Wealth management and fintech: How they’re shaping the financial landscape

The wealth management industry is one of the oldest sub industries of financial services. Which is why it’s also one of the industries that is currently experiencing the most profound technological and even existential transformation.

Wealth management used to be exclusive to only the very wealthy, who were paying to have their wealth managed by someone who had expertise that no one else had.

However, the internet has completely reversed this situation. Now, information is readily accessible to anyone with a phone, and investment platforms allow anyone with $10 to start investing. 

The wealth transfer from older to a different type of younger generation is already happening, and the younger investors are demanding new ways to manage their wealth. They want to access updates from an app on their phone, they want control over where their money is invested and they take the time to educate themselves on how investing works. 

So how is the wealth management space adapting? What are wealthtech companies doing? And as a startup accelerator focused on fintech, how can we help wealth management firms adapt?

Based on my background working at UBS Wealth Management and my now role as Head of Europe at Tenity working with wealthtech and fintech startups, here’s what I’m seeing in the wealthtech space.

1. Three key ways fintech is disrupting wealth management
2. What wealth managers and corporates need to know about wealthtech
3. An example in practice: How Julius Baer is exploring new technologies via an accelerator program
4. How you can learn more about fintech as a wealth management company with Tenity

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Note: are you a corporate looking to understand wealthtech? Reach out to us to learn more about how we can help you.

Three key ways fintech is disrupting wealth management

1. It’s helping democratise wealth management

Wealth management used to be reserved for the wealthy. But with the introduction of technology and solutions offered by roboadvisors, modern day investors can get started with a lot less money, fewer connections and in a few clicks. 

In 2022, Vanguard did a survey of whether various generations would work with a roboadvisor. Only a third of generation X and 15% of younger boomers would work with a roboadvisor. But for generation Z and millennials, the number was close to 50%.

It’s clear that younger generations prefer working with digital wealth management tools. Whether that’s via fintech companies like True Wealth that give you access to fractional shares, or inyova which allows investors to do impact investments into sustainable companies and fight climate change, or Splint Invest, where inventors can buy tokens of alternative investments, cryptocurrency and diversify their portfolios even more. 

The point is that technology has done to wealth management what it did to information: it has democratised access. Now, younger generations can do research online to understand stocks, bonds and what the right allocation should be for their portfolio. People learned they can follow the performance of an index fund, and that they should be careful with the fees they pay.

Wealthtech companies like the ones mentioned above are helping democratise access to wealth management, which means more people than ever are able to manage their wealth. This does grow the number of potential customers for traditional wealth management firms – but it also changes expectations, as we’ll see below.

2. It’s delivering a better customer experience to the more informed counterparty

The internet and technology has also led to customers demanding better user experience, lower fees, personalised portfolio management and more transparency. 

The modern day investor wants to be able to make their own investment decisions, receive multiple sources of advice and feel in control of their personal finances. They’re not happy with receiving a PDF once per quarter: they want to be able to stay in control of their portfolio on a day to day basis.

Financial technology companies are delivering on this better customer experience in a few ways. Here are some examples:

• Allowing people to manage their investment portfolios in real-time from an app on their phone.
• Being able to choose a portfolio that doesn’t invest in arms, petrol or other sin products and is ESG friendly.
• Educating retail investors via content, an investor community and in-platform educational material.  

Nowadays, doctors are dealing with much more educated patients. People who Google their symptoms, do their own research and then go to the doctor often with an idea of what their diagnosis is. I believe we’ll see this happening with wealth managers as well, and managers will need to learn to deal with much more educated and knowledgeable clients.

I also believe in one step further: with more artificial intelligence tools at our disposal, I wouldn’t be surprised if younger generations actually prefer using an AI financial advisor rather than a human one. The AI has full visibility on a portfolio, is aware of current events happening in real-time, has a much more holistic view on the customer and can share recommendations instantly, 24/7 and for a lot cheaper. You can read my thoughts here: AI and banking: How will AI transform the banking industry?

