Wealthtech Trends: A Look Back and Ahead

Margaret Hartigan is the founder and CEO, Marstone, Inc.
Digital innovation and fintech influence continue to change how wealth management services and advice are delivered to clients. It’s not just about doing things with a mobile wallet, or enabling robo advisory services. The digitization of wealth management is about meeting clients where they are and offering customized, personalized investing options based on their own goals, beliefs, and interests.
With that said, let’s take a look back at some of the top digital wealth trends of 2019 and look ahead to what might be making headlines in 2020.
Collaboration in the Digital Channel
Clients have come to expect anytime, anywhere digital solutions to manage their financial lives — ones that enable collaboration and provide an optimal user experience.
Financial institutions and advisors will need to expand beyond a financial-assets-and-liabilities mentality, exploring opportunities for deeper conversations about aspirations and goals. Digitalization brings the potential for greater transparency and advisor collaboration, as well as greater ease and convenience. Education and financial literacy are areas where technology can help reduce friction and provide insight into spending and saving.
Fintech Partnerships
We’ve heard for several years now about how traditional financial institutions and fintechs are going from enemies to “frenemies.” Financial institutions realize that fintechs can innovate quicker and are adept at creating robust digital services, while fintechs see the value of partnering with institutions that have large, built-in customer bases. The best partnerships go beyond white-labeling services for banks. Instead, enterprise-ready fintechs are helping solve technological disconnects, allowing banks to share data across different business lines within their institutions.
Expanding the Offering
That said, there are still some successful standalone fintechs providing robo-investing or wealth management advice competing with banks — and they are starting to offer more bank-like products.
Robo advisors and fintechs are offering unsecured loans, high-yield savings accounts, debit cards, payday advances, and other traditional financial products direct to consumers. These companies are pursuing this strategy mainly to get assets onto their platforms. For their part, consumers love the easy credit, especially the underbanked, Millennial and Gen Z consumers, and others who have had difficulty accessing traditional lines of credit. Not wanting to lose wallet share, banks themselves are stepping up the amount of unsecured lending, with Citibank offering Flex loans and Santander going after high-yield savings customers.
Data Management Takes Center Stage
Better data management for compliance is critical for wealth managers as an ever-evolving and increasingly complex regulatory environment persists. That said, better data management has also helped to support commercial goals: it can help advisors understand patterns of client behavior to serve individual needs, detect potential threats and risks, and reduce customer churn.
2020 Predictions
While those are some of the biggest trends we saw come to the forefront in 2019, here are a few emerging trends we expect to see in 2020.
Generational Wealth Transfer
You’ve probably read by now that we’re about the embark on the biggest generational wealth transfer in U.S. history, with money flowing from Baby Boomers to Generation X and the Millennials. Technology will play a key role in how this transfer is conducted and how the money is managed. It will likely mean a lot more money flowing into digital wealth management tools.
Older generations, by and large, had a more traditional, face-to-face wealth management approach with a human advisor. Younger generations, while still valuing that human touch, predominantly use and prefer digital tools for investing and wealth management. Technology will also make the intergenerational wealth transfer more efficient as younger generations go through the complicated and often paper-intensive inheritance process.
Financial Literacy Goes to School
With rising student debt levels and an uncertain economic outlook, university students and recent grads often have difficulty managing their finances. That’s fueling calls for requiring financial literacy courses as part of higher education. This poses a great opportunity for fintech and wealthtech firms to help schools and other institutions build financial literacy curricula. These firms can also make their technology available as tools for teaching these courses. It can even be an effective way to engage customers just starting out on their financial journey.
Continued M&A
In general, the wealth management industry was on pace for a record year of M&A in 2019 and we will see that trend continue to permeate into the digital space as well. This could mean traditional firms acquiring fintechs. It could also mean traditional firms and fintechs doing deals to acquire — or partner with — businesses such as data analytics companies, CRM or marketing firms, and non-financial software businesses in order to create a more robust digital platform.
Sustained Pressure to Invest
These days, having a robust digital platform and offerings is table stakes, not merely a “nice to have.” That means in all areas — whether it is acquiring firms, ramping up internal capabilities, or a combination of both — all firms that deal in wealth management or financial advice will need to at least maintain, if not increase, their investment in technology. This investment can improve the customer experience while reducing operational costs and better handling regulatory burdens as well.

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