Nov 09 2020

Wealthtech: Everything you need to know

Are you wondering what is wealthtech? In the recent years, new financing and investment formulas for companies have appeared known as wealthtech . These provide quick access to capital and simplify processes.

What is Wealthtech?

Wealthtech is the contraction of Wealth and Tech, a term created to designate a subcategory of Fintech where financial technology companies create digital solutions to transform the investment and wealth management industry.

They manage and grow people’s wealth with advisors based on artificial intelligence and big data, micro investment platforms or social network solutions.

In other words, it is the management of savings and investment with technological means, one of the segments of Fintech with the greatest projection.

Some examples of Wealthtech in Spain are Indexa Capital, Micappital or Acuratte Quant.

Wealthtech’s identified categories

What is wealthtech? In these new investment methods we find different categories:

Micro investment that allows to make small investments without commissions with very low initial amounts. In other words, they are applications that present investment as something simple, comfortable and accessible.
Digital Brokers: online platforms and software tools that make stock market information available to anyone, as well as the possibility of investing in the stock market. Clients can see statistics and make comparisons with other traders.
Robo Advisors that provide an automated portfolio management service. They invest their clients’ money in different instruments. It is passive management.

These help platforms for investors and financial advisors bring together the necessary tools to optimize the management of investment portfolios. In other words, they are robotic financial advisors that provide an automated portfolio management service with machine learning algorithms. They carry out passive management and the investment they promote is made with quoted funds.

Thanks to this type of service, investments are created, planned and monitored and help to make decisions on the products to be selected or the resources to be allocated.

Quant Advisors use artificial intelligence to provide an automated investment service and predict the best investment strategies. It is active management.
Crowdfunding, a collaborative project financing mechanism developed on the basis of new technologies. There is no financial intermediation and it consists of putting in contact promoters or creators of projects that demand funds from different investors. Here, there is not only one investor, but several people invest in the project they like and become new partners in that company. Each person pays a minimum amount for the project until the necessary figure indicated in the round is reached, it is a collective collaboration. In this way, the risks are also reduced.
Crowdlending, on the other hand, is one of the forms of micro patronage. In this case, it is based on loans. It consists of financing companies, projects or individuals through numerous investors, en masse, in exchange for an interest rate. It is an innovative model, an alternative to traditional banking services.

In other words, it allows people to be financed by the financial community without resorting to the services of a bank or other traditional financial institution. It makes it possible to increase the security of investors who can spread their investments over a large number of assets, thus reducing risk (non-payment, bankruptcy of the company, changes in interest rates or in the economic prospects of the company or the economy, etc.).

Moreover, they do not have to have previous experience or financial knowledge, nor do they have an exclusive investment obligation with the platform.

Legal aspects to be considered

The evolution of technology and the progress of digitalisation are enabling the evolution of financial services. While Wealthtech is transforming the investment management industry, it is important to comply with all legal obligations.