Beyond adoption: Wealthtech finally eyes innovation

Innovations in technology are front and center after a year of pandemic-driven lockdowns have forced a rapid increase in wealthtech adoption by advisers. One year later, technology providers are, finally, able to innovate beyond pushing the adoption of Zoom video conferencing and eSignatures.

In 2021’s “New Normal,” wealthtech innovation is focused on bringing the entire universe of financial services into the pockets of everyday users — not just the ultra-high-net-worth investor.

“The time is now to bring these changes forward to the industry and Covid-19 has accelerated that, as people have turned more to digital for obvious reasons,” said Tricia Rothschild, President of Apex Clearing, an API-driven alternative to traditional custodians.

Fintech giants like Envestnet are striving to provide the technology needed to facilitate this new era of financial advice and wealth management — one where everyone has personalized user experiences accessible from a smartphone.

Envestnet is already working on a digital user experience that curates, connects and orchestrates everything that can impact a consumer’s financial life. In fact, the fintech added $30 million to its operating expenses this year with the goal of putting connected financial lives into the pockets of consumers via mobile apps.

Apex Clearing, too, is looking to build fresh tools that enable the democratization of finance after going public through a merger with Northern Star Investment Corp. II. AssetMark Financial Holdings Inc.’s merger with financial planning software Voyant is also meant to position the turnkey asset manager to build a financial wellness platform for more users.

The rapidly accelerating trend of democratizing financial services has forced the industry and venture capitalists to give wealthtech the attention it so desperately needed as financial services, in general, has severely fallen behind other industries in providing digitally-driven services.

“I can order a book from Amazon and my medications from Capsule and they can be delivered to my door -- yet we can't clear a trade instantly,” said Northern Star Chairwoman and CEO Joanna Coles. “It's kind of nuts how far behind the financial industry is.”

When it comes to user experience, an adviser’s technology is being compared with innovative fintechs like Robinhood, which was evident during a Reddit board hosted by Fidelity Investments Feb. 10.

Counteracting the appeal of such fintech insurgents may mean replicating their digital capabilities, partnering via APIs, or, in some cases, buying them out, said William Trout, Javelin Strategy’s head of wealth management.

“In the short term, banks must leverage built-in strategic advantages, including their customer base and associated analytics, to rethink the way they approach their customers,” Trout wrote in a Javelin Strategy report. “They must track customers’ digital footprints to better understand their needs while using APIs to bring new sources of data and capabilities in-house.”

Unifying banking, savings, and investments functions through a single platform and incorporating design elements from inside and outside the industry will be critical to improving the digital experience, which has become the differentiator between wealth-management propositions, Trout said.

Personal financial advice is already blowing up on social media platforms like TikTok -- and if the next generation investor wants to access advice on their phone, they likely want the full breadth of financial services in their pockets, too.

“If you think about the way that information has been democratized, investing and the markets are going to be democratized in the same way,” Coles said. “Gen Z and millennials don't trust the big banks, look at 2008, they don't trust institutions in the same way and they would rather do something on their iPhone.”

This article is part of a series of special reports appearing in the March 15, 2021, edition of InvestmentNews.