{"id":34984,"date":"2022-04-04T09:18:51","date_gmt":"2022-04-04T07:18:51","guid":{"rendered":"https:\/\/www.getsmarter.com\/blog\/?p=34984"},"modified":"2025-10-07T12:11:32","modified_gmt":"2025-10-07T10:11:32","slug":"how-fintech-has-affected-the-wealth-management-sector","status":"publish","type":"post","link":"https:\/\/www.getsmarter.com\/blog\/how-fintech-has-affected-the-wealth-management-sector\/","title":{"rendered":"How Fintech Has Affected the Wealth Management Sector"},"content":{"rendered":"\n

Fintech has been driving trends in the wealth management industry since the 1980s, thanks to the emergence of e-trading and online banking. But owing to recent advances, wealth management \u2013 like every aspect of the modern finance world \u2013 is currently experiencing profound disruption. The surge in investment in fintech has cascaded into investment in financial technologies. In 2020, global spending on fintech reached $121.5 billion.1<\/sup> This is a marked increase from the 2015 global spend of $20 billion.2<\/sup><\/p>\n\n\n\n

Traditionally, wealth managers offer a broad range of professional financial services, from investment advice to general financial planning. Essentially, these multiskilled advisors guide those looking to manage their portfolios and finances.3<\/sup> Now, fintech<\/a> \u2013 the application of technology in the financial sector<\/a> \u2013 makes its presence felt by creating digital solutions that transform the investment asset management industry.4<\/sup> However, this change heralds new opportunities in the future of wealth management.<\/p>\n\n\n\n

Wealthtech: the future of wealth management<\/h2>\n\n\n\n

Fintech enables wealth managers to improve their service, giving rise to an entirely new skill set: wealthtech. Often driven by artificial intelligence (AI) and machine learning (ML), wealthtech leverages complex algorithms to advise clients on the best investment or savings plans, with minimal human intervention.5<\/sup><\/p>\n\n\n\n

This technology is being used in diverse ways:<\/p>\n\n\n\n

Robo-advisors<\/h3>\n\n\n\n

These online applications take on the role of human advisors in fintech wealth management by using algorithms to calculate and select investments based on prospective clients\u2019 desired risks and objectives. As a result, they\u2019re typically able to fulfill the same role as a wealth manager but at a lower cost. Robo-advisors spread portfolio management costs over many customers and require less human interaction, making them a less expensive option. <\/p>\n\n\n\n

But there are some drawbacks. In practice, the robo-advisors offer defined but fewer choices in how to invest money. A wealth manager, in contrast, encourages client input \u2013 they might, for example, avoid investing in specific markets you consider problematic.6<\/sup><\/p>\n\n\n\n

Robo retirement planning platforms<\/h3>\n\n\n\n

Essentially a subcategory of robo-advisors, these digital platforms specifically focus on retirement investments. Like robo-advisors, they have limitations. They use algorithms to recommend investments based on a client\u2019s desired outcomes and risk profile, and there are restrictions when it comes to customizing their portfolio. For example, clients won\u2019t be able to tailor their investment portfolio to focus on specific companies nor will they enjoy personal human interaction with an advisor that keeps specific preferences in mind.7<\/sup><\/p>\n\n\n\n

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\n \n \"School\n <\/a>\n <\/div>\n
\n \n HARVARD'S VPAL <\/a>
\n \n FinTech online short course <\/a>\n <\/div>\n <\/div>\n
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\n \"Read\n <\/div>\n <\/div>\n <\/div>\n<\/div>\n<\/div>\n\n\n\n

Micro-investing<\/h3>\n\n\n\n

Fintech companies have been trying to demystify investing for customers and develop simpler, low-cost ways of generating greater financial reward without an initial costly investment. Today, this is achieved by allowing customers to invest small amounts of money over time through micro-investing. Typically, customers are charged a small subscription fee instead of the usual management fees in wealth management.8<\/sup> Unfortunately, sometimes the initial investment amount is small enough that the fees (while not significant themselves) cannibalize enough of the initial amount to make the investment seem futile.<\/p>\n\n\n\n

Many micro-investing platforms operate on a \u201cspare change\u201d basis, allowing individuals to invest a small amount calculated by rounding up purchases made on a client\u2019s debit card to the nearest dollar. This means that even if the subscription fee is low, investors could ultimately pay an effective five percent commission fee \u2013 and this number increases once the account grows past a certain point.9<\/sup><\/p>\n\n\n\n

However, micro-investing platforms offer an attractive prospect for new investors who may be reluctant to invest in more expensive options, which often require a larger initial capital input.10<\/sup><\/p>\n\n\n\n

Self-investment tools<\/h3>\n\n\n\n

A number of different tools and platforms can help investors to invest their money themselves. These programs and platforms can be used independently or collectively, enabling individuals to invest their money as they see fit \u2013 assuming they know what they\u2019re doing.<\/p>\n\n\n\n

These self-investment tools are essential for wealth management:11<\/sup><\/p>\n\n\n\n