Fintech companies are already catering to these needs: to be informed, to have the same customer experience as one would get on Netflix or Instagram, to be in control. Wealth management firms will need to adapt as well in order to cater to the younger generations.

3. It’s developing better technologies that help lower costs

Fintech is all about the intersection of finance and technology, so no wonder one of the key disruptors is better technology which helps offer a better service while reducing costs.

We are seeing this with technologies like blockchain, machine learning, AI, cloud computing and others. By leveraging these technologies, not only are fintech companies better able to serve modern clients, but they’re able to reduce costs and therefore the fees they need to charge.

With AI, they can automate a lot of tasks and better assess risk. With digital assets and blockchain technology, they can help create wealth in ways that wasn’t possible before (e.g. DeFi). With Open Banking, they have a much better and more holistic understanding of their customers. Wealth managers and financial institutions that don’t use these tools risk being undercut by fintech firms that are tech enabled.

But that doesn’t mean they need to compete. In fact, I believe the best solution is partnership between the two. It’s not efficient for a wealth manager to develop every new solution in-house. Instead, it’s better to collaborate with a smaller company that is dedicated to just one problem, and constantly iterating on the solution (which is our open innovation ethos at Tenity).

We’re already seeing this with bLink, the Open Banking platform by SIX, the Swiss Stock Exchange, which partnered with fintech startup Deedster to help bring to market a CO2 footprint calculator. Thanks to the collaboration, banks in Switzerland can now provide added value to their clients by having a better idea of how their investments make an impact on the world. 

Read the case study in more detail: Driving Sustainability through Open Banking

Fintech startups are disrupting with technology and simpler user experience, which means partnerships between fintech companies and corporates will matter more than ever: one focused on the client touchpoint, and the other focused on the technology. I think it’s the only way forward if wealth managers want to ensure they have the right solutions in place for their clients.

What wealth managers and corporates need to know about wealthtech

Like many other industries that existed before information technology, wealth management is just another area that’s changing. Every day that I’m working with wealth managers from around the world, the message remains the same: it’s super important to learn, get exposure and upskill your workforce.

In order to best understand how to implement technology, how to partner with the right startups and how to adapt, wealth management teams need to have hands-on experience. They need to learn about the new trends, to collaborate on Proof of Concepts (POCs) and feel comfortable within a new environment.

That’s why this is what we focus on at Tenity, via corporate innovation workshops, accelerator programs and our events. Getting people participating in workshops, meeting others and working on POCs themselves is the best way to be ready for disruption.

It’s clear that first-movers will have a great opportunity to capture a big share of the next generation of wealth. Unlike other sectors like retail banking and pensions that are necessary for people to live, wealth management isn’t. If the industry doesn’t adapt, younger investors can easily switch to more tech-enabled solutions, or even solutions that are only used by technology (for example, roboadvisors). 

The next generation is demanding, educated, and they will inherit the largest amount of wealth. Wealth managers need to understand who their perfect client is, how to support them from an early start and understand their problems. And they need to start adapting right away.

An example in practice: How Julius Baer is exploring new technologies via an accelerator program

If you work for a wealth management company, what are some ways you can explore new technologies and understand the coming generation in a way that is safe, secure and supports innovation?

A great example of a company doing this well is Julius Baer, a partner of ours. For over 100 years, Julius Baer has managed the wealth of their clients as a trusted and personal advisor. They’re present in over 25 countries in 60 locations, and have always been focused on creating value beyond wealth. 

In 2023, we collaborated with Julius Baer to help them identify opportunities for wealth management services in the Web 3 space across the European and Asia Pacific region. During this program, selected startups collaborate for 3 months with Julius Baer employees and Tenity to enable exploration and experimentation of various use cases.

The startups would get wide exposure within the Julius Baer network at a global level, giving them insights into the bank and creating relationships with key stakeholders within the organisation.

The focus topics for the program were:

• Distribution and product
• Client experience
• Metaverse
• Beyond wealth

The program is still ongoing, but you can read more about it here: Julius Baer Global Web 3.0 Program

By collaborating on this program, the Julius Baer team get real-life experience with startups in the Web 3 space, learn about potential use cases they could implement themselves and get exposure to new ideas. You can read below a real life example of Julius Baer partnering with a wealthtech company to help digitise a part of their services.

