The first quarter of 2024 has marked a promising rebound for WealthTech stocks, which had faced significant challenges throughout the previous year.
This finding comes from a new WealthTech report from Drake Star, a global tech investment bank. The report can be downloaded for free here.
Despite the improvements WealthTech stocks have experienced, WealthTech still trails behind other FinTech sectors in performance.
Alongside stocks, there was resurgence in valuations during Q1 2024, which can be attributed to the growing interest in alternative asset classes, such as cryptocurrencies and ESG investments. Additionally, evolving regulations have spurred increased demand for WealthTech solutions, underscoring the sector’s resilience and adaptability.
In the realm of mergers and acquisitions, strategic buyers have prominently shaped the landscape, being responsible for over 70% of all activity over the past 16 months. The average size of M&A deals in WealthTech has also seen a dramatic increase, jumping from $98m in 2023 to $145m in the first quarter of 2024. This surge highlights a shift towards more mature assets, even as the sector experiences a gradual recovery in investment levels after a previous decline.
Drake Star’s inaugural WealthTech Report provides an in-depth exploration of the sector, offering various insights, including the development of share prices, funding activities, and valuations, along with a detailed analysis of landmark deals dominated by strategic buyers. A market map across the entire value chain is also featured, providing stakeholders with a clear view of the sector’s dynamics.
Looking forward, the WealthTech market is poised for further consolidation. This trend is driven by the increasing need for profitability and high-quality products. Moreover, the diversification of asset classes and a heightened focus on fraud prevention are set to play crucial roles. Additionally, the adoption of advanced algorithms for robo-advisors is expected to revolutionise the sector. Despite the potential of artificial intelligence to transform the WealthTech industry, caution is advised regarding its implications.
Drake Star Partner Sam Levy commented, “WealthTech players see the potential for AI to profoundly transform their industry. From supporting the largest ever generational wealth transfer to augmenting user experience, the AI-opportunities are real. However, panelists at the Global Wealth Tech Summit warn against AI hallucinations and data privacy. Humans remain critical in interpreting and interfacing with clients and the results of AI cannot become a black box, but rather needs to be auditable, traceable, and disclosed as such to the clients.”
Download the report here.
