Updated: Jan 29
The financial industry is changing fast. If you look away for a second, you may miss the crazy changes taking place. It takes time and effort to keep up, so we have condensed this guide down to just the most important terms.
According to CB insights consulting, in 2016 “wealthtech” firms obtained $657 million USD with 74 financing agreements. That is a lot of money. Wealth technology, or simply “wealthtech,” is a new movement in the financial industry aimed at integrating technology with wealth management to create a more efficient and streamlined experience for consumers. Wealthtech is currently transforming the investment and asset management industry with its ability to help advisors adapt to ever-changing consumer expectations such as transparency, digital experience, multiple point access, and so on. Many incumbent banks are beginning to invest in the wealthtech space. Goldman Sachs and JP Morgan Chase are co-investors in Motif, Northwestern Mutual and Citi Ventures are co-invested in Betterment, and UBS and Santander InnoVentures are co-investors in SigFig. These three companies, along with Personal Capital, WealthNavi, Folio, and ForwardLane fall into the Robo-Advisors category, (See Robo-Advisors) which is the category of wealthtechs garnering the most investment from incumbent banks.
Machine learning is a term that describes a system that builds data models using artificial intelligence. The foundational idea is that intuitive systems can learn from new data to identify patterns and make “informed” decisions without human intervention. AI is having a big impact on the financial industry, as algorithms begin to do the jobs that financial specialists used to do. It sounds bleak, but what it really means is firms are providing services that are more efficient, more personalized, and more affordable, to all sorts of customers.
Blockchain is essentially a single ledger which tracks a series of digital transactions over time. Commonly discussed in the context of cryptocurrencies such as Bitcoin, blockchain has a number of applicable uses in areas of business beyond transaction verification. For example, manufacturers have begun to utilize blockchain in order to track the movement of materials from start to finish–in a durable, detail-intensive environment.
90% of the world’s data has been generated in the past two years alone. Data is rapidly taking over and businesses are figuring out how to make sense of it. Big data is a term which refers to the rapid growth in the generation of both structured and unstructured data over the past several years. Businesses in all industries have developed ways of gathering and leveraging large data sets in a manner which benefits both themselves and the consumers.
Robo-Advisors are digital services that provide users with investment options according to the user’s risk aversion profile, age, income, and other variables. They serve as a replacement for traditional, human financial advisors and brokers. Now that users can access resources and gain personalized investment advice without human expertise and interaction, investing is significantly more affordable. A whole segment of the population who previously could not afford a financial advisor are now potential investors.
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I am CPO and Co-Founder of Cred. Cred is a disruptive WealthTech startup aimed at enabling financial advisors and institutions to truly personalize each of their retail clients' portfolios, based on their unique backgrounds, financial situations and preferences. This is the way investing will work in our generation, and we’re excited to be pioneers on this journey.
A special thanks to Olivia Johnson for preparing this article!