Why Wealthtech is the Secret Weapon for Modern Investors?

Wealth management has been crucial ever since humans adopted the method of valuing items with currency. Before that, our ancestors used to exchange one essential item for another, like giving away a goat for a bag of rice. Sounds stupid, right? It was a norm during medieval times and before.

Now, we have learned that managing our finances is as essential as earning more. With advancing technology, the 21st century has given rise to many new sectors like AI, fintech, etc. The birth and development of these young sectors in the market has followed a different roadmap, whether it's about the growing pace, business model, structure, or idea. One such new sector is wealthtech.

Wealthtech is a compatible combination—or, should I say, the intersection of finance and technology —focused on wealth management and finance planning. You might be familiar with this sector via popular platforms like Zerodha, Upstox, etc.
 
In this article, we will discuss what exactly the wealthtech sector is, its growth prospects, its importance in the economy and many other aspects.

What Exactly is a Wealthtech Startup?

Wealthtech is a young but fast-growing field. The rise of Artificial Intelligence (AI) , Machine Learning (ML) , and big data opened doors for this innovative approach to wealth management, especially in the last decade.

In simple words, wealthtech is all about managing your money with the smart efficiency of a supercomputer! It's a cool new way to handle your finances using cutting-edge tech like AI and data analysis. This tech helps automate and improve your investment and future plans.

The best part? The wealthtech sector is dedicated to making the conundrum of managing wealth easier for everyone, not just fancy finance folks. Basically, it is like having a tiny financial expert in your pocket, helping you grow your money and reach your financial goals!

Between 2019 and 2023, over 120 million new investors entered the stock market. As per BSE's data, over 161 million investors are taking their finances into their own hands, whether by investing in mutual funds, equity, or other options.

This has given a wondrous boost to the wealthtech sector, opening doors for further advancement. The growing numbers in turn, would help both the people and the new startups as well as old patrons of the industry.

Many new trends and advances in the finance sector pay their contribution to this brand-new sector. But before we check out those new trends, let's clear out some air surrounding the confusion between fintech and wealthtech.

Difference Between Wealthtech & Fintech

Many people think wealthtech and fintech are the same entity, but that is far from the truth. Wealthtech is actually a subset of fintech, or you can say it is a part of what fintech represents.

Fintech is like a big umbrella covering a wide range of financial services that are made more accessible and faster with technology. This includes mobile banking apps , online payment processors , cryptocurrency platforms , and more.
Wealthtech, on the other hand, is a specific branch under fintech. It focuses on using technology to improve how people manage their wealth, specifically investing and financial planning.

In short, where fintech makes everyday financial tasks easier, wealthtech helps you reach your long-term financial goals.

Kinds of Wealthtech Companies

There are two kinds of wealthtech companies:

1. B2B Wealthtech:

These startups help businesses like banks and financial advisors improve their performance. They tech provide tools to these pros to grow their businesses and serve their clients even better.

Kuvera , Stable Money , etc., are some popular B2B wealthtech companies in India.

2. B2C Wealthtech:

It is the kind of wealthtech you might use yourself. It offers user-friendly tools to help you manage your own investments, like building a portfolio or tracking your progress. So, whether you're a pro or just getting started, wealthtech has something to offer!

Groww , Zerodha , Angel One , etc., are some of the well-known examples.

Tools & Emerging Trends

The development of the wealthtech sector presented multiple tools and services for consumers to handle wealth management better. Here are a few of them:

a. Hyper-personalisation:

Every person's wealth, financial goals, and investment strategy differs. Wealthtech platforms leverage big data and AI to provide hyper-personalised investment recommendations and advice tailored to each user's financial situation.

Hence, users can get tailored solutions instead of the same options people used to try. This means no more investing in the same stocks solely based on Sharma Ji's advice.

b. Robo-Advisors:

Traditional robo-advisors are evolving into more sophisticated tools. Many of these advisors incorporate advanced features like tax optimization, automated rebalancing, and the ability to invest in alternative assets like real estate or equity .

However, robo-advisors need more advancement as they have many biases that could create problems for retail investors. Hence, it is advisable to tread safely in this particular service.

c. Focus on Financial Wellness:

Wealthtech is moving beyond just managing investments. Now, platforms are offering holistic financial wellness tools, including budgeting assistance, debt management solutions, and even mental health resources related to money management.

This would allow you to avoid as much stress as possible that is associated with managing finances.

d. Rise of Fintech-Wealthtech Mergers:

Collaboration is key! We might see more partnerships between wealthtech companies and fintech startups offering services like payments or neobanks. This would create a one-stop shop for all your financial needs.

Growth Prospects & Future Outlook

As per a market research company, Industry Research Biz, the global wealthtech market was worth around $9.8 trillion in 2022 . This amount is predicted to reach over $37 trillion by 2028 . That's almost 4 times bigger in just 6 years!
Other growth prospects in the wealthtech sector are:

a. Democratization of Finance: Wealthtech has the potential to make financial planning and investing more accessible to everyone, not just high-net-worth individuals.

b. AI-powered Solutions: Expect AI to play a bigger role in wealth management, with personalized investment recommendations and automated portfolio management.

c. Embedded Wealth: This involves integrating wealth management services seamlessly within other platforms you already use, making it even easier to manage your money.

The Bottom Line

Overall, wealthtech transforms how people grow and manage their wealth, offering investors a more digital, personalized, and potentially lucrative future. The sector has so much more to offer retail investors and attracts more consumers who want to contribute their attention to managing their finances well.

However, there is a matter of big concern that shouldn't be left unattended. I am talking about data privacy! With the factor of tech playing such an important role, handling of user's data with high regard in security is extremely important. Without setting necessary parameters for this, further development of wealthtech sector is not possible.