Beyond that, there’s a challenge for providers because they might be experts in technology, but are certainly not when it comes to fiduciary concepts.

Things like due diligence, reporting, and portfolio management, along with planning, that’s an added level of complexity. That complexity in financial services is a tough topic because if it’s complex for the financial professional and the advisor, it’s even harder for the end investor to translate.

For people who are not skilled and aren’t really focused on the nuances of the industry, it just becomes a lot of jargon that they don’t understand. Being able to take these capabilities and adhere to rules and regulations and fiduciary duties of care, while making it easy for the end advisor and the end investor to understand, is a really big challenge.

Wealth transfer and its impact on wealth management

Think about the amount of generational wealth transfer that is only just beginning to happen, especially as the baby boomers retire and then as they pass on and that money gets transferred. That not only requires innovation on the technology side, but also forces advisors to differentiate themselves and the added value that they offer.

If parents are passing along with legacy positions, which typically could be in the companies for whom they worked for 30 or 40 years, they have large proportions of that company’s equity and stock. It may not be as important to the next generation to maintain that position just because that’s where their parents worked.

This demands innovation from the industry to help those investors not only understand what that concentrated position means, but also what they should do with it. Such a need really aligns with the demand for better financial planning.

A greater need for investment analytics that are simple for the end investor to understand puts pressure on the industry and providers to make sure that there are simple solutions out there.

Companies to watch

To start with, Matt mentions

Riskalyze

because he really likes what Aaron Klein has done. Riskalyze have taken very complex topics of risk and portfolio optimization and translated them into great software that really gets into the nuances and makes complex things easy to understand.

With their elegant solution, Riskalyze has enabled advisors to engage in a conversation, and at the end of the day to have taken a very complex topic and made it simple for the individual to understand.

Another Chicago based firm,

YCharts,

helps advisors with fairly real-time data and data from many different sources. YCharts has taken a lot of that functionality and consolidated it at a price point that is affordable for advisors to be able to have as a reference on their desktop. So whether it’s in doing research or answering client calls, they’ve also taken very complex data and made it simple.

Near future

A few macro trends will have a dramatic impact on technology, and FinTech providers specifically.

At the macro level, the absolute amount of money that’s investible will continue to grow, especially in the US where more and more people are going into 401(k) plans. In addition, the number of providers that service the industry are continuing to consolidate, whether it’s the absolute number of advisors continuing to shrink, the broker-dealers buying each other up or the asset-management branch continuing to consolidate.