Wealthtech platforms solve the financial literacy divide

Wealth management and preservation are the main objectives of the FinTech branch known as Wealthtech. The technology is used to manage datasets, perform analytics, enable digital execution of investments, and enable a positive investment experience. Wealthtech companies can operate under a B2B business model, creating solutions for banks, IFAs, RIAs, or under a B2C business model, offering services directly to end users. Additionally, investment markets, investment tools, financial advisors, robo-advisors, trading platforms, and data analytics companies are part of its ecosystem.

The wealth management technology industry is growing exponentially as more people use a range of apps to access investment products with the click of a button. Users continue to focus on both traditional products (mutual funds, bonds, and NPS) and relatively new asset classes like P2P lending products, income-backed fixed income products, and even digital currencies and non-fungible tokens (NFTs). Although personal finance has grown in popularity over the past few years, there is still an urgent need to build financial literacy and consumer awareness. Gaurav Tiwari – Founding Partner, Centricity Wealth Tech explains it in detail.

The growing importance of the financial literacy gap

Covid-19 demonstrated the interest in building a carefully constructed and monitored financial corpus. Due to job losses and unexpected pay cuts, people have experienced financial hardship; businesses around the world have faced unprecedented challenges. The positive side of the coin is that individuals have realized how essential savings and investment are to overcoming challenges. Consumers have become aware of how sound financial management can help them protect their future and avoid unexpected expenses.

Given the accelerating pace of digitalization in the world and the emergence of fintech companies, many digital solutions have helped customers save and gain financial literacy. Many personal financial apps are now available that can track and organize spending and investments, encourage disciplined saving, as well as check and boost credit ratings. Some apps even help users locate unnecessary subscriptions, so they can cancel them and focus on saving money. Many of these applications include tools and techniques to guide investments. These apps are an excellent approach to advising clients on investment opportunities and can be seen as a crucial tool for clients’ financial literacy. However, users still need to know about the reliability, usability, and security of the apps.

Wealthtechs are filling the gaps

Increase reach: Although many Indians are switching from physical to financial savings, the market is still incredibly underdeveloped, with only 2% of Indians investing in stocks and even fewer in bonds. However, increased reach to Tier 2 cities, where most Indian households are located, will be key to bridging this gap. By providing investors of all ticket sizes and demographics with top-notch financial services, wealth management technology firms are bridging this gap. They can use technology to their advantage to reach a wider Indian audience and boost their presence in rural India by leveraging their low cost offerings and enhanced user experience. Asset allocation, portfolio rebalancing, investment policy statements (safeguards), commodity markets, etc., are value additions that existing investors can access at a lower cost. Wealth management technologies are developing tools to make this possible.

Improve customer experience: New investors are often deterred from investing due to technical terminology, lengthy onboarding procedures, and the vast product selection in the industry. For existing investors and newbies, Wealth Tech is closing the financial literacy gap. However, new platforms in existing asset classes (AIF, PMS, bonds, gold bonds) and new combined asset classes – structured notes, international equities, structured credit products, cryptocurrency, commercial real estate Fractional, asset-backed financial products, P2P lending products, and income-backed financial products – are being introduced for new investors, especially HNI investors. Although Wealthtech platforms have already taken many steps to streamline processes and improve user experience, there is still a long way to go to improve the overall customer experience. Firms will continue to simplify current procedures as the sector develops, working with authorities to provide investors with a simple investment experience. This will support the expansion of the sector and fill the gaps in the financial markets and investors.

Integrate technology into the value chain: Companies are continuously modernizing traditional investing by integrating advanced technologies such as artificial intelligence and predictive data analytics to make smart investment decisions. The platforms effectively control risk and reduce costs by implementing technological advancements, such as automated back-end operations, throughout the asset management value chain. Additionally, eliminating any emotional bias related to investing and maximizing returns can be accomplished by making decisions that are only supported by realistic and unbiased data.

Digital Push: Online transactions are generally preferred by tech-savvy working-age millennials. The pandemic has also accelerated digitalization by encouraging the formation of habits among investors of all ages. Wealthtech firms focus on offering digital solutions, which makes them more suitable for individual investors who are more comfortable with digital platforms. As a result, this digital effort boosts the natural integration of the platform and broadens the audience.

Based on their risk and return profiles, wealth technologies provide advanced tools to help investors achieve their financial goals and diversify their investment portfolios. They offer a variety of fixed income assets that serve as a hedge against inflation and stock market volatility, as well as a source of regular income and preservation of capital. Additionally, they eliminate the fallacy that only ultra-HNIs should invest in fixed income securities. Investors can decide whether or not to invest in fixed income instruments based on their risk-return profile.

The path to follow

As part of a comprehensive financial services offering, Wealthtech is seamlessly integrating into everyday life as it grows. Individuals are free to control their financial future by removing traditional barriers. However, we have certain advantages in the weathtech industry while bridging the literacy gap, such as according to industry experts, tech wealth platforms will focus on the social aspect of wealth generation in the future to come, and cryptocurrencies will not only continue to be in high demand but also gain popularity in the following years. Additionally, more and more legacy technology companies will focus on impact investing, which is growing in popularity. In addition, companies are trying to create systems that allow couples or families to manage their wealth together.

Sarah J. Greer