How does a company with the next potential blockbuster idea in wealthtech garner investor attention with everyone fighting for a spot at the table?
Advancements in wealth technology have transformed the daily lives of financial advisors, and their clients. From powerful advisor tools focused on portfolio management to client-facing solutions that provide a greater sense of control, a growing selection of digital and mobile-first platforms have added power, efficiency and accessibility to every part of the wealth management process.
As a result, an increasing number of startups are rushing to join a global wealthtech market expected to
According to a panel of experts, it depends.
During a Monday afternoon talk at
All three of the panelists agreed that the wealthtech market remains hot, but based on your position in the industry, what makes for a good investment can vary as widely as the needs of clients served by the emerging tech.
For Kim Mackrill,
“For us, anyone who is data driven and design first, those are really exciting spaces for us to be looking at … we're looking at what it’s like for them to actually be inside of the interface,” she said. "Is it intuitive? Is it beautiful? Does it have an emotional connection with the user? Is it completely open?
Mackrill added that a strong focus on creating a positive user experience can be the difference between breaking out, and falling behind.
“What we have are a lot of people playing at the same level across the board, and if you can't excel in your design or your data integration, you're going to wind up being just another clanging gong in the noise that sits in platform spaces,” she said.
Jim Brown, founder and
“So mundane tasks like onboarding and documents and legal. Areas that you wouldn’t necessarily focus on initially that are tougher to do, but when you get in there are more sticky. Those areas are very interesting to us,” said Brown, whose investments include Carson Group. “We are also very interested in how technology can enable the RIAs to sell new products and services. Like banking, like lending, like insurance, which historically have been a lot harder to do. We think with the advent of tech we’re moving closer toward being able to do that.”
Brown said integration is also a top priority when considering future wealthtech investments. With every firm focused on building a “tech stack” to support their needs, it’s important that anyone entering the space is able to interoperate with tools that have become standard.
"It’s almost a ticket for admission to even look at an investment,” Brown said. “Because if you don't have good integration technology and good APIs where you can actually talk to other systems, you’re not going to make it very far in this new tech world.”
Mackrill and Edward Shahnasarian,
Shahnasarian, whose firm is invested in Hightower, took it a step further by saying that poor integration is an easy way to miss out on a large number of advisors and investors who may be interested in your idea. With such a wide number of services on offer at every firm, wealthtech adaptability has to keep up.
“There isn't a best-in-breed archetype because there are so many different types of advisors. So best-in-breed means something different to many different advisors,” he said. “To participate in the space long term, you're going to need to be able to integrate with somebody else, and frankly everybody else.”
In terms of the kinds of investments he’s looking for, Shahnasarian said he is focused on growth. He said advisors want to grow their business quickly, so tech that can assist with leads, clients and direct marketing will stop him in his tracks.
But he’s also looking at big picture ideas that can grow into something bigger than their original pitch.
“Anything that we invest in, we'd be trying to build into the next platform in the space,” he said. “That would be our end goal, so everything that we look at is about how we take this company or this opportunity to the next level.”
Hot market aside, the panelists pointed out some wealthtech ideas that too many companies have pursued. Portfolio management software, robo advisors and products in the TAMP space were mentioned among those suffering from oversaturation.
"Every new entrepreneur, they want to be the “new home screen” for the advisor. They want to be the center of attention and the focal point for the advisor, which is great and it's exciting and it's a great place to be as a company,” Shahnasarian said. “The problem is there's already 10 people doing it really well, and five of them have real scale. So to climb that mountain from standing still, it's a tough endeavor.”
Brown, meanwhile, wants to see more ideas that blend powerful technology with human sensitivity.
“If you look at a lot of the first wave that came, it was a lot of self-service. How do I provide tools to individuals so that they can become their own RIA or service themselves, which we believe is a tough model. It’s at least tough right now,” he said “That may change in the future as the lending and banking groundwork is embedded into the tech system, but we love the hybrid model. Combine the best of the human aspect and the best of technology.”
