Trends in Wealth Management That You Should Keep an Eye On

Published on Jan. 09, 2019

Owning a business means changing. Changing to address new needs, new expectations from consumers, new competitors. Change, whether we like it or not, is part of making business. But let’s be honest - the last 20 years have been a bit too much.

New technologies have disrupted the market and there are few sectors unaffected by them. Today, we’re going to focus on Wealth Management: what has changed and which are the main trends shaping the way wealth management firms do what they do best.

Innovation in wealth management has taken its time, but it’s affecting all players involved:

  • Financial institutions (FIs): They’re gradually adapting to the changes. “Strangled” by heavy processes and bureaucracy, they move slowly when adopting new trends.
  • Fintech startups: Right now, there are thousands of fintech startups all over the world. Big corporations recognize the threat they pose, so collaboration becomes key.
  • Consumers: Clearly, those who have benefited the most from this situation. Higher competition has resulted in cheaper fees, better service, and extraordinary transparency. They’re more in control than they’ve ever been.

But innovation -as its own name suggests- never stops. Every year, wealth and asset managers face new trends. Some of them lose strength, but others end up becoming key and shaping the industry.

We’ve talked to some very interesting folks from the fintech industry to help and we have put together the main trends that are really changing wealth management. 

Let’s find out what they think. 

Artificial Intelligence

what is a robo advisor

Nowadays, you can’t talk about innovation or trends in wealth management without bringing up Artificial Intelligence (AI). Many see AI as a threat, but few are really leveraging everything it has to offer.

We’re not talking about robotic humanoids. We’re talking about super intelligent software that can help wealth managers do their jobs better and more efficiently. 

Take a look at this survey conducted by Thomson Reuters:

Artificial Intelligence

Rosali Steenkamer is CCO at AdviceRobo, a company that has developed a technology that applies Artificial Intelligence on non-financial data to predict the financial risk of people (and companies) taking out loans.

From her point of view, Artificial Intelligence and machine learning will be game-changers. “Consumers and SME’s behaviour and needs are changing fast. Self-directed millennials force new values including a new digital customer experience. Also, there is an immense data explosion with structured and unstructured data. Only big data-driven models, Machine Learning algorithms and Artificial Intelligence (AI) can tackle this to serve the right solutions to the right customer. Traditional technology is simply not able to deal with these challenges.”

Democratization of financial advice

Millennials wealth management

The Wealth and Asset Management industry is no longer just focused on the super-wealthy. Not even on the wealthy. Of course, these two kinds of customers are a relevant target for Financial Institutions, but thanks to innovation and new technologies, all kinds of people are starting to rely on a financial advisor.

We have talked to Chris Doyle, Co-Founder and Chief Investment Office at Grove. Grove is the perfect response to this trend in Wealth Management. This fintech company has a clear goal: making financial planning accessible and affordable for everyone. 

“Only 1 in 5 people are confident that they’re going to achieve their financial goals. And these goals can be as fundamental as paying your student loans, buying a home or paying for your children’s education.”, says Doyle. “This uncertainty is very stressful, and we believe that financial planning is an answer to that stress and that it should be available for everyone”. 

So innovation is democratizing financial advise, but there’s still so much work to do. And, so far, fintechs are doing most of the work.

“The Wealth sector is really lagging behind in embracing technology”, continues Doyle. “Advisors are getting older, and so is the bulk of their clients. There’s a big opportunity for wealth managers in the new technologies that have been developed.”

“There’s an opportunity to serve customers that the big Financial Institutions aren’t aggressively going after. For instance, these firms haven’t really shown that they can really capture and address the needs of the under-40 demographic.”

Automation and personalization

Trends wealth management personalization

“Automation is the first step, and mass personalization is the real benefit of these technologies.” These are not our words, they’re Sage Wohns', CEO and Founder at Agolo. “The ability of Wealth and Asset Management to massively customize content, so that each of their clients get the information that matters to them and tailored to their interests.” 

“Imagine an endless force of analysts creating specific content for each of client’s they’re connected with.”, continues Wohns. “Rather than pushing clients to low-value robo-advisers, the power of the machine learning tools enables Wealth Managers to add significant value to client relationships.”

“For professional asset management, the major benefit of automation will be scale. A junior analyst today can track 80 or 100 companies. Even then they are, at best, skimming lots of content, hoping not to miss anything important. Advances in machine learning and natural language processing enable that junior analyst to scale, covering several hundred companies, enabling them to pick up trends more quickly and identify potential opportunities. In parallel, these tools enable analysts to view the same set of content with different perspectives, delivering more customized insights to their portfolio managers, informed by their investment hypotheses.”

Retirement planning and decumulation

Retirement planning wealthtech innovation

“Up until today, there really hasn't been significant technology innovation in the decumulation/retirement income space.”, says Milan Suri, Founder and CEO of Pensio Inc. “Most of the change in wealth management that's occurred over the past couple decades or so has been focused on accumulation, or what I like to think of as the front end of the life curve. There are countless examples to cite: discount broker-dealers, ETFs, robos, financial planning software, etc. I think we are now starting to see real attention being paid to the latter half of life and figuring out how to pay for it.”

And that’s what companies like Pensio aim to solve. In Suri’s words: “We just think there's a dearth of modern, generally accessible products in the market to help people draw down on whatever savings they've accumulated (most likely in a 401k or IRA) especially with the disappearance of pensions & shakiness of Social Security. So what we've done is develop a simplified annuity, which delivers pension-like income for life in an affordable & online way. Our mission is to help people retire better and make the prospect of living a long life be less scary - it’s really something worth celebrating.”

