Top 2024 Wealthtech Trends Include Growing Presence Of AI

Industry Tech Experts Also Point To More Digital Platforms Offering Customization.

When it comes to trends in the wealthtech sector, the growing presence of artificial intelligence (AI) in new platforms, products and services for advisors and their clients is the most obvious sign that AI has started to take off in the financial services industry after the introduction of ChatGPT chatbots in late 2022 and generative AI in 2023.

Noting that he recently attended Advyzon’s first conference for advisors, Joel Bruckenstein, Producer of the annual Technology Tools for Today (T3) fintech conference and Publisher of the T3 Technology Hub, said Advyzon is “in the process of incorporating AI into much of their platform.”

Joel Bruckenstein, President, Technology Tools for Today
Joel Bruckenstein, President, Technology Tools for Today

Meanwhile, demand for more personalization tools is growing as well, according to wealthtech and fintech experts.

Among the emerging technology awards that were given at the T3 conference in January in Las Vegas, Bruckenstein said: “The most interesting one to me is Syntax Data,” a financial data and tech firm.

“They have a unique data set that I think is revolutionary,” according to Bruckenstein. “They also have a platform that allows advisors to create highly customized client portfolios at scale within minutes,” he said.

Meanwhile, the clients of Timothy Welsh, President of consulting firm Nexus Strategy, have told him they are developing solutions to achieve “personalization at scale – how to actually give everyone a unique portfolio, tailored to their goals and circumstances, not to the results of their risk tolerance questionnaire,” he said.

Timothy Welsh, President of consulting firm Nexus Strategy
Timothy Welsh, President of consulting firm Nexus Strategy

One example of that, he said, is asset management firm GMO’s Nebo Wealth, a new platform designed to help registered investment advisors (RIAs) achieve portfolio personalization at scale.

“In its first year, [it] has already gathered over $2 billion” in assets under management (AUM), according to Welsh, who noted the company is one of his clients. “Their premise is the redefinition of risk as not volatility, but rather not having what you need when you need it. As a result, advisors are able to better personalize portfolios at scale,” he explained.

Two ‘Megatrends’

“Two continuing megatrends” in 2024 are “clients expect personalization, and advisors require scalability,” according to Martin Tarlie, Nebo Product Lead and a member of GMO’s asset allocation team.

“But these two trends are at odds: generally firms that scale cannot deliver personalization,” he said.

Martin Tarlie, Nebo Product Lead and a member of GMO’s asset allocation team
Martin Tarlie, Nebo Product Lead and a member of GMO’s asset allocation team

“These two megatrends are driving key industry dynamics,” he said, pointing to the growth in model portfolios and Blackrock “projecting a doubling in allocation to models.” Broadridge, meanwhile, is “projecting even faster growth, to a level of $11.3 trillion.”

There has also been an increased focus on financial planning, which is “inherently personalized,” said Tarlie. “Advisory firms that have historically been more investment focused are adding financial planning services to their practices,” he noted.

The personalization trend is “economy-wide,” Tarlie said. “Consumers expect personalization [in] goods and services, from the shoes they buy, the food they eat, to the vacations they take. And wealth management is no different.”

Meanwhile, advisors’ “pursuit of scalability is driven, in part, by increasing difficulty and cost in hiring financial planners,” Tarlie added.

Nebo Wealth, he explained, is “based on the simple but intuitive idea that what matters most to the client is that they have the financial resources they need, when they need them. Nebo builds portfolios to maximize this likelihood.”

The main benefit for clients, he said, are “perfect-fit portfolios for every stage of their life. That is “very different from the current paradigm today, which largely focuses on risk scores and having the asset allocation driven by risk scores,” he noted. “By contrast, Nebo Wealth builds personalized portfolios based on each client’s needs and circumstances.”

The main benefit for advisors, he said, is “more confidence in their process [and] … more confidence improves client interactions and also increases growth: more confident advisors grow faster. Furthermore, increased understanding leads to better decisions and therefore better client outcomes.”

And the main benefit for advisory firms is they get “personalized portfolios for each client based on their unique needs and circumstances with no more work than it takes to select a model, allowing firms to differentiate and grow faster than their peers,” Tarlie added.

TradePMR Addresses Both ‘Megatrends’

Another tech firm that Bruckenstein singled out was TradePMR.

