisors collect clients’ information like financial goals, risk-taking ability, investment horizon, etc. to understand their needs and preferences. 

Step 2: Algorithm-based Investment Plan

Robo advisors make algorithmic analyses of clients’ needs and preferences to generate tailored investment plans.

Step 3: Portfolio Construction

Construction of diversified investment portfolio based on algorithmic analysis.

Step 4: Portfolio Monitoring

The platform gives access to the client’s investment report and tools to monitor the portfolio. 

Step 5: Portfolio Rebalancing

Robo advisors automatically rebalance the investor’s portfolio depending on the changing market conditions to maintain the original asset allocation.

Step 6: Customer Support

Robo advisors extend round-the-clock support to clients by addressing their all concerns related to the portfolio. 

Complete automation of investment management makes robo-advisory services a cost-effective, accessible, and well-suited platform for new-age investors. Optimizing the usage of machine learning and artificial intelligence for further improvements and socially responsible investing are emerging as new trends in the robo-advisory space. 

With rapid FinTech innovations in the wealth management space, the robo-advisory services market is growing exponentially. As per the market report by Mordor Intelligence, the global robo-advisory services market is valued at $ 7.16 billion in 2022. And, it is projected to grow at a compound annual growth rate (CAGR) of 31.78% to reach a market value of $34.72 billion by 2028. 

Some of the major players in the robo-advisory industry are Betterment, The Vanguard Group, and Wealthfront. 

• Financial services software

With FinTech innovations in the wealth management space, a wide range of digital tools and applications have been introduced to support various aspects of the industry. Wealth management companies are using these software solutions to manage financial transactions, reporting, planning, analysis, and more. 

Here are some of the common types of financial software services used in the WealthTech space:

These software solutions are enhancing the efficiency, security and streamlining the process in the WealthTech space to offer effective wealth management solutions. 

Rising demand for digital channels, the need for superior services, and the increasing implementation of workforce optimization strategy are mainly driving the constant growth of the financial services software market. As per the industry report by Allied Market Research, the value of the global financial services software market stood at $118.65 billion in 2021. And, it is projected to grow at a compound annual growth rate of 9.2% to reach the value of $282.71 billion by 2031.

• Robo-retirement solutions

Robo retirement solutions are completely automated investment solutions designed exclusively for retirement goals. Robo advisors for retirement create a diversified investment portfolio tailored to the client’s retirement needs. Here are the services offered by the robo-advisors for retirement:

As robo retirement solutions are one of the biggest impacts of FinTech innovations as they are cost-efficient, simplified, and easily accessible. 

• Micro-investment applications

Micro investment application is designed to provide a digital platform for investors who may not have large sums to invest upfront. Micro investment applications encourage and inculcate savings habits in young investors with easy setup of accounts. It allows them to invest in fractional shares and build diversified portfolios with a mix of different assets such as stocks, exchange-traded funds (ETFs), bonds, and in cryptocurrencies. They also offer a cash management feature for uninvested cash. 

Micro-investment applications are democratizing WealthTech solutions by introducing the younger generation to the world of investment by helping them take the first step. Some of the prominent names in the WealthTech industry that offer micro-investing applications are – Acorns, UNest, Stash, and Early Bird. 

Here are the important features of micro-investment applications:

• Digital brokerage services

Digital brokerage services are the digital platform that facilitates the trading of various financial assets such as stocks, exchange-traded funds (ETF), bonds, options, and cryptocurrencies. Here are the prominent features of digital brokerage services:

The emergence of these digital brokers is transforming the investing world. They make advisory services and investing in the financial market more accessible for all types of investors. Many WealthTech companies offer digital brokerage services – Robinhood and Charles Schwab are some to name. 

• Digital investment tools

Digital investment tools leverage advanced technologies to assist investors in the various aspects of the investing process by providing insights, research, analysis, etc. These tools can guide both wealth managers and investors in the wealth management process to make informed and rational decisions.

Here are some of the popular digital investment tools trending in the WealthTech space:

• Investment tracker applications: These digital tools help in managing the budget, track and monitor the investments in one place. For example, Personal Capital, Mint, Webull, etc. 

• Social investment platforms: These platforms allow investors to share their investing ideas and other information to copy or follow the trades/investing strategies of successful investors. For example, Freetrade and eToro.

• Cryptocurrency exchanges and applications: These applications allow interested investors to trade in cryptocurrencies. For example, CoinDCX, BITmarkets, Bitbns, Unocoin, etc. 

• Algorithmic trading

Algo trading is a method to execute trades in financial markets using computer algorithms. Algorithms are designed to identify trading opportunities, analyze market data and automatically execute trades as per the defined criteria. There is a wide range of strategies coded into the algorithms to guide trade decisions. Algorithmic trading is widely used by trading firms, institutional investors, and a few individual traders. 

Here are some of the prominent features of algo trading:

As per the market report by Fortune business insights, the value of the global algorithmic trading market is $2.03 billion in 2022. And, it is projected to reach the value of $ 3.56 billion by 2030.

Conclusion

As the wealth management industry moves to the next evolution stage, the WealthTech companies need to evolve their products and solutions by reaping the power of technology to keep up with the competition. Multidimensional approaches can help these companies in their future innovations. For example, wealth.com, a leading estate planning platform has recently formed an Advisor Council of highly influential industry leaders to enhance product innovations in future.

Growth in the digital assets market can lead to creation of more innovative products. The report published by the Markets and Markets in 2023 projects the global digital asset management market to grow at a compound annual growth rate (CAGR) of 13%. Investor’s increased interest in digital assets and working with FinTech shows that there are immense opportunities for WealthTech companies to develop innovative products in future for next generation investors.