What were the big WealthTech trends in Q1 2023?


Following the rollercoaster year of 2022, 2023 looks like it could equally be full of significant changes. Having already got to the end of the first quarter, Kidbrooke has taken a look at some of the biggest trends shaping the year.

Last year saw slow growth and a battle against inflation that caused a lot of trouble for firms. This has continued into 2023. Banking giant Silicon Valley Bank recently collapsed after tech investors and startups set off a bank run. This was the second-largest bank failure in US history, following Washington Mutual in 2008. Across the pond in Europe, a similar seismic collapse was felt by the market. Swiss investment bank Credit Suisse looked set to collapse, before it was acquired by fellow financial services giant UBS.

The troubled state of the financial market is clear, but Kibrooke urges not everything has been doom and gloom.

The powers of Chat GPT

In November 2022, Chat GPT seemed to come out of nowhere. The technology stunned people with its ability to write content to a similar standard as a human. Today, it is estimated there are around 13 million daily users of the technology.

This technology can transform the role of the financial advisor, reducing their overheads and improving the customer service, Kidbrooke explained. These tools can even help wealth managers develop portfolios and research investment opportunities for their users.

It said, “Take for instance, Morgan Stanley. The US-based juggernaut tested an OpenAI-powered chatbot with 300 advisors with plans to roll it out widely to all 16,000 advisors in the coming months. The move was to help the advisors make the most of the bank’s huge library of research and data resources.

“With the help of the tool, investment experts can parse through endless pages of in-depth analyst commentary, intellectual capital and market research in seconds; a process that could take hours, enabling advisors to focus more on client service.” This is just the beginning. The firm is looking at how the AI tool can enhance the insights from advisor notes and streamline follow-up client communications.

While the technology is bringing exciting new opportunities, Kidbrooke emphasised that this is not the end of the human worker. It stated there is an issue with Chat GPT’s level of accuracy.

A group of over 1,000 experts also issued a warning that the industry is in an arms race to develop AI systems. The group, which includes co-founders of Apple, Pinterest and Skype, as well as Elon Musk, said this human-competitive intelligence could pose an existential risk to humanity, and demanded a six-month moratorium on further research until regulation is put in place.

Embedded finance

The next trend is the rise of embedded finance and the opportunities it poses. Kidbrooke stated that embedded finance has made almost every company into a FinTech company. Services like Klarna and PayPal have helped non-financial institutions integrate financial services into their platforms and offer forms of payment, credit, insurance and investment.

Juniper Research claims that embedded finance services will exceed $183bn in 2027, rising from just $65bn in 2022. Some of the use cases of embedded wealth include integrating personal finance and wealth management into shopping and subscription management services or embedding pension planning toolkits into firms’ intranet to help employees better plan their retirement.

“Looking ahead, there is no doubt that more companies will see the benefits of embedding wealth solutions. The true benefit of embedded wealth can of course be realised with powerful APIs. For financial services firms, it will grow their addressable market while lowering customer acquisition costs, thus boosting profits.”

Advice democratisation  

The next trend that Kidbrooke has seen during the first quarter of the year is the democratisation of wealth. It stated that the evolution of digital distribution channels, open banking and analytical capabilities has lowered the costs of wealth management services, allowing firms to better cater to underserved clients.

Despite this, there is still a large percentage of people that are not investing, Kidbrooke said. A reason for this is that current solutions are either out of reach or too generic, where retail advisors are seeking personalised advice. To better meet the needs of retail investors, wealth management firms should improve their product offerings by expanding their investment services repertoire and build better digital capabilities. “They must pivot towards a client-centric approach that places holistic wealth planning at the centre of their activities.”

Kidbrooke believes that one way to resolve this is by creating interactive customer journeys. An example of this can be seen with Kidbrooke’s advanced analytics tools. These allow wealth managers to identify potential issues in the financial situations of thousands of customers within seconds and then send them actionable and personalised notifications.

Greater compliance

The final trend that Kidbrooke is that regulatory compliance is in a pivotal area when it comes to wealth management using technology.  

It said, “The differences in regulations and tax regimes across the world can make international expansion ever more pressing for financial companies. Therefore, it is better to select a financial analytics provider with a long-term perspective and ensure it supports your goals.”

A solution that meets the critical requirements has the potential to diminish compliance expenses, facilitate quick and effortless internal adjustments at all states of the journey. By implementing a well-tailored wealth management solution, a firm can better navigate the financial ecosystem with greater confidence.

To find out more, read the full post here.

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