[Wealthmanagement.com] Wealth Management 2023 Midyear Outlook

We are in an age of unprecedented innovation among financial services and financial technology companies. According to data from KPMG, in 2022, global investment in fintech companies reached $164.1 billion. Amid all this startup activity, companies are striving to develop new ways to harness data to make tech-enabled wealth management simpler and more efficient.

However, that level of innovation and investment in the wealthtech ecosystem could be even higher. In the wealth management space, fintech firms rely heavily on data, particularly client accounts and investments data that resides with custodians and back office providers. Each custodian has its own data policy, file formats, and structure, along with archaic systems tied to flat files and overnight processes. That means companies that want to use the information must build custom connections and workflows for each custodian to pull in data, which is a timeconsuming and expensive process that can take as long as 12 months to get right—just for a single custodian.

With multiple feeds of data and systems that aren’t in harmony with one another, the quality of the data often suffers, resulting in poor advisor and user experiences. At minimum, multiple feeds often require manual processes for aggregation and normalization to preserve the integrity of all the data and make it usable.

If ever there were an area in need of reform to boost wealthtech innovation, it’s in the outdated infrastructure that exists between the variety of data sources and custodial feeds.

But new tools are allowing organizations to access and harness critical data more easily and efficiently. There is a growing trend we see of more open API access points to critical client wealth data, which has caused a tremendous amount of innovation across wealthtech. Greater use of APIs over legacy infrastructure is allowing investment companies and fintechs to control their own digital experiences more easily. This new, turnkey architecture is a true accelerator, allowing wealthtech firms to easily create novel investment-driven solutions, expand or enhance existing functionality, and bring innovative ideas to life, faster.

We’ve seen first-hand what other wealthtech companies can achieve once you remove the cost and complexity of accessing custodial data. Two fellow fintech partners of ours—one trying to disrupt the trust market and the other aiming to create a comprehensive compliance solution for RIAs—were facing the prospect of long and costly development time and a host of ongoing maintenance overhead. By leveraging new API-based tools available to them, they soon had access to more scalable data—all in a matter of weeks versus months, allowing these emerging tech providers to compete with more established competitors and disrupt their markets faster and at a fraction of the cost.

The potential to create the most disruptive wealthtech applications rests with changing the infrastructure that exists between data and innovation. As an API-first approach begins to take hold, we are looking forward to powering the next generation of wealthtech innovation.