Financial advice can be a sensitive topic – those giving it don’t want to mislead customers, while customers are wary about the level of trust they can place in their advisers. Nonetheless, done correctly, investing can be a very beneficial way for someone to use their funds. This November we are exploring all the aspects of wealthtech and how the industry has developed this year.
Rounding up our focus on alternative investments, we take a look at the impact wealthtech has had on accessibility, putting a spotlight on retail investment.
Breaking down barriers
Sundip Patel, co-founder and CEO of Avana Companies
Historically, large sums of money had to be placed aside when someone wanted to invest, meaning it was very challenging for everyone to diversify their portfolios. Sundip Patel, co-founder and chief executive officer at AVANA Companies, the investment firm, highlights how wealthtechs are creating a more financially inclusive ecosystem.
“Wealthtech platforms are making alternative investments, especially in real estate, more accessible to retail investors. Through co-investment and fractional investing opportunities, these platforms break down barriers that once limited access to institutional investors. The technology empowers individuals to diversify their portfolios with smaller capital amounts, while providing educational resources that enable them to make informed decisions. This can result in a more inclusive financial landscape where retail investors can confidently participate in private credit, direct lending or real estate investments.”
Democratisation, transparency, and efficiency
Nelson Chu, founder and CEO, Percent
Nelson Chu, CEO and founder of investment platform Percent, highlights three major factors which are making investing in private credit more accessible: democratisation, transparency, and efficiency.
“Digital platforms now lower costs and minimums, opening access to institutional-quality investments for a wider range of accredited investors. This democratisation is enhanced through sophisticated data analytics and risk assessment tools that were previously available only to large institutions.
“Innovations have also dramatically improved transparency. Investors can now access detailed performance metrics, portfolio analytics, and risk assessments in real-time through intuitive dashboards. This transparency helps investors make more informed decisions about their alternative investment allocations.
“Finally, technology has streamlined the entire investment process. From digital onboarding to automated portfolio management, technology enables investors to react faster to market shifts, ensuring their portfolios remain aligned with financial goals.”
Generational shifts in preferences and behaviours
Nicole Valentine, fintech director, Milken Institute
“The wealth management industry has traditionally been associated with exclusive asset classes accessible by the few and not within reach for the many,” starts Nicole Valentine, fintech director at Milken Institute, the independent economic think tank. However, she explains that wealthtech has opened up new lanes of prosperity as more retail investors can now look towards investing in alternative assets.
“We are seeing generational shifts in investing preferences and behaviours as the tech-savvy social media generation is influencing the wealth industry to reach them in new ways and with new opportunities.
“Opportunities to invest in commercial real estate ventures and Bitcoin ETFs are on the table as well as portfolio management and budgeting technology to track financial goals. It is promising to see how wealthtech has transformed the industry by personalising financial planning and automating portfolio monitoring.
“I remember engaging in the private wealth industry several decades ago when the world was less digitised and the menu of investment choices was leaner. Today, there are many more options to build and track wealth, and new asset classes to consider adding to the portfolio.”
Bridging the traditional investment world with the new
For Priya Vaidyanathan, associate director buy-side investment research, Acuity Knowledge Partners, the research, analytics and business intelligence firm, wealthtechs are making investing more accessible by acting as the mediator between hedge funds or alternative investment funds, and individual investors.
“Ultra-high-net-worth investors hold around one-fourth of their portfolios in alternative assets, but this percentage slumps to low single digits when it comes to high-net-worth individuals.
“There is significant under-penetration in alternatives among high-net-worth individuals, but substantial investor interest. Wealthtech platforms are slowly expanding into the alternative asset space, entering into partnerships with hedge funds and alternative investment funds to set up feeder structures and offer smaller ticket sizes with relaxed eligibility criteria, making it more accessible to individual investors.
“These platforms also help improve transparency, providing regular data on valuations and other corporate actions of private companies and, in certain cases, supporting with tactical back- and middle-office operations.
“Multiple avenues such as registered funds of funds, interval funds, real estate investment trusts and investments in business development companies are being made available through wealthtech platforms, increasingly democratising alternative investments.”
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