WealthTech Trends to Watch in 2020

Xtiva’s annual report includes contributions from 20 top WealthTech influencers globally
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by Jay Palter on December 4, 2019

As we begin the 2020s, all aspects of money, wealth and finance are undergoing a remarkable transformation. Digital technology is changing virtually everything about our financial lives – how we pay, save and invest – and also how we get help and advise.

What began as a sprouting of innovative financial services startups in the aftermath of the global financial crisis of 2007-2008, has morphed into a multi-faceted, fundamental rethinking of financial industry technology and business models in payments, lending, banking and, of course, wealth management.

WealthTech has come to refer to this technology-driven reimagining of how wealth management and advisory services are structured and delivered to markets – a subset of the overarching reinvention of financial services denoted by the term FinTech.

In compiling the WealthTech Trends 2020 report, we reached out to top wealth industry influencers and subject matter experts and asked them to identify key trends to pay attention to as we enter the decade of the 2020s. Their responses are summarized below.

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Five WealthTech Trends for 2020

While most would agree that our society, culture and economy are in the midst of a digital revolution, there are a wide range of perspectives on where these momentous changes are heading. With respect to how this transformation is affecting the wealth industry, we observed the following six key trends woven through the contributions we received:

  • AI and data-driven technology will remodel advice, powering scalable and ultra-efficient money management and goal planning, while shifting human advisors up the advice stack.
  • Holistic planning will become the foundation of advice and guidance, and regardless of the delivery modality, will accelerate the collapse of non-customer centric silos.
  • Technology will empower a new type of enabled customer, seeking more collaborative wealth management relationships.
  • Scalable, integrated digital wealth platforms will open new markets and render old business models obsolete.
  • New digital asset classes, trading platforms and intelligent tools will radically expand the ways and means to invest.

AI and data-driven technology will remodel advice, while shifting human advisors up the advice stack.

Technology is catalyzing a fundamental transformation of the advisor’s role.

Consider how modern technology automated housework in the second half of the 20th century freeing homemakers to be more engaged in parenting and career work outside the home. So will the intelligent and automated tools of wealth management free up advisors to focus on being stewards of their clients’ broader life mission and goals, not merely manage their investments.

THE next-generation approach hides all of that complexity and provides a bridge for advisors to shift from caring about individual trades to focusing on decisions for clients. It’s similar to driving in a newer car. Automatic transmissions and autonomous cruise control allow you to spend less of your time focused on the mechanics of shifting gears and controlling speed, and more time thinking about getting to your destination and preventing accidents. Trading automation is going to allow advisors to think less about the mechanics of individual trades and more about helping clients make high-quality behavioral decisions, and let the technology handle the details.
~ Aaron Klein, @AaronKlein

WHILE AI is impacting everything from top of the funnel activities to process automation and portfolio management, the most important use cases revolve around augmenting both advisor and client intelligence related to behavior and, increasingly, to prescriptive, anticipatory actions that keep clients engaged in ongoing planning and beneficial actions that advisors can coach towards. We’re heading towards a world where our financial plan is a dynamic, living, breathing guide that, informed by hyper-personalized data and insights, impacts investor behavior, addresses the issues that are most important to them, and frees up advisor time to focus on higher value activities that clients actually care about and will pay for. Technology won’t replace advisors but will instead augment their ability to serve. However, it will replace advisors who don’t leverage technology effectively.
~ Gavin Spitzner, @gspitzner

ARTIFICIAL intelligence (AI) is barely more than a promise until it can consume and contextualize sentiment and emotion. Voice is fuel for the systems of intelligence that will inevitably drive business success. How does all of this relate to wealth management? Voice technology offers two things – new types and volumes of data and new means of interface – which together become the foundation of a wave of powerful innovations.
~ Jeff Marsden, @Jeff_Marsden

IN the year ahead, the interplay of tools, architecture, and processes will be increasingly visible downstream, at the level of the business user, where so-called data wrangling tools will enable the deployment of robust, actionable analytics. Delivered via a dashboard, these analytics will power the conversion of sales leads and decision-making across the front and back office. Increasingly, they will be able to support improved service delivery via Next Best Action recommendations and other prediction-based models.
~ William Trout, @williamtrout

PERSONALIZATION is a major secular trend as wealth management becomes digital – powered by the rise of the millennial class and the increased demand for visualization of insights and a modern client experience.
~ Nathan Stevenson

THE digitized ecosystem will be 2020’s most significant disruptor. And if I were to place one technology at the center of this thoroughly potent (and disruptive) ecosystem, it would be Artificial Intelligence. Is it any wonder that more than half of all wealth managers now say AI is essential to their businesses? For years we’ve heard about how technology has helped investors unlock hidden value in the capital markets. The digitized ecosystem will do the same for a new generation of wealth managers and their clients.
~ Jim Roth

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Holistic planning will become the foundation of advice and guidance

Planning has been emerging as the foundation of sound advice for years, arguably decades, but it has remained bundled as a value add or prohibitively expensive for the vast majority of investors. With intelligent automation technology, planning will become scalable and embedded in customer-centric advice models.

