NEW YORK, NY - FEBRUARY 09: CEO and co-founder of Ellevest Sallie Krawcheck attends the Build Series ... [+]
The past decade saw the emergence of a number of digital investing solutions, such as Robinhood, Wealthfront, Betterment, Acorns, and a slew of others, all aiming to democratize access to investment products through low-cost, digital-only solutions. These FinTechs offer easy onboarding processes, low minimum investment requirements, lower fees, and user-friendly interfaces.
However, the next phase of wealth management disruption is taking a different approach. Three new FinTech innovators are taking the best of what new technology has to offer but building it, hybrid style, into exciting new solutions that offer the best of both worlds – Ellevest, Harness Wealth, and Facet Wealth.
This phenomenon mirrors what we saw starting in 2012 with retail eCommerce darlings like Bonobos (my former employer), Warby Parker, and Allbirds, who all eventually opened physical stores or showrooms to combine the best of online and offline shopping. While these three FinTechs might not be opening physical locations any time soon, they are moving away from exclusively robo-based services.
Tackling The Gender Investing Gap
Ellevest is a full-service robo-advisor aimed at female investors, with a focus on how different incomes, lifetime earnings, events and lifespans add up to the need for a discrete investment approach to help women meet their life and financial goals. It was co-founded by Sallie Krawcheck, who held numerous senior roles in Wall Street including serving as the president of Global Wealth and Investment Management at Bank of America, and Charlie Kroll, former founder and CEO of Andera.
Clients get a customized investment plan with simulations that show how decisions made in some areas may affect goals elsewhere, for example, how their risk approach now might impact college fees or retirement in years to come.
Ellevest automatically adjusts asset allocation in line with agreed timelines and while customers can adjust their own exposure, where they veer too far, their investments are rebalanced for free. But while it’s robo-based, there’s still a human element. Ellevest Premium includes unlimited access to advice from Certified Financial Planners and even adds career coaching services.
Leveraging The Best Of Technology And Human Advisers
New York-based Harness Wealth, founded by former Compass CFO/COO David Snider and former Nutmeg CMO, Katie Prentke English, is one firm that tackles this hybridization of human advice and technological innovation head on. Their approach blends top advisers with sophisticated technology to help clients identify financial opportunities and when appropriate pairs them with the right adviser as determined by their sophisticated algorithm.
Harness Wealth seeks to deliver the ultra-high net worth “family office” model for millions of successful Americans. They take a holistic approach across financial, tax and estate planning and encourage clients to look at the complete picture, to capture financial opportunities and manage their whole financial life and legacy across wealth, tax and legal advice, all in one place.
Leveraging Remote Working And Affordable Subscription-Based Price Points
Baltimore-based Facet Wealth’s approach is to combine technology with the benefits of a remote workforce. It was founded by Anders Jones, former Venture Partner at Argyle Ventures; Brent Weiss, former Principal at Brotman Financial Group; and Patrick McKenna, Managing Partner at Catalyst Opportunity Funds. The company looks to attract a clientele that aspires to a more personal service than robo-advice alone but doesn’t have enough in investable assets to qualify for – or to be profitably served by – a traditional full-service wealth management firm.
While Facet incorporates technology to match its clients to a network of geographically distributed Certified Financial Planners, it still provides a dedicated, personal service, including portfolio management – albeit delivered via video conferencing or over the phone. A CFP works with clients to understand their needs and goals and then develops a tailored financial plan, complete with actionable items for the client, before carrying out regular reviews with them. This client ‘blueprint’ is assembled, tracked and managed online. This means they’ll help you with everything from paying off your medical debt to saving for a child’s future educational expenses and beyond.
The next wave
What these three examples show is a trend to use new technology to enhance the strength of current wealth management models, and the continued importance of humans working in conjunction with it to result in the best solution for customers.
As we move into the next decade, the new wave of financial disruptors is embracing advances in FinTech as part of an expanding toolkit, and the future of disruption and innovation may well be characterized by a powerful blend of software and soft skills.
Data shows that it’s getting harder each generation to earn as much as previous generations, so any innovation that expands access to financial planning is a step in the right direction.
