In today’s high-tech climate, the long-term market development of businesses active in the financial sector is primarily related to their investment in wealth management technology and the speed by which they can adapt to industry changes. Wealth technology, also known as wealth tech, represents a generalist term referring to the adoption of cutting-edge technologies in wealth management consultation services to fintechs, private financial institutions, or business owners.
The use of a B2B platform that prioritizes wealth management technology could streamline your portfolio as a private wealth manager, expand your service offerings, simplify the processes of managing global payments, and provide financial institutions with FX services and digital payment solutions relevant to international activities. Wealth technology comprises a vast array of different tools related to portfolio management, investment platforms, and overall financial planning. What tools?
For starters, one could mention robo-advisors, which, in a nutshell, are platform-tailored algorithms designed to manage client’s portfolios based on the user’s risk aversion, monetary possibilities, market fluctuations, or financial goals. In other words, they are AI-based tools built to facilitate the entry of lower-capital investors into international transactional markets and lower the entry level for monetary commitments.
Are They Helpful?
The origin of robo-advisors dates back to the early 2010s, and their creation was a consequence of the financial climate following the great recession of 2008. By 2012, the first so-called partially-independent monetary management system was available to private investors. However, nowadays such tools are a common occurrence and represent one of the biggest innovations brought by wealth technology advancements. Robo-advisors are convenient, as potential investors can use them to set up their accounts and create specific risk scenarios that will minimize the risk of monetary investments.
These tools are cheaper to use than human financial advisors, require lower capital to get started, eliminate subjectivism and human errors from the investment process, and can be used for everything from portfolio management to retirement planning or tax-loss harvesting. High-quality B2B platforms that make use of the latest wealth technology advancements often integrate robo-advisors in their services and use them to offer scalable and highly customizable solutions that can be used to enhance the data-focused construction of private portfolios. BaaS platforms and robo-advisors are interconnected and work together to increase the efficiency of customer-offered services and enable fintech companies, wealth managers, or private investors to focus on their tasks.
What Are the Other Elements of Wealth Management Technology?
Robo-advisors have simplified the way investors and fintechs interact with digital financial platforms. However, wealth management technology is not only limited to advancements in AI-based, automated financial administration services. For example, a crucial component of wealth tech platforms is represented by the use of AI-predictive algorithms for comprehensive financial planning services. Digital financial planning involves the use of machine learning and data-driven analytics to personalize financial offerings to the specific requirements of investors. Moreover, in digital financial planning, time-consuming tasks such as tax planning or long-term monetary budgeting can be automated.
What is the role of these tools? In short, to minimize the access barrier for the financial services available to broad audiences, lower the minimum income threshold associated with conventional investment opportunities, and enhance the scalability of digital platforms.
Wealth technology can be used to provide a personalized digital experience to market-focused customers, is a necessity for data-focused fintech companies looking for market expansion, and represents a way to gain control over automated financial tasks and track portfolios without in-depth knowledge of the ins and outs of the online financial markets.
How Did Wealth Management Technology Change the Digital Financial Climate?
Wealth management has helped streamline most existing digital processes on private B2B platforms. With the help of AI-assisted robo-advisors, the difficulty of managing digital portfolios has been significantly reduced, manual interventions have become rare, and investors can now monitor their financial returns 24/7, regardless of location. Additionally, through the analytical insights provided by comprehensive data-collection crawlers, B2B agencies that prioritize wealth tech development can integrate behavioral analysis models in the backend code of their platforms and help clients by providing personalized solutions for subjective financial frameworks.
Wealth tech encompasses a set of comprehensive digital tools that BaaS platforms can use to automate communication with customers, provide personalized deep-web portals to token-verified clients, and streamline the KYC processes that must be followed by all financial institutions doing business in American markets. Through wealth tech, financial institutions can perform automated verification of client identity, utilize advanced analytics for AML purposes, and streamline the process of sending SARs to the Financial Crimes Enforcement Network.
What Is Compliance Management?
Compliance management, in a nutshell, is the process by which national or international financial institutions or fintech companies adhere to the monetary regulations and industry-specific standards applicable to ventures active in this industry. Compliance management procedures involve the process of engaging in continuous monitoring of transactional data, creating internal policies that align with KYC and AML guidelines, and providing regular SARs to FinCEN for any illicit activity that could affect financial operations.
Compliance management procedures can help FinTech companies and private financial institutions keep in line with data protection laws like the GDPR. On top of that, these procedures are the only way to respect AML directives, automate KYC verifications, and adhere to the financial guidelines imposed by regulatory bodies like the FCA. Wealth management technology platforms often integrate AI-based AML and KYC tools in their toolkit, use robust data protection measures assisted by 256-bit SSL encryption, and leverage machine learning algorithms to continuously record transactional data and identify external threats before they impact clients’ portfolios.
In the US, FinTech companies and private financial institutions must keep in line with the regulations laid out in the Bank Secrecy Act, enforce strict AML measures, invest in KYC checks, and report any cash transactions over $10,000 to the IRS via Forms 8300. In Europe, on the other hand, financial institutions must follow the CRD IV and MiFID II directives and comply with the GDPR. These regulations are no joke, as one mistake, intentional or not, could mean the end of your financial institution’s expansion ambitions. Binance, for example, was fined $4.3 billion in February 2024 for breaking anti-money laundering laws, while in Europe, BNP Paribas was fined almost $9 billion for violating AML regulations.