How Wealthtech is Democratizing Investing • Windmill

How Wealthtech is Democratizing Investing

Windmill Editorial Team
  • WealthTech

Abiding by the status quo is so yesterday: Wealthtech firms nowadays are smashing it. Despite the name, Wealthtech firms don’t exclusively cater to the wealthy, but use technology to extend their services to different income groups as well. For the layman, investing has become more simpler because of Wealthtech services and the industry is on the rise. Modern technologies like robo-advisors and artificial intelligence make this possible as they offer investors valuable, personalized advice and budgeting techniques. The global Wealthtech solutions sector, in terms of revenue is predicted to grow to $137.44 million by 2028. Between the time period 2021 to 2028, the industry is expected to increase by a CAGR of 14.1 percent.  

Nutmeg is an example of a successful Wealthtech firm that serves a mass-consumer base. Founded in 2011 and based in London, UK, the company specializes in investments, ISAs (individual savings accounts), and pensions. Nutmeg allows the layman to invest easily as it creates investment portfolios and based on the risk level users are willing to take, they are offered investment opportunities aligned with their preferences.  

So if you’re wondering how Wealthtech has democratized investing, you’ve come to the right place. In this blog, we’ve covered everything for you.  

How Wealthtech has made investing more accessible

One of the big things Wealthtech has broadened access to is investing. 

Micro investing

Wealthtech firms broaden their audience by offering services that appeal to more than just those belonging to the HNWI segment. They now serve, for example, the younger population or people from lower income groups. They do this by lowering the cost of entry to make investments and deliver services that are increasingly accessible, i.e., via smartphone apps.  

It has also become more accessible for different groups to access Wealthtech services because no minimum investable assets threshold is required. For instance, if people needed to have investable assets worth more than, for instance, $1 million to be eligible to obtain private wealth  services- this is no longer the case. 

Various micro-investment platforms available today allow users to regularly invest smaller amounts of money without paying a commission. Stash is a leading company that offers customers micro-investment platforms. Founded in 2015, it offers customers different investment plans based on their needs and budgets. They can invest $1, $3, $9, and so on and choose investment plans that work best for them.  

Robo-investors

Wealthtech firms today incorporate smart technology such as artificial intelligence, machine learning, and robotic process automation. While the good old model of in-person interaction between client and advisor is still relevant, many of these services are now automated and customized.   

A great example of technology used in Wealthtech firms is robo-advisors. These use algorithms to efficiently buy and sell equities and provide financial advice. Robo-advisors are automated services that use machine-learning algorithms to create the best investment portfolios for users. In 2020, the total AUM (Assets Under Management) for robo-advisors rose to $980 million. Moreover, a report published by Insider Intelligence states that in 2022, Robo-advisors will manage a massive $4.6 trillion 

Digital brokerage

Digital brokerage is another example of how technology helps with investments. Digital brokerages are online platforms that allow customers to get stock market data and access to a range of investment opportunities. Brokers usually charge an expensive flat fee per trade, which is one reason why investing was formerly a fruit only enjoyed by the rich. The new face of Wealthtech is undoubtedly changing this. A popular social trading platform used today is eToro. On the other hand, Robinhood is a company that makes it easy for traders to invest in stocks.

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How Wealthtech has made private banking services more accessible

Wealthtech has also broadened access to private wealth-like services, made possible through algorithm-based long-term financial planning. 

Retirement planning

Robo-retirement is a technology used by Wealthtech firms that helps customers with their retirement planning. The goal is to help customers efficiently manage their retirement savings. Robo-retirement services not only make retirement portfolios for customers but also help them manage their assets better and offer strategic solutions.  

Personalization

Wealthtech firms use personalization to provide their customer base with tailored solutions on a large scale. Personalization includes analysing customers’ susceptibility to risk, their access to funds, and any expectations for the future. This way, Wealthtechs can make investment portfolios for them that are best suited to their needs. Betterment is a leading company creating high-quality investment portfolios for clients.  

Personalization can include an optimized content management system that improves investment solutions and advisor efficiency. This can enhance customer experience as their relationship with the company will strengthen via better communication channels. Another way of personalizing a Wealthtech app includes having in-depth information about a customer’s household, their annual income, etc as this can help companies create personalized options most appropriate for them.

Conclusion

The art of investing money has changed with the times due to a sharp rise in technology and modern innovation. Things like micro-investment platforms mean people from different income groups can enjoy the benefits of investing and increasing their savings over time. Wealthtech firms play a significant role in the finance world, and without them, investment would not be as democratized as it is today. Technologies like robo-advisors or robo-retirement, for instance, not only help customers manage and invest their money wisely, but their automated nature makes the process convenient and seamless. 

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