FinTech Platforms Emerge in Wealth Management

Software companies are seeking to use the “platform” model to extend their reach and help segments of the wealth management industry use technology to retain clients and expand market share.

“It is well established that when software platforms enter into any market, they virtually always win, and they win big,” said Lawrence Johnson, SVP and Head of Fintech Engagement for Morningstar. “Platform businesses are changing everything from metrics to behaviors, and we have to be ready for that.”

Platforms differ fundamentally from traditional value-chain businesses, he said. Wealth management firms traditionally create value by harnessing inputs and optimizing outputs. Platforms facilitate interactions between consumers and producers, easing the interactions in that process.

Initially, FinTech firms offered API stacks and application marketplaces. Now they’re seeking to facilitate the adoption of those technologies in service of client interactions.

Johnson made his remarks to introduce FinTech is Everywhere: the Future of Fintech Platformification, held February 27 in the Boston offices of RSM, an accounting and consulting firm. RSM sponsors the FinTech is Everywhere series with Morningstar.

Most of the seven startups showcased have focused on developing custom software solutions. Seeking to build on what they have learned through multiple engagements, the firms in general are:

  • Marketing their technology and software development tools to companies seeking to build similar solutions.
  • Offering complete white-label solutions with either no or limited customization to targeted segments in the wealth management market, such as brokers and wealth managers.
  • Broadening their market reach to other financial services firms, such as community banks and credit unions.

The primary value proposition is that platform customers can develop or offer their own wealth management solutions in less time and at a greatly reduced cost. The platforms, in turn, will generate revenue without the intense effort and labor that custom solutions often entail.

Platforms presenting were:

ABE. A Better Exchange is approaching digital assets from a different angle. Distancing itself from crypto-exchanges that list Bitcoin and other cryptocurrencies, ABE seeks to provide a global exchange focused on digital assets that represent traditional securities, starting with Real Estate Investment Trusts (REITs).

Hydrogen. This platform is focused on providing an easy way for companies building FinTech-based solutions to integrate the solutions of multiple FinTech firms more easily. Rather than integrate half a dozen FinTech APIs, the Hydrogen platform provides a single, standardized solution.

Bambu. Drawing on broad experience building robo-advisors for large financial institutions and wealth managers, Bambu is providing a white-label robo-advisory solution so that brokers, wealth managers, and financial institutions can more easily offer these solutions to their customers.

Mirador. Focused on the high-net-worth market exclusively, Mirador is aiming to build easier, smarter reporting. The firm will manage client portfolio data to provide a view of all assets to extend reporting into advanced analytics that provide greater insights, as opposed to traditional in-house spreadsheets.

55ip. A “model adoption” platform built to give a financial advisor easier access to tools that analyze its client portfolios against the advisor’s own investment models. The platform is designed to make it easier for an advisor to set up its model and make strategic recommendations to clients based on it.

SESAMm. Through a heavy focus on highly granular alternative data, SESAMm offers a different approach to modeling than traditional market activity-focused procedures. The AI-based platform draws on large datasets, including credit card data, satellite information, and social media, analyzed using proprietary techniques for time-series and other predictive analytic techniques.

OpenFin. Technology in financial services is lagging almost every other industry. OpenFin is trying to change that through interoperable desktop application development and operating environment that enables individual applications to share information, regardless of the native operating system or software application.

Whatever their platform focus, speakers agreed that, ultimately, strong platforms are built around strong user feedback. They also agreed that any financial application must focus on the experience of the end-user. This is a piece that financial institutions can miss when relying on development teams without specific wealth management experience or in-house teams too close to internal systems.

Platform customers will still desire and some absolutely require custom development work to duplicate their high-touch service models. Automating that experience will be the make-or-break difference for everyone. As ABE’s CEO John Pigott put it, “The more the systems and processing disappear, the more the humanity reappears and connects people together.”

Collin Canright