By Nigel Green, deVere Group CEO & Founder

The global wealthtech industry is booming, having had a phenomenally successful 2022.

However, investment levels were off the all-time highs of more than $25bn experienced the year before.  But this should be expected considering the bleaker global macro-economic landscape of last year.

That said, with more favourable market and economic outlooks for 2023, the wealthtech sector is predicted by most experts to surpass the 2021 levels of venture capital, private equity, M&A investments and research and development.

The definition of ‘wealthtech’, a portmanteau of the words ‘wealth’ and ‘technology’, encompasses digital solutions which facilitate the processes of various strands of wealth management. 

Along with digital payments, regulatory technology (regtech), insurance technology (insurtech), amongst others, wealthtech is one of the sub-sectors of the fintech industry.

It is used by financial advisers to help their clients reach their financial goals. Wealthtech tools cover tax planning, investments, wealth protection, estate planning, retirement structuring and planning and broader saving.

How it started…

Wealthtech began in earnest, as a concept, in the aftermath of the 2007-2008 global financial crisis, when traditional financial companies were, in most cases,  caught off guard by the crash. 

In the fallout, they were understandably busy dealing with the new regulatory landscape that prevailed in the aftermath, evolving client expectations and, for some, the massive financial penalties that were imposed on them. As a result, business and technological developments were way down their to-do list. They were too focused on regrouping as they were in survival mode.

But at that time, huge tech and innovation developments were also coming to market, which were reshaping the consumer experience. Think Uber and AirBnB. 

It happened in the financial services industry. Fintech firms filled the void left between what traditional financial services companies, especially the traditional banks, were offering and what customers are now expecting, especially in terms of customer experience.

From there, the natural progression was to specialise and form a sub-sector, and wealthtech was born.

It has grown ever since, and particularly so during the Covid pandemic.

Pre-coronavirus, we were already in an exciting new era driven by the lightning pace of the digitalisation of our everyday lives. But like so many areas of our lives, the pandemic accelerated this trend.

Like never before, people are embracing the convenience of immediate, low-cost access to, use and management of their money.

The financial services sector is currently undergoing possibly the most profound transformation in history, much of it is being driven by wealthtech.

We’re seeing seismic and far-reaching shifts in client expectations. As the world moves towards an ever-more digitalised and globalised future – which is increasingly influenced by those who’ve grown-up with ‘on-the go’ tech − this phenomenon can only be expected to gain momentum. 

This is especially true as the Great Wealth Transfer is underway. During the next couple of decades, Baby Boomers, who represent the richest generation in history, will transfer more than $30 trillion to their children, who themselves belong to more tech-orientated Generation X and Millennials.

Wealthtech predictions for the future…

First, hyper-personalisation.  Financial advisers will harness the enormous potential and power of an increasingly personalised service for their clients through innovation, which will boost returns and outcomes. 

This could come in the form of customised portfolio views, newsfeeds and insights, notifications, and activity tracking, amongst other ways.

Second, first choice. Digital solutions will become clients’ initial ‘go-to’ when it comes to wealth management, before they move on to seeking the advice of a professional adviser.  Wealth managers who do not keep up with tech advancements will fail.

Third, security.  Privacy and cyber-security measures will become an increasingly important differentiator for clients choosing between wealthtech providers.

Fourth, consolidation. The biggest and best-resourced wealthtechs will consolidate into ‘one-stop shops’ offering and accessing various financial products and services from insurance to investments, pensions to mortgages and banking, amongst others.

What’s clear is that the way we save, invest, use and manage our money has changed forever and continues to do so apace. We are witnessing a personal finance revolution and, for the consumer especially, it’s driven by wealthtech.