Investment in adviser fintech lowest since early 2018

Investment in adviser fintech lowest since early 2018
Dip in venture capital funding, but early stage companies are tackling a variety of adviser challenges.
AUG 13, 2019

Deals and funding into wealth management technology dipped in the second quarter of 2019, according to the latest Global Fintech Report issued by research firm CB Insights. Only 35 deals were made in wealth tech, which CB Insights uses to account for both consumer-facing and adviser-facing fintech startups, during the second quarter of 2019, for a total of $421 million. It's the fewest number of deals and lowest funding amount in five quarters. But that doesn't mean the market is petering out, said Lindsay Davis, CB Insights senior intelligence analyst. The dip is reflective of overall fintech funding, which has hit a 10-quarter low, and the fact that most of the wealth tech support is backing young firms. A close examination of where wealth tech funds are flowing, suggests venture capitalists are backing early-stage startups that are focusing on a variety of adviser pain points. "There's no shortage of really cool stuff happening in the market," Ms. Davis said. One theme was startups offering next-generation adviser tools with highly customizable user experiences and product suites. For example, Vestwell, a retirement investing and planning software for registered investment advisers, attracted $30 million in Q2. [Recommended video: Advisers put digital marketing tools to work to generate new clients] Trizic, a white-label suite of wealth management products for advisers brought in $7.96 million. Jacobi, which delivers automated financial planning with self-service tools, multi-asset portfolio design and analytics received $7.5 million. "It's good to see investors putting capital to work in a sector that has been very opaque," Ms. Davis said. "It's not all about the robo-advisers." As for direct-to-consumer market, Ms. Davis highlighted a trend of new fintech platforms offering retail investors improved access to various asset classes. The Small Exchange received $10 million in Q2 for its platform to help consumers invest in futures, while Glint attracted $6.27 million for a gold investing platform. (More: Two fintech firms providing tools for uber wealthy clients) Some startups also are using technology to create new types of asset classes, Ms. Davis said. Royalty Exchange brought in $1 million in funding for a platform that turns music royalties into an investable asset class. "In 2019, the market is starting to evolve more granularly," Ms. Davis said, adding there is an effort by fintech companies to "democratize everything." "There is demand from multiple sides of the market," for wealth tech, she said. The fall in wealth tech funding mirrors a larger trend across the entire fintech ecosystem. Despite a record-number of $100 million mega-rounds of funding, with 25 deals totaling $5 billion, total funding in fintech hit a 10-quarter low, CB Insights reported. The number of fintech deals in Q2 dropped 22% on a quarterly basis and declined 23% year-over-year. (More: Advice industry leaders focused on improving the digital client experience) CB Insights reported that there are now 48 fintech unicorns, which is Silicon Valley-speak for startups with at least $1 billion valuations. Seven companies reached unicorn status in Q2. There is not yet a wealth tech unicorn, though Social Financial (SoFi) is valued at $4.88 billions and has a robo-adviser product, while mobile brokerage app Robinhood is valued at $7.6 billion.

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