TODAY, the cost of a one-time financial plan is $3,000-$5,000 and it can take an advisor 20+ hours to prepare a financial plan. As a result, access to financial planning and advice is typically limited to the top 1% of clients. However, new technology leveraging AI has the potential to not only reduce the time and effort to create a financial plan but also provides the opportunity to open digital-only and digital-hybrid service tiers that will allow financial institutions and advisors to take on clients once thought too unprofitable to serve.
~ Ramya Joseph, @ramyajoseph

IMPROVEMENTS in the planning experience within the investment advice relationship is a key trend for 2020 – regardless of whether the services are being distributed by a traditional advisor, a digital advisor, or even via self-directed investing channels. The increased focus on financial planning of late seems buoyed by improvements in the underlying technology.

As financial planning becomes increasingly tech-enabled, it also becomes more readily deployable as part of a streamlined path to engagement. The net effect for firms is a reduced burden on certified planners and a concurrent opening of opportunities to deepen customer relationships beyond portfolio management.
~ Josh Book, @JoshBook10

Technology will empower a new type of customer, seeking more collaborative wealth management relationships.

Women today are earning more and exerting greater financial influence. And younger generations with little accumulated wealth can get information and tools to help them save and invest the way they want – in an app on their mobile device. WealthTech innovation is ushering in a new era of investor self-reliance and collaborative value creation between advisors and their clients – and advice delivery models need to adapt.

I BELIEVE that clients will play an increasingly active role in driving innovation and that true innovation will occur when advice is more completely integrated into the lives of clients when, where and how they need that advice. Co-creation of value isn’t just asking for feedback (although that’s part of it) and it isn’t just shifting some of the work to clients (which is also part of it). It’s about client involvement and the creation of a truly personalized experience.
~ Julie Littlechild, @JLittlechild

TECHNOLOGY is democratizing both financial education and access. There is a global realignment towards a new model of investing. Women, millennials and GenY are finding it easiest to adapt to change and technology is their best friend. They’ve lost trust in the old system and technology is the perfect antidote. Rising global awareness of the need for financial education and growth in social media usage mean these demographics will be the first to embrace the new model of managing money: one of self-reliance.
~ Barbara Stewart, @RichThinkingB

Scalable, integrated digital wealth platforms will open new markets and render old business models obsolete.

The conditions that gave rise to the modern wealth industry – limited technology access and information scarcity – no longer exist. We now live in an era of cheap computing power, abundant information access and, increasingly, intelligent technology that is creating new opportunities for wealth creation through personal finance services not previously viable for many demographics.

THE business of creating wealth truly starts in the day-to-day management of savings, spending, and credit – this is what traditional firms are missing, as an entire generation have shifted their loyalties and preferences. We’ve long given wealthy households and businesses access to private bankers and specialized wealth management services, but we are now in an era where technology levels the playing field. Everyone should be able to access personalized tools and advice that helps wealth creation. This is most effective when managing the spend side of a budget to maximize day-to-day savings toward investment opportunities (alongside the optimization of credit), as income levels have remained relatively flat. We need to look at the whole of the individual’s financial need, and technology is finally at a point where it can help solve this societal enigma – economic inequality through building wealth earlier and across generations – to start diminishing the impact of the long standing wealth gap in society.
~ Bradley Leimer, @leimer

BROKER-DEALERS, large RIAs and RIA aggregators who build out their own advisor desktop software are disintermediating their external application vendors. They are increasing their operational risk but greatly reducing the inertia that has kept legacy systems from being replaced even when they are no longer delivering value.