“The retirement and healthcare challenges people face today may not all be new, but they are growing and becoming direr, and with modern technology, I would expect to see more products that are currently used in fragmented, exclusive pockets become more transparent, simplified, and accessible.”


Trends wealth management regtech

Being compliant with regulatory issues is becoming harder and harder for wealth management firms. GDPR and MiFID II in Europe, the Fiduciary Rule in the U.S. Those challenges alone are already huge - and there are many more going on. 

That is why Wealth and Asset Management are spending more money (and more time) on compliance than they’ve ever done before. According to a study conducted by WealthManagement magazine, firms have increased their compliance budgets by 9%. 

Let’s be honest - We will always need a human to try to make sense out of the details, but technology can also help.

This situation has brought to light the importance of RegTech as one of the main trends in Wealth Management. Different companies were aware of this need and tried to offer a solution. For instance, Ascent RegTech, a Chicago-based business. They have developed a cloud-based platform that brings together AI, machine learning and -of course- human expertise. This solution provides Intelligence-as-a-Service to help institutions to face the complexity of financial regulation.

This is what Jeff Heine, their Chief Revenue Officer, thinks about this issue. “As more an more Fintechs emerge, including Digital Asset Managers, there is increasing pressure on all companies in that market to innovate and go digital. Today, RegTech is tracking a parallel problem, but on the side of financial regulation, which has been steadily mounting since the meltdown of 2008.”, he says. 

“As innovations in natural language processing and machine learning improve, RegTech makes parsing through financial regulation faster and easier, giving asset managers actionable insights into the how, what and when of their compliance obligations”.


esg investing technology

ESG (Environmental and Social Governance) and specifically technology applied to ESG is definitely one of the main trends that are shaping the Wealth Management industry. This infographic sums up pretty well the main facts about ESG.

Being ESG-compliant is not easy, and technology is playing a relevant part. For some, Big Data is key in bringing innovation to ESG.

Hendrik Bartel is CEO at Truvalue Labs, a fintech startup that provides investors with real-time insights on how companies are managing intangible factors that have a material impact on value. So, basically, they deal with ESG all the time. And there’s a big challenge to face when we talk about innovation in ESG:

“ESG is an investment area where information access is unequal, and innovation is the dividing line between the haves and the have-nots,” Bartel says. For them, Big Data seems the logical solution. 

He gives the example of BlackRock, one of the world’s main asset managers, that “integrates ESG and intangible considerations and cultivates sources of Big Data using AI.”

BlackRock’s Debbie McCoy, a managing director and portfolio manager who heads the firm’s sustainable investing work, addressed this topic at PRI in Person in September 2018, the largest-ever gathering of responsible investors.

“There is information asymmetry in the marketplace. It continues to not be the standard for companies to report sustainability information. Some do, many don’t,” McCoy said. “We can now ask ourselves some of the very important questions about ESG, about sustainability, and have a real fighting chance of finding answers, because we don’t feel bound simply by the information that companies are providing directly.” 

Companies like TruValue help asset managers to overcome this problem and move from the “have not” category and get non-company-reported, ESG risk and opportunity insights from Big Data. 

In Bartel’s opinion, “One thing investors cannot do is ignore innovation in ESG – they do so to the detriment of their clients.”, and this is just one of the ways in which innovation is boosting ESG and creating new opportunities. 


trends wealth management cybersecurity

We also have a Plug and Play representative in this article! Nate Hinman is Director of our Cybersecurity program, and he’s given us his views about cybersecurity as a trend in the Wealth Management industry

“The finance industry is the most regulated industry there is, and complying with all the new regulations can be extremely complex for businesses,” says Hinman. “Innovative cybersecurity companies are making it easier for wealth managers to comply with regulations surrounding things like PII (Personally Identifiable Information). 

“This, in turn, allows wealth managers to do business securely and sometimes more efficiently. Additionally, some new cybersecurity companies actually make it easier to do business. For example, a company like BotDoc, allows customers to quickly and efficiently share PII data with their wealth managers, without having to use a portal, download an application, or even create a password. 

Unfortunately, FIs do not always give cybersecurity the importance they should. A study conducted by Accenture stated that a typical financial services firm faces 85 data breaches per year. 

“In general, not many people are aware of the importance of cybersecurity, however, that is shifting as more and more horror stories come out (think Uber, Facebook, Equifax breaches.)” 

“JP Morgan, one of the largest firms out there, has publicly announced that Cybersecurity is it's number 1 concern. Smaller companies, or one-person broker-dealers, are likely less aware of the importance of securing their clients' information.”

“Wealth managers are unlucky in that they hold PII data on millions and millions of people. As a result, they are often the most targeted by hackers - hackers go where the money is. A large security breach could result in fines worth millions or even billions of dollars. Additionally, the brand reputation of that firm is going to be tarnished. A worst case scenario is a ransomware attack that prevents a business from operating. Imagine going to your wealth manager and asking what the status of your portfolio is, and his or her response is "I don't know because my systems are compromised." That type of thing can ruin a completely ruin a business.”

If this doesn’t justify including cybersecurity as one of the main trends, we don’t know what does.

Trends keep changing, but innovation is always there. At Plug and Play's Fintech accelerator we match cutting-edge startups and the largest corporations. Join our platform today.

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