What is WealthTech?
Everyone in the startup space has heard of FinTech, however WealthTech as a market sector in our view, up to this point of time has been mostly overlooked or grouped into the FinTech definition. However it is very different and we believe that the WealthTech market is one of the greatest, high-value opportunities for a global industry disruption. For us as an Alternative Asset Investment manager and VC firm, it’s a key focus in what we do.
So what is the WealthTech market? Simply, it’s the investment and wealth management industry. Whether this industry likes it or not, the world of Investment and wealth management is about to enter a new era undergoing an unprecedented change which presents innovators with the ability to build global product and ecosystems that can positively transform a global industry which has traditionally lacked imagination and changed only through necessity.
What are the megatrends and drivers for change?
Four years ago we came across a report written by a global specialist team within PWC titled AM2020 that inspired us to take our group down its current path. In this document, they were forecasting what the AWM industry was going to look like by 2020 and what were the megatrends that were driving transformation. Firstly they had modelled that by then the industry will have over USD $100 trillion of (FUM) funds under management which other than the banking and finance sector is the biggest bucket of money on the planet and represents a fantastic opportunity to build highly valuable disruptive businesses within it.
So what are the current drivers that PWC see will transform the industry? Here are in our view the most significant insights together with what we also see are megatrends at play;
Technology will change everything – This is the same for all industries. Unlike banking and finance, the Investment/Wealth Management industry hasn’t had the same amount of technological disruption and innovation. There are many parts of the industry that technology can capture inefficiencies in the value chain meaning that the opportunities are abundant for startups.
Alternative assets become mainstream. Traditional assets such as publicly traded stocks and bonds are struggling to deliver the yields the market requires and there is a movement towards alternative assets such as infrastructure, direct property, venture capital and private equity that are longer-term investments that deliver a higher return.
The emergence of a new form of global fund manager. Imagine for a moment if Facebook or a Google chose to enter this market with the level of influence and reach that they have. PWC tell a story on their Youtube AM2020 videos of Alibaba launching a fund and achieving significant attraction of new FUM in an unbelievable period of time.
AI (Artificial Intelligence). Another emerging technological trend that has the ability to disrupt the advisory and ultimately the AWM industry are Robo Advisors. There are a couple of recently launched US-based funds management platforms that were founded and built on the use of Robo Advisors and have attracted by industry standards, significant FUM in a fast period. AI can transform many parts of the AWM and investment advisory industry to create greater efficiencies, yields and customer experiences.
The rise of the self-directed investor – Technology is empowering what is a growing segment of the global market, people wanting to take control of their investments and financial future. In Australia, a clear sign of this trend is in superannuation. The fastest growing segment of the market is SMSFs (self-managed superannuation funds) that will grow from currently 21% of the market to 30% in the next 3 years (this is of a current AUD $2 trillion market). In addition to traditional revenue streams, we see that there are opportunities to productise and monetise information in this space into wealth education and user-friendly technical know how that
will support this market in their drive for independence.