John Bird: Opportunities for Startups in Digital Wealth Management

According to Financial Planning, digitally savvy investors are approaching their finances in ways that are radically different from their parents. They are increasingly drawn to emerging financial technologies that are triggering seismic change in the financial sector. More conservative and less trusting, this population is abandoning traditional brick and mortar providers and drifting toward financial technology apps. In this blog, John Bird, Senior Director of Product Marketing at Yodlee, will share insights on the Digital Wealth Management Transformation and how technologies like account aggregation and dynamic new wealth apps are being used to deepen collaboration with investors, and ultimately drive more assets under management. John is responsible for the marketing of the Yodlee platform to financial institutions and startup financial technology companies. With more than 20 years experience in financial services technology, John’s passion is delivering new and innovative products designed to transform the way people manage their finances. 1. What are key trends in wealth management?  With the increase in competition from technology-driven startups and demographic shift to Gen X and Y – wealth managers today experience challenges from many different areas. Independent wealth managers face challenges as they build their own business and provide a myriad of investment products for clients. It is challenging to find the right products and distribute effectively. They also realize the importance of providing an engaging digital experience. Disruptive technology makes it feasible for wealth management firms to serve more customers in the digital channel while reserving the high touch relationships for their most profitable clients. Since 2008, self-service tools have provided the type of artificial intelligence and wealth management advice that was only available from human beings. This type of technology is growing and advancing, based on the ability for these new players to consume data. Data aggregation services like Yodlee make it easier to provide the foundation for building the type of experience that masses want, as well as maintain the high touch relationships that is the bread and butter of the practice. Hence, there’s a proliferation of investment from VCs and private equity firms into financial technology because the banks are too big to fail (not innovating). Larger financial institutions need to transform digital experiences to maintain engagement with clients or else consumers will go elsewhere. In addition, large financial institutions such as Wells Fargo and BBVA are creating seed funds for innovative startups and this trend is likely to continue. 2. How are wealth management startups addressing unmet needs? Overall, the ability for a large financial institution or wealth management firm to deliver self-service tools through the web has been paralyzed. Focused on compliance and regulatory pressures, they have de-prioritized the digital channel. Gen X/Y, two generations raised during an unprecedented period of technology transformation – believe in a more digitally engaging experience. In contrast, wealth management startups are thinking about customers as technology users rather than banking clients. They first consider “How do you want to engage with me in the digital channel?” not “what product do I need to sell?” These startups focus on “How do you want to look at and interact with your personal finances?” and then “How can I provide you with the type of products to help you achieve your goals?” This is a big difference from banks that are predominantly stuck in product-centric solutions. Innovative startups all start with data aggregation. That’s the only way they can obtain a full 360-degree picture of financial accounts. By entering credentials and syncing accounts, wealth managers can quickly create a financial plan and focus on client goals. While the typical banks require extensive paperwork and account statements, aggregated financial data allows wealth managers to speed up the process from 3 months to 1 day. Technology gives wealth managers the ability to scale their business, gain more accounts and generate more feeds. This in turn makes wealth managers more profitable and their clients a lot happier. 3. What type of wealth management solutions does Yodlee offer? Our wealth management segment focuses on two pillars – advisor and investor – built on a foundation of investment and financial data. First, we provide aggregated germane financial data to the advisor so that they can produce financial plans, manage client accounts more effectively and increase scalability. This is accomplished through integration into existing applications that advisors are using or new applications that they would like to build or buy. We enable our data to seamlessly flow into these systems. Second, we enable advisors in financial institutions to build a robust client experience that is engaging and prescriptive. These solutions use machine learning to educate clients about their financial situation in relation to benchmark demographic data. By doing this, advisors can gain trust among clients and increase loyalty. 4. How does aggregated data solve wealth management challenges? Aggregated data enables a wealth manager to get a holistic view of client assets without a manual paperwork, intensive process. This helps with financial planning, customer service and revenue generation. Our data platform serves both wealth advisors (through white-labeled applications) and their investor clients. For large financial institutions, our aggregation feeds into advisor systems so they can cross-sell and provide a better level of advice for a broader set of clients. In the future, the number of wealth managers is likely to be affected with the advancement of automated technology. For people without a lot of money, a wealth manager may not be initially affordable due to limited assets. However, if these people or affluent individuals are engaged early on through a self-service digital experience, they may progress from a free subscription to a paid service. As investors grow their assets and use machine learning, providers can move them into an advisor relationship. Over the past 6 months, we’ve seen a significant increase in financial institutions that are willing to engage the innovative, financial tech startups and transform their digital experience. Financial institutions realize the challenge in developing engaging UI experiences for clients and are therefore seeking outside help. 5. Can you provide examples of successful wealth apps powered by Yodlee? Below are examples of successful FinApp solutions built with our Aggregation API, which is designed for clients who need permission-based access and bank-level security to access their customers’ bank, credit card, investment, and loan accounts.

  • Personal Capital combines digital wealth management tools with sophisticated, objective advice from registered financial advisors to help people manage their money. Its award-winning apps enable users to effortlessly view their entire financial life in one place.
  • FutureAdvisor is an award-winning online investment manager that helps investors analyze and improve their retirement savings plans. It can help analyze 401K plans, IRAs, and brokerage accounts to maximize returns, optimize tax exposure, minimize investment fees, and diversify risk.
  • SelfWealth is a unique online tool, which empowers investors to compare their portfolio’s performance against those of peers, professionals and the market for one low flat monthly subscription.

What changes do you see in the wealth management industry? We recently hosted a webinar on the Digital Wealth Management Transformation with Aite Group that covers trends among digitally savvy investors and the need for engaging user experiences and technologies to deepen collaboration with investors. Feel free to watch the on-demand recording and share your comments below!