It remains to be seen how much impact this trend will have on the incumbent category software providers. If enough firms stand up their own user interfaces and build out the underlying data infrastructure, we will see vendors less reliant on flashy UI features and shift their roadmaps to expanding their application programming interfaces (APIs), protocol support and integrations with other vendor products. This will also make their applications less sticky and return control of the advisor desktop to the people it should belong to… advisors.
~ Craig Iskowitz, @craigiskowitz

THE Roaring 2020s will see wealth consumers recognise that the essence of value in their engagement with financial services is around how their personal information is collected, stored and curated. Yield and risk management will, of course, continue to be important too, but they will form part of a much bigger commercial engagement. Core revenue will come from information management, rather than purely from money management and those that get on this evolutionary train will see profits grow rather than diminish.
~ Seb Dovey

THIS is no longer about slapping a robo-capability on the side of a stoic full service channel. It’s no longer about digitizing what we have always done. The next two to five years will be about those brands that chose to truly shift the paradigm, separating from those who are still flying to San Francisco for fintech tours and hoping a splashy digital channel will distract analysts from a core that is fundamentally not transforming with the times.
~ Kendra Thompson, @Kennyt5

IN THE current world of wealth management, revenue opportunities derive from typical activities such as advisory fees, mutual fund investments, managed account enrolments, security transactions, platform fees, and other products and services, all neatly bundled up in the delivery of financial advice via a human advisor in some form of the financial planning process.

These traditional activities and revenue sources, however, are being disaggregated into their component parts, now more than ever, based on new technologies and emerging regulatory requirements creating disruption across wealth management. So much so, that a “Great Unbundling” is now changing the economics of manufacturing, packaging and distribution across the industry forever.
~ Tim Welsh

RADICAL disruption from the share economy, blockchain, AI, demographics and geopolitics are upon us, and once again it will not go down as the forecasters have predicted. We’d do well to remember that disruption issues forth from the scythe of Saturn during the depths of crisis, in shadowy ways that are only truly understood in hindsight.

Since there is no technology trend that can save you from this kind of disruption, and since I’m not smart enough to tell you what’s actually going to happen over the next decade, it is my conviction that you earnestly innovate your values and priorities before venturing to any hashtags du jour with unwarranted confidence.
~ Davyde Wachell, @davyde

New digital asset classes, platforms and tools will radically expand the ways and means to invest.

Digital assets are the frontier of investing. With technology commoditizing investment management and fuelling fee compression, digital assets present opportunities to generate meaningful investment alpha not accessible on traditional infrastructure.

IN ORDER to differentiate, advisors and wealth managers will need to think seriously about blockchain-based investment assets. Those may be simple digital securities like equities, real estate, or municipal bonds. Or, they may be early stage private equity in technology companies. Or, they may be digital currencies or other rendered valuable collectibles. As investment managers fail to generate alpha and compete against monolithic index providers, spending time to understand the frontier becomes increasingly important. For example, decentralized lending vehicles and exchanges are able to generate idiosyncratic alpha in a way inaccessible on traditional infrastructure. Custodians, brokers, and the rest of the value chain continue to be challenged in order to keep up. WealthTech needs to bridge the gap to digital assets, or be disintermediated by emerging players.
~ Lex Sokolin, @LexSokolin

Wealth aggregation for traditional and alternative assets will become critical for wealthy individuals and family offices. As low or even negative interest rates become widespread in many countries with a large population of high net worth (HNW) individuals, investments into alternatives, including non-bankable assets, will become more common. These assets are usually not serviced by traditional wealth managers and private banks and require new ways of aggregating the asset data, including pricing and other information to create the total wealth and its value.
~ Urs Bolt, @UrsBolt

When I look at the wealth management barbell, with conventional finance on one end and Decentralized Finance (DeFi) at the other, 2020 will be a year to closely watch distributed ledger technology (DLT). I see 2020 as a year that several permissioned DLT architectures will go live and at scale in specific domains, following on the launch of the world’s first mutual funds transactions network powered by DLT in late 2019. This is a DLT-powered upgrade of middle and back office stacks in wealth management. Fintech SaaS and DLT upgrades will also accelerate.
~ Efi Pylarinou, @Efipm

Technology is definitely not going anywhere, and wealth managers are starting to wake up to the reality that they need digital offerings for their HNWI clients – if they want to keep them. Keep an eye on this space in 2020, as more partnerships between traditional technology companies and wealth management firms will pop up to quickly fill the tech gaps for establishment players. Those who don’t adapt quickly are going to fall behind.
~ April Rudin, @TheRudinGroup


All this prognostication can be enlightening and motivating – and it can also have the opposite effect. Radical disruption is indeed upon us – but how it will ultimately play out we cannot be certain.

The year and the decade that lies ahead will foster dramatic changes to the wealth industry – some more predictable, others considerably less so. To help navigate this certainty/uncertainty, contributor Davyde Wachell offers some guiding principles that will serve everyone well. Know yourself and your limitations. Know your customers and provide honest value. Defend and grow what makes you unique. Work with partners you trust.

Some things don’t change.

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