How you can learn more about fintech as a wealth management company with Tenity

At Tenity, we operate as an open innovation ecosystem and early stage investor. We do this by running corporate accelerator programs, connecting corporates with startups and investing through our own fintech fund.

Here’s how we help wealth management companies adapt to fintech. 

1. Connect corporates with the right startups

As I mentioned earlier, I believe the way forward for corporates is to partner with startups. Corporates’ strength is understanding wealth, and startups’ strength is developing technology and using it to solve problems. We believe this type of open innovation is the way forward for the wealthtech and fintech movement.

And it’s a big part of what we do at Tenity. When we partner with a corporate, we are constantly scouting for startups that may be a good fit for what they do. 

Since 2015, we’ve facilitated over 60 collaborations with corporates and startups. And we don’t just do matchmaking: we also help ensure the collaboration is successful. That’s why we also help prepare startups for a corporate engagement by:

• Connecting them with mentors
• Allowing them to network with corporates
• Taking part in our incubation programs

Through our facilitation and collaboration, we’ve helped many corporates partner with wealthtech startups. One clear example is Julius Baer’s collaboration with vestr, a platform that connects issuers, asset managers and service providers. Thanks to the collaboration:

• Vestr was able to develop a platform to digitise AMCs that could also be used by Julius Baer clients
• Now has over 1,000 professional asset manager users
• Has secured CHF 10mn in financing
• Has a trading volume of over USD 1 billion
• Julius Baer was able to access a team with highly specialised knowledge and a ready-to-use, market-tested product

Read more here: How Julius Baer and vestr successfully built a platform to digitise AMCs

2. Invest in wealthtech companies

As part of our fintech fund, we invest in startups that go through our program, and that includes wealthtech startups. Since 2016, we’ve incubated and accelerated over 250 startups that have attracted over 370M USD in funding.

By investing in these startups, we’re able to see first hand the technologies they develop, as well as what are the key technologies that are trending. 

For example, our Tenity Incubation Fund II invested in fintech and insurtech companies at the angel, pre-seed and seed stage that graduate from our programs in Europe and Asia. We’re usually the first institutional investor in the startup, and are able to support them with funding, hands-on support and a network. 

Separate from our fund, we’ve been able to support companies such as:

• Yokoy’s USD80M Series B from Sequoia
• Keyrock’s USD72M Series B by Ripple
• Stableton’s CHF15M Series A by TX Venture
• Oper’s EUR11M Series A by ABN Amro Ventures

And more!

Our unique position in the market means we’re able to support wealthtech startups at the early stages and enable them to become an innovator in the industry. 

You can learn more about our fund here: Our early-stage fintech fund

3. Helping grow the ecosystem with events

As I mentioned earlier, a big part of adapting the wealth management industry is about getting hands-on experience and learning about it yourself. That’s why we put a lot of emphasis on our events and workshops. When a corporate partners with us, they can attend and organise events in this space and invite key people that are relevant for the corporate.

Luigi Vignola, Head Markets at Julius Baer, explains it very well: 

“It’s a bit of a laboratory for us. We can throw in questions and see if somebody can come up with a smart solution without using too much of our own resources, which are largely committed to the day-to-day processes.” 

The fact that we operate as an open innovation ecosystem means that we enable a lot of serendipity. Within our ecosystem we have: 

• A proprietary database of over 2,500 startups.
• 200+ mentors focused on fintechs.
• 270 startup alumni.
• A track record of 50+ accelerator programs.

Operating as an ecosystem means we can more easily stay on top of trends, enable collaboration and help the industry move forward. 

You can see many of the collaborations we enabled here: Corporate Success Stories

Wealth management is an industry that will need to adapt quickly if it wants to cater to younger generations. I believe the best way forward is by partnering with fintech solutions and wealthtech companies that have the right technology in place. 

To learn more about our programs and fintech fund, reach out to us to see how we can help you.