What is Wealthtech?
If we ask ourselves about wealthtech, what is it, we must first consider the new economic paradigm based on technology and digital asset and investment management. Indeed, it is a sector of finance oriented towards IT development with the purpose of improving capital management and increasing wealth.
This type of services is manifested through fintech companies, in which technology and financial activities coexist. Therefore, it is constituted as a sector within the latter, in which high-performance IT solutions for investment prevail: algorithmic systems, artificial intelligence, big data and programmable applications (APIs).
This stream of companies, firms and start-ups coexist in an ecosystem called wealthtech. This is positioned as the new great frontier in terms of financial services and finance at a global level. Most of these companies come from more economically developed countries, although there are many examples in all corners of the globe.
According to Insider Intelligence, one of the most recognized finance and technology consultancies, the US wealthtech sector as a whole is currently worth some $4.6 trillion. Furthermore, 30 % of the sector’s financing is dedicated to the so-called robo-advisors. Robo-advisors are a type of platform capable of assisting decision making, using advanced artificial intelligence systems.
How to implement Wealthtech
While this is a rapidly growing industry, it is difficult for most banks, corporations and businesses to implement this type of fintech solution on their own. Therefore, the most expedient way to implement this model is through partnerships with technology companies.
As this is a very diverse ecosystem, there are multiple companies and developers of technologies of this type whose main objective is to obtain funding and exposure in the market. This is precisely why the best way to have financial solutions for wealth management is through commercial alliances with companies in the sector.
Development of proprietary services
The implementation of IT-based financial solutions requires an analysis of the characteristics of the company, bank or business.
Therefore, the type of management service to be offered and the technical requirements necessary for its development must be determined: data providers, application programming interfaces (APIs), robo-advisors, etc.
Legality and regulatory framework
The wealthtech services industry must comply with the data collection and data protection requirements of the European Union’s Revised Payment PSD2 Directive in order to dispose of legitimate data from third party providers.
In addition, Know Your Client requirements and the rules of the Sixth European Money Laundering Directive must be complied with.
Digital platforms and applications
Finally, the proper implementation of finance and wealth management services of this type are geared towards the personal consumption of customers and businesses. Therefore, platforms and applications of sufficient operational capacity for direct customer access must be developed. At the same time, these must meet the necessary security standards to protect the individual’s data and assets.
Benefits of wealthtech for users
The IT solutions of fintech and, in particular, wealthtech, represent a qualitative leap in terms of wealth management and administration. Although there are certain operations that are not new, they are optimized to improve their performance and, therefore, maximize results.
New products and services
The progress of this sector and the contributions of big data make it possible to create new and better services based on the characteristics of the clients themselves. In the same way, as these operations are automated, the cost of management is reduced. In this sense, the client can invest without having a large amount of capital.
Investment management also becomes less complex. Due to advances in artificial intelligence and algorithmic systems, robo-advisors offer decision-making assistance, reduce risk and increase investment returns.
Investment portfolio management
Thanks to the integration and standardization of online exchange and finance procedures, there is a wide field of developers offering the possibility of maintaining an investment portfolio entirely online. In this way, the client can use his capital in different areas and access international markets to which they would not otherwise have access.
The Wealthtech trend has established itself as one of the best performing sectors within the fintech world. It therefore represents a qualitative leap in terms of wealth and wealth management.