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HOW FINTECH IS SHAPING ASSETS AND WEALTH MANAGEMENT

FinTech, shortened from Financial Technology, is a fast-rising industry that improves financial activities like asset and wealth management through technology, hence its name. It is a technologically driven innovation that seeks to challenge the normal methods used in carrying out activities in finance and the delivery of financial services. Some of the very evident examples of technologies with conscious efforts to make financial services even more accessible to the public, in general, are the use of cryptocurrency (bitcoin) and smartphones for mobile banking and investment services. Companies that have embraced financial technology comprise established financial institutions, startups and technology companies that work hand-in-hand to improve or replace the traditional methods of carrying out financial services and activities by already existing financial companies. Any idea that is innovative and enhances financial services by introducing technological solutions in a way that is following different business situations and has a potential of birthing ideas that can lead to new business models or, even better, new businesses, can be considered as Financial Technology. It can also be described as the new business models, applications, processes, or products in the financial service industry, put together by one or a collection of complementary financial services provided via the internet without a third party’s involvement. Financial Technology has ever since contributed massively to the shaping of assets and wealth management.

Asset management is a variety of bonds, stocks, and real estates of investors and how they’re managed, whereas Wealth management is financial management services like retirement planning, estate planning, investment management, etc. offered to high net worth individuals.

Asset and wealth managers are sure to face losing large parts of their business to new entrants if they don’t adopt the responsive digital strategies of FinTech companies. They also risk losing their core clients who are interested in cheaper options to receive advice on how to manage their assets because they underestimate the imminent technological revolution. Paying close attention to how FinTech is reshaping the financial industry seems like the rational thing to do. FinTech is already pressing forward to disrupt the traditional wealth management industry as we know it. This has forced rapid developments and changes to take place, as seen in the digital field of digital wealth management, with more opportunities expected to manifest shortly.

High Net Worth Individuals (HNWIs) prefer digital tools in most aspects of their lives and hence expect the same when it comes to the management of their wealth. Many people often make the mistake of believing that this fact about High Net Worth Individuals (HNWIs) is limited to the millennial.

All around the world, people are now digitally abreast and desire constant exposure to sophisticated tools and services.

Did you know? That;

  1. 34% of asset and wealth managers have nothing to do with FinTech companies at all.
  2. Most asset and wealth managers underestimate the potential of fresh entrants with the mentality that they pose no threat.
  3. Asset and wealth managers are afraid to lose part of their business to FinTech companies, yet the majority still do not engage with the new entrants.

Here are a few FinTech opportunities that will shape the wealth management industry.

EXPANSION OF AUTOMATED WEALTH ALLOCATION SERVICES.

The wealth allocation process can be customized and executed online with the adoption of automated solutions. This makes the constant monitoring of the portfolio possible as well as a rebalancing of trigger-based portfolio, which in turn reduces some of the limitations that time zone differences and office hours impose.

When we talk about automated investment solutions, its currently often limited to mutual funds, shares, bonds, and exchange-traded funds. But, with future enhancements in FinTech, we should be expecting to see leveraged instruments, improvements and structured investments using the capabilities of automated solutions in real-time.

SECURITY IS TOP PRIORITY

Of all the features FinTech is popular for, security seems to be on top of the list. Facial recognition technologies, among other new technologies can serve as the barrier breaker between a client and his data, many do not take matters of security lightly. Innovations in the field of verification of identity and document management are still the necessary conditions for the entire adaptation of most FinTech. Conversations around matters of security will go on and on for at least the next few years, which will surely reflect in the continued security innovation.

TOO CARELESS ABOUT THE FINTECH DISRUPTION

Although many people know that asset and wealth managers will be most probably disrupted by FinTech, some industry players still somehow hold on to a belief that the disruptive potential of the new entrants is powerless over them.

Tangible examples of FinTechs changing the financial industry by proposing new innovative solutions that are disrupting traditional players can be seen in the banking and payment industries. Asset and wealth managers are next in line to face the game-changing impact that the new entrants have on the financial sector.

Even though this should be an eye-opener, but asset and wealth managers believe they are immune to the threat. They underestimate FinTechs and have a belief that they pose no threat to their industry.

Asset and Wealth Managers were the least disturbed when asked about any type of threat. According to a survey, traditional industry players believe that Financial Technology will only have a restricted impact on their business. Most of them are expecting concerns to be raised on data privacy, loss of shares on the market, and increased pressure on margins.

THE FINTECH-WAY IS STILL AT ITS EARLY STAGES OF DEVELOPMENT

The current asset and wealth managers and upcoming FinTech players must work hand-in-hand to succeed. To do so, traditional players will need to be more open to the idea of engaging with the emerging FinTech players.

Asset and wealth managers who work under the FinTech mindset will attest to the fact solutions that are technologically enhanced bring sizable opportunities to the table. One of FinTech’s signature moves is cost reduction. There would also be high additional revenue and differentiation for incumbent asset and wealth managers if they can find a way to blend their personal touch and technology in a way that it matches the kind of client experience that they receive from other service providers to their advantage.

However, quite several asset and wealth managers do not engage with FinTech companies at all. Those who do, hardly engage in joint partnerships with the emerging Fintech players and are not exactly enthusiastic about acquiring FinTechs.

KEEN FOCUS ON DATA ANALYTICS AND AUTOMATION

According to a survey, the majority of the asset and wealth managers saw data analytics to be a very important trend. The ability to transform and analyze data after capturing it is now essential to the asset and wealth manager to be able to compete. Being able to analyze data also helps to manage compliance and risks while improving trading efficiency.

 

CONCLUSION

Asset and wealth managers would have to find their rhythm, technologically, to encourage improvements coupled with a substantial pricing structure to win in the redesigned market. Ignoring the disruptive potential of new entrants by traditional players is a very dangerous move. The imminent and quick rise of innovative services, products, and business models should not be ignored. Traditional player and FinTechs must work together if asset and wealth managers to deliver technological solutions that match the speed of the market.

 

 

 

 

 

 

 

 

 

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