Source: Pixabay

The traditional understanding of what a financial institution does and the function it serves in wealth management is undoubtedly changing. In a modern landscape with data, AI and machine learning meeting with your portfolio manager on a regular basis seems a little too ‘old school’ and even time consuming. Along come WealthTech companies that provide a holistic restructuring of traditional wealth management. In a recent Forbes article Alan Prince describes wealthtech as:

“A subset of fintech (the combination of finance and technology) is wealthtech, which is a portmanteau of wealth technology. It is all about applying technology to wealth management to create a better experience for individuals and families as well as deliver superior services and products more cost-effectively.”

Whilst Alan continues in the article to explain how wealthtech will never truly replace traditional wealth management firms. It is important to note that the wealth management landscape has drastically changed and will continue to do so. Below are five wealthtech firms that are revolutionary and highlight the fundamental change taking place in wealth management.

Five noteworthy companies:

Company Name: Nutmeg

Website: http://www.nutmeg.com/

Country: United Kingdom

Quote: “Investing shouldn’t cost the earth”

About: Nutmeg is an online discretionary investment management company (discretionary meaning that it makes all investment decisions on behalf of its customers, rather than providing a platform for people to trade on). The company invests customers’ funds in line with their investment goals and appetite for risk. It invests in listed securities, debt, cash, commodities and other investment asset classes, primarily, but not exclusively, via exchange-traded funds (ETFs). It provides an online alternative to stockbroker platforms where customers make their own trading decisions. They are particularly popular due to the fact that they offer a mobile application allowing clients to amend and check their portfolio from their own mobile device.

Company Name: Wealthfront

Website: https://www.wealthfront.com/origin

Quote: “The financial industry wasn't designed to be fair.”

About: Dubbed as a ‘robo-advisor’ this company seeks to provide everyone with the ability to have access to wealth management and seeks to remove the traditional cost barriers associated with wealth management.The company manage risk and provide a tax advisory service too. The service is automated and day to day portfolio management is carried out by the automated software that Wealthfront have created. 

Company Name: Betterment

Website: https://www.betterment.com/

Quote: “The old way of investing is like a paper map you have to figure out how to get from A to B yourself”

About: Betterment has stepped out as a clear leader among ‘robo-advisors’, with about 300,000 clients and $11 billion in assets under management today. Betterment has two service options: Betterment Digital, its legacy offering, has no account minimum and charges 0.25% of assets under management annually. Customers in this offering can consult financial advisors via in-app messaging. Betterment Premium provides unlimited phone access to financial advisors in exchange for a 0.40% fee and $100,000 account minimum. Betterment is particularly suited for retirement investors and those who want automated rebalancing.

Company Name: FinMason

Website: https://finmason.com/

Quote: “Despite being diversified on an asset-class basis, many portfolios failed to adequately mitigate losses. One reason for this is that asset-class diversification does not account for risk factors.”

Country: United States

About: FinMason sources nearly every publicly-traded security, of every type, from around the world and does the heavy lifting of cleansing the data, validating the data, and running a full analysis on each and every security. FinMason develops Algonath, an independent investment analytics platform that delivers institutional analytics to the retail investment community. Its solutions include FINSCORE WIDGET, an interactive risk tolerance assessment calculator that engages prospects and helps them see for themselves if they need professional advice.

Company name: I Know First 

Website: https://iknowfirst.com/

Quote: “Investment selection by using Artificial Intelligence”

Country: Israel

About: I Know First is a Wealthtech company that provides state of the art self-learning, AI based algorithmic forecasting solutions for the capital markets to uncover the best investment opportunities. The company provides daily investment forecasts based on an advanced, self-learning algorithm. The AI Algorithm was developed by Dr. Lipa Roitman, a scientist with over 20 years of research and experience in artificial intelligence (AI) and machine learning (ML) fields, who leads the Research & Development team to further develop and enhance the algorithm. Dr. Lipa Roitman is an R&D Chemist with a long record in computer modelling of processes, product development and process development. The concept of the current algorithm has crystallized following years of prior research into the nature of chaotic systems.His unique R&D team consists of PhD’s and AI and Machine Learning experts, including IDF intelligence veterans and consults with Prof. Yakov Yakubov, a mathematician from Tel Aviv University. The I Know First algorithm is designed for large financial institutions, banks, and hedge funds in the capital market as well as private investors looking for an advanced algorithmic support system. The algorithm is currently tracking and predicting a growing universe of over 10,000 financial assets. I Know First has clients in over 50 countries and makes predictions over 40 markets across the world and considered one of the Top fintech companies in Israel.  

Industry convergence is inevitable

The modern financial services landscape is increasingly converging to one firm/company serving multiple roles from investment bank to asset manager the differences between different companies are less concrete are more difficult to spot. Of the five companies listed about three of them (Nutmeg, Wealthfront and Betterment) are providing discretionary investment management. This means that after a client fills out a questionnaire regarding his/her risk-appetite and the investment goals he/she wish to seek, client funds are deposited into their “account” and from there on the system is automated both for initial composition of portfolio and for further management processes. As such, it may include portfolio rebalancing, reports generation and other related functions, such as tax compliance. All that is done for the client and on his behalf completely autonomously. Portfolio restructuring is a critical part of maintaining a healthy investment fund. All of the firms listed above aim at assisting or even automating this process. The advantage to automating the process means it is easier for the client, they can simply give the company their money and set it on ‘auto’ however, this means the company is limited to who they can provide this service too and due to regulations and restrictions the number of different investment strategies they can utilise is limited. Consequently, firms like Nutmeg are limited to UK customers only.

Source: pixabay

Conversely, allowing the client with the freedom to manage and restructure their own portfolio means that regulations is easier as there is significantly less risk that the WealthTech company is responsible for.While Finmason provides the clients with access to large quantities of data making it easy for the client it still does not provide investment strategy solutions. However, it can be used and utilised by a far wider client base and the FINSCORE WIDGET, an interactive risk tolerance assessment calculator that engages prospects helps clients see for themselves if they need professional advice. The I Know First AI algorithm is designed for large financial institutions, banks, and hedge funds in the capital market as well as private investors looking for an advanced algorithmic support system. The algorithm is currently tracking and predicting a growing universe of over 10,000 financial assets. Clients will still need to personally restructure and manage their own portfolio but are provided with clear strategies and advice on how to conduct and manage their portfolios.

Summary

In the table below the advantages and disadvantages are summarised of the five WealthTech firms listed above. This table allows ones to quickly identify and distinguish between the different services the WealthTechs companies provide.

Algorithmic traders utilise daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster. To learn how you can become a subscriber today, click here. Please note-for trading decisions use the most recent forecast.