Harbor View Advisors

Strong Trends Continue in Wealth Tech

FinTech, Human Capital Management, M&A Advisory

September 2018 — By John Mathis


The WealthTech market is extremely dynamic. The end-customer market is comprised of investing consumers who demand a richer, more interactive, online experience from their financial advisors.  Technology innovations are breaking down traditional brand name structures and new entrants are flourishing.  Financial Advisors that embrace technology will have a distinct competitive advantage. 

However, valuations may be reaching a peak as recent “down-round” capital raises may suggest a turning point. Through the first six months of the year, three key trends continued to play out: 1) Proliferation of robo-advisors; 2) Burgeoning micro-investment platforms are beginning to take hold; and 3) The mega-trend of generational wealth transfer has incumbents and new entrants scrambling for their share.

1. Robo-advisors

Trend insight – Robos keep coming

  • Robo-advisors are increasing in popularity due to transparent fee structure and lower account minimums that attract millennials.
  • Global AUM (Assets Under Management) on robo-advisor platforms are expected to quadruple in the next few years from $3.7 Trillion in 2020 to $16.3 Trillion in 2025.
  • While robo-advisors were originally expected to threaten traditional advisor models, they are now viewed as complementary.

Notable transaction – “down-round”

  • January 2018 – Wealthfront raised $75m of Series G venture funding, led by Tiger Global Management, at an estimated $425 Million pre-money valuation. Notably, Wealthfront’s $425m valuation was down from around $700m the last time the Company raised capital in 2014, due to rising competition reducing investor optimism.

2. Micro-investment platforms

Trend insight – Micro-investment is on the rise

  • Micro-investment platforms, which encourage increased investment frequency with lower minimum contribution amounts, continue to gain traction.
  • 41% of millennials feel that they lack enough money to invest, making micro-investment platforms an ideal learning tool for first-time investors.

Notable transaction – Traditional brand embracing technology innovation

  • May 2018 – Acorns raised a $50m funding round from BlackRock (NYS: BLK). BlackRock plans on using its investment in Acorns to gain insight into savings and investment behaviors of a younger generation of investors. BlackRock also plans to evolve its own technology offerings to better suit the needs of younger investors.

3. Generational wealth transfer

Trend insight – Mega trend

  • The industry is preparing for the largest-ever generational wealth transfer, as an estimated $30 Trillion in assets will be passed down from Baby Boomers to Gen X and Gen Y.
  • As technology providers prepare for this shift in demographics, demand will increase for better technology and platforms that provide an intuitive, mobile user experience.

Notable transaction – Traditional brand embracing technology innovation

  • March 2018 – Trizic raised a $10m funding round led by Sorenson Ventures, with participation from FIS (NYS: FIS). The investment in Trizic will enable FIS clients to manage smaller-balance accounts, attract tech-savvy millennials and serve high-net-worth clients with sophisticated investment models through digital advice.

DISCLAIMER This presentation is intended for information and discussion purposes only and does not constitute legal or professional investment advice. Statements of fact and opinions expressed are those of the participants individually and, unless expressly stated to the contrary, are not the opinion or position of Harbor View Advisors, LLC (“HVA”). The information in this presentation was compiled from sources believed to be reliable for informational purposes only. HVA does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.