The Democratization of Wealth Management

The wealth management (WM) industry is in the midst of significant change. As the industry is re-shaped, one positive outcome will be that more people will have access to a greater quantity and quality of investment strategies and advice that was traditionally reserved for high net worth individuals. Two drivers that will accelerate this democratization of wealth management are a shift in investor preferences and advances in technology.

The younger generation of investors typically likes digital solutions, demands convenience and desires transparency and control over their finances. Those preferences are also increasingly shared by other demographic groups. The user experience they desire is shaped by their experiences with companies such as Apple, Facebook, Google and Amazon. The result is a growing need for WM offerings that deliver tailored investment advice, are accessible through multiple channels, allow for social/peer input, and are intuitive to use.

Technology has already transformed industries such as transportation (Uber), travel (HomeAway) and many others. It has already had an impact on WM and will continue to transform it. Access to more data, the ability to quickly convert that information into useful models and algorithms, and applying that intelligence to decision making enables science to play a larger role in investing. By using technology to simplify asset allocation, facilitate exchange traded funds (ETF) or mutual fund research and selection, and deliver other common investment activities, costs can be reduced and services made more affordable. Another important trend is that as smartphones and tablets become ubiquitous, clients expect to be able to monitor their portfolio, undertake research, transact and get advice – all in real time and on-the-go. According to the World Wealth Report 2014 (Capgemini and RBC Wealth Management), the demand for mobile app services is so acute that 80% of high net worth individuals under 40 years of age indicated they would leave their wealth management firm if it fails to provide an integrated-channel experience. It’s clear that modern technology allows for fiduciary advice to be delivered affordably, at scale, in real-time and with an exceptional client experience.

Companies such as Wealthfront, Nutmeg and Betterment have successfully raised millions of dollars and used that funding to take their technology-driven solutions to market and rapidly build significant asset bases. Traditional players such as Schwab and Vanguard have responded with their own advisory tools. Whether you believe the startups or the traditional players will lead the industry into the future, investors will still want exceptional user experiences and advanced security across all channels. Solutions such as mobile app development platforms can be strategically used to ensure design and back-end services of mobile wealth management apps meet all of the user experience, security, regulatory and compliance requirements for both investors and asset managers.  

It is the convergence of demographic trends and advances in technology that provide a unique opportunity for previously underserved market segments to benefit from the democratization of wealth management. For those who could not previously afford a personal financial advisor or weren’t as comfortable with human-based advice, there are now more options to achieve their financial and life goals. Some so-called “Robo advisors” or automated advisors are already gaining traction and attracting new clients but future innovations in service are certain to provide additional opportunities to reach more wealth bands. There will always be a place for human-based advice to complement science-based advice but it’s exciting that high quality advice, regardless of the form it takes, will be available to more and more people!