At T3, “we wanted to discuss some new data showing how many RIAs are not seeing organic growth apart from market turns, and efforts TradePMR is making to help RIAs reignite that growth engine,” according to Robb Baldwin, Founder and CEO of TradePMR.

Robb Baldwin, Founder and CEO of TradePMR
Robb Baldwin, Founder and CEO of TradePMR

“We talked about a new platform called Apollo that was built with behavioral science and AI to help advisors through the entire life cycle of a client,” Baldwin said, noting his company recently started accepting “early entry into Apollo for advisors with an existing relationship” with TradePMR.

“Apollo brings personalization at scale to help clients think about their finances and make good decisions about their money,” he explained.

While “many firms are using technology and AI to replace advisors, our strategy is for RIAs to implement systems to help increase the personalization scale,” he added.

Baldwin called AI and how it’s making its way into wealth management a “trend too big to ignore.”

“As an industry, we have been focused on processes and scale for the past 10-15 years at the cost of deeper relationships with clients,” he said. “Frankly, we’re excited about the opportunity to incorporate AI as a tool to deliver more personalized service to an increasing number of clients.”

Robert Sofia, CEO of martech company Snappy Kraken
Robert Sofia, CEO of martech company Snappy Kraken

F2 Strategy’s 2024 WealthTech Outlook Report showed that top wealthtech sector trends included growing demand for AI. Most wealth management firms have an AI project in the works, and they are increasingly exploring AI applications for client experience, efficiency and growth, with a significant percentage using optical character recognition (OCR) or predictive analytics.

Although AI impact has been small and exploratory so far, firms in the space are “poised to expand beyond initial experiments, anticipating both successes and failures as the industry embraces more advanced AI projects,” according to F2.

Echoing that take, Robert Sofia, CEO of martech company Snappy Kraken, said of AI: “We are still in the early stages, but relevance for advisors shot up when wealthtech companies started integrating AI features heavily in late [2022] and through 2023. Creating efficiencies for advisors continues to be the main role of wealthtech. AI certainly supports that.”

Meanwhile, 70% of wealth management firms improved their data governance in 2023, according to F2. That was a significant increase from the 50% of firms that indicated this would be a priority heading into 2023, F2 said.

Trends in the space that Kelly Waltrich, Co-Founder and CEO of marcom firm Intention.ly, pointed to included demand for a solution to the problem of integration.

Kelly Waltrich, Co-Founder and CEO of marcom firm Intention.ly
Kelly Waltrich, Co-Founder and CEO of marcom firm Intention.ly

“I think it’s become apparent that the SSO most tech firms call integration is no longer cutting it for RIAs that want a seamless passing of data to all of their systems,” she said.

“More and more firms (especially the all-in-one options) are working to figure out how to de-clunkify their cobbled that drive measurable efficiencies.”

Another trend, according to Waltrich, is wealthtech firms “really focusing on their onboarding experiences.”

“The good ones have figured out that one of the biggest reasons RIAs don’t switch technology is the pain of the migration so if technology players can showcase a pain free transition process, it removes a barrier to the move. A lot of work still to be done here but the focus is at least in the right place,” Waltrich said.

Also, “tech firm partnerships are coming back in vogue,” according to Waltrich. Reflecting back, she said: “In the day (when I was at eMoney and early days at Orion) tech companies relied on each other to grow – back then, a rising tide lifted all boats. An influx of PE money changed this, and it seemed to become an ‘every man for himself’ arena for a few years.”

However, “lately, I am starting to see a renewed appetite for coming together for the good of the RIA and the technology collectively,” Waltrich said.

As advisory firms seek more organic growth, many of Welsh’s clients are also looking for a “digital growth engine that goes beyond dinner seminars,” he said.

Asked what trends he expected will be significant for wealthtech firms in 2024 and beyond, Tarlie said: “Broadly we see a continuation of the [same] megatrends and associated dynamics… We believe this means a continued move towards ‘personalized models.’”

In that vein, he said: “There has been a trend over the years to outsource investments, the growth of TAMPs being an example. But TAMPs have struggled to gain traction in the RIA space. We believe Nebo Wealth changes that dynamic.”

He added: “One other trend that is just coming on our radar is a move to outsourced trading. Not sure how big that is yet, but definitely something to keep an eye on.”

Jeff Berman, Contributing Editor & Reporter at Wealth Solutions Report, can be reached at jberman@wealthsolutionsreport.com.

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