Should wealth managers support retail investors?

WealthTech has helped to democratise the world of investing. What was once locked off to the wealthy has now been made more accessible with some providers enabling investments from as little as $1.

Innovation with technology has paved the way for digital trading platforms, like WealthSimple and Robinhood, to gain significant market traction for retail investors. But one rising area that could also attract a significant portion of retail investors is neobanks. Serving as digital alternatives to established financial institutions, neobanks have helped provide clients with tools to help them easily manage their finances. In fact, the global neobanking market was valued at $143.2bn in 2024 and is expected to reach $3.4trn by 2032, according to Fortune Business Insights.

While these initially started as competition for banks, as they grow, many are looking to expand their offerings. Many are on a path to becoming financial super apps that can provide customers with everything they could need for their financial life. One area at the centre of this is digital investing services.

For instance, UK neobank Monzo released its own investment features for clients in 2023, while German neobank N26 launched investing tools in January 2024. Revolut, another UK-based neobank, is another to have recently entered the wealth management sector. Late last year, it launched Revolut Invest, a standalone wealth management app providing access to over 5,000 US and European stocks, ETFs, commodities and bonds. It is also reportedly in the process of adding UK stocks to its offering.

As more neobanks continue to grow, it is inevitable that more will look to embed retail investing into their services. The question is, should wealth managers be concerned by this rise of neobanks?

Speaking to FinTech Global, Vitaly Kudinov, Senior Vice President at Devexperts, said, “It is first important to acknowledge that wealth managers have a very specific role – to protect and grow their clients’ wealth – and are under fiduciary duties to ensure they act in best faith in order to do so. The self-directed retail trading capabilities offered by neobanks are very different from this by nature.

“For example, certain assets, like cryptocurrencies or leveraged ETFs, are high-risk but often available for non-professional clients of a neobank. By comparison, it is still very rare to see a wealth manager allocating clients’ money into such assets without sharing the associated risks or discussing an investment horizon and targets.

“On the other hand, keeping client funds in a traditional 60/40 portfolio nowadays will most likely devalue clients’ wealth significantly – and a wealth manager must be prepared to address possible concerns their clients might raise on this front. So the meeting of these two worlds is definitely something that wealth managers should be thinking about.”

Kudinov also pointed to the rise in interest in retail trading. Thanks to advancements in technology that have made trading possible through the mobile phone and the rise of financial ‘influencers’ on social media, there has been an increased popularity in trading. Younger generations, particularly, are now becoming interested and knowledgeable about trading from a young age, Kudinov noted, which is something wealth managers should be aware of and consider ways to support younger investors.

“Overall, wealth managers need to be asking themselves the question: how can we cater to our clients’ evolving wants and needs, whilst continuing to deliver on our more traditional wealth management services?”

Why implement retail investing capabilities?

While retail investing is rising in popularity, should traditional wealth management firms try to diversify their client base. Many of those investing through neobanks are likely to be younger investors with less expendable wealth, not the typical priority for wealth managers. However, these are the investors of tomorrow and building a relationship now could be vital in the long-term.

Nick Perrett, CEO and founder of Prosper, is not sure wealth management firms need to target retail investors. He said, “I’m not sure it is appetising for existing wealth managers – this is their Kodak moment – there is only downside and loss of margin if they embrace this future, so why would they? Most won’t and most will die just like Kodak did. The smartest in the room will reimagine themselves – I believe the future will yield a new third way. One that is part online platform, part human adviser, but definitely not the same as anything we know today.”

Kudinov noted that there is an opportunity for wealth management firms to diversify their product offering. However, products would need to be designed to meet the market demand, whilst reflecting the wealth managers’ brand and values.

A way to achieve this could be through partnerships or collaboration between wealth managers and neobanks. For instance, the wealth manager could provide the structured products via a neobank’s retail trading service. “We are seeing collaborations between the traditional or established and the trendy and new in many sectors so the approach might be similar in the wealth management space.”

If a firm opts to take this path, Kudinov encourages them to consider what types of products they would want to offer to ensure clients will trade responsibly. This is particularly the case for younger clients that might eagerly take up trading but lack the knowledge of how to navigate markets. Potential solutions could include ringfencing, and setting limits for trading.

Kudinov also noted that many firms already issue their own structured products that could be introduced as an asset class available for self-directed trading. Additionally, many have teams that design and manage the products, often employing proprietary algorithms and open architecture to select the best features and pricing. These products can also be highly customised to meet a client’s risk tolerance, investment horizon and return goals.

“If offered by a neobank in partnership with a wealth management firm, clients of the neobank can enjoy investing into assets with a defined investment horizon and risk level, often not available for an individual trader due to the proprietary algorithm of the risk assessment, growth potential of the underlying assets, and nature of the complex investment assets offered by investment banks, which are not traded publicly.”

Making retail investors appealing to wealth firms

As previously noted, retail investing has not been an area of focus for many wealth management firms, but there are ways that can make it more appetising.

Álvaro Morales, chief strategy officer and co-founder at Flanks, believes by using technology to streamline and automate much of the process, retail trading can become much easier to support without significant impacts on resources. Morales said, “Digital technology can dramatically reduce the cost of processing trades while improving the quality of advice. With instant KYC verification and automated account funding, investors can execute trades in minutes. Meanwhile, technology that pulls together all client holdings across different platforms gives advisors a real-time, complete picture of their clients’ wealth and risks.

“This transforms simple trade execution into valuable advisory moments – every retail trade can trigger automated risk checks, portfolio reviews, and personalised investment ideas. What was once low-value “execution only” business becomes an ongoing, data-driven advisory relationship.”

One of these, as noted by Kudinov, is the ability for a wealth manager to extend their current offering with self-directed trading, diversifying its current product list. Alternatively, they might partner with a neobank to offer structured products in over-the-counter mode via omnibus or a fully disclosed model to the neobank, which in turn offers the products to their end users.

Another option would be to have a neobank extend its offering by implementing wealth management services on top of existing banking and self-directed trading services, such as robo-advice, regular investment plans and automated portfolio builders. As a final option, Kudinov highlighted a possibility for a wealth manager to partner with a neobank offering banking and trading services to its clients.

“In all of the scenarios described above, it is important that software is built to offer flexibility and integration-appropriateness, allowing for clients to access their wealth management and trading services all in one place, whilst seamlessly transitioning from one to the other. Strong API capabilities, and a modular architecture, so that additional services can be added, are important aspects to think about when it comes to software design.

“Depending on the nature of a collaboration or partnership, it is important for technology providers to be offering advanced customisation capabilities also – both in relation to the look and feel of technology, but also in relation to what features the structured products being offered need to have in place.” Kudinov added that the ease of integration and the seamlessness of appearance and functionality are important to ensure products are appetising for the end user and wealth managers.

When it comes to implementing these retail trading capabilities, it is important firms balance meeting modern expectations while ensuring they reflect the quality and reputation of an established wealth firm. Kudinov noted that it is important to understand that many wealth management clients actually simply want more engagement. This means providing them with real-time portfolio updates, clearer explanations of risk level calculations, and more.

Kudinov said, “In these cases, it’s like going to a doctor’s appointment and being given a prescription with a clear explanation of why the doctor believes the specific medications prescribed will help you. Technology that enables clients to instantaneously access details on why a certain decision has been made, together with a holistic overview of the implications of this, and as it happens can be extremely valuable.”

On a final note, Kudinov explained, “The trend towards neobanks and retail trading services is unlikely to fundamentally change the role of wealth managers, but it does present an opportunity for wealth managers to expand their offering and adapt to the evolving wants and needs of their clients.”