The Path to WealthTech’s Needed Convolution — Part I: A Conviction Without Consensus

My Series on the Future of Wealth Management Technology (“WealthTech”)

I’ve spent 15 years in the Financial Services Industry and 4 years as a FinTech Entrepreneur (focusing on Wealth Managment). The Wealth Management Industry is a truly unique space because of how important it is to individuals, and yet how eternally frustrating a space it is for technologists (for several reasons I’ll later explore in later Parts).

I haven’t seen any great summaries of the Wealth Management industry, the challenges it faces, the likely outcomes of the future, and the broad industry trends whose direction of inflection will drive future outcomes. In fact, I’ve seen a lot of supposed “experts” get many things wrong. My N-Part Series, “The Path to WealthTech’s Needed Convolution” aims to provide just that: a cohesive roadmap for anyone in the WealthTech space looking to understand its driving forces, biggest hurdles, and likely outcomes.

Part I: Conviction without Consensus

In Part I of my Series, I shed light on the inconsistency with which industry experts view the WealthTech industry. Because industries frequently do not change through actions of a single actor (i.e. there might someday be a “Google” of the Wealth Management Industry … but the industry’s characteristics make that outcome highly unlikely) conflicting and potentially mutually exclusive views of the future could stall innovation and the adoption of technology.

Likewise, if you’re listening to an “expert” talk about where Wealth Management Technology (“WealthTech”) is going, there’s a high likelihood that:

  1. Their view is heavily skewed based on their role within the industry
  2. You can find other “experts” within the industry with differing views

This is a phenomenon that is unique to the Wealth Management Industry and I share with you my personal experience below to elucidate these inconsistent views.


If you were to poll experts in the wealth management industry and ask them “to what extent do you agree with following statement?”

The Wealth Management industry will undergo considerable change over the next decade

the vast majority of responses would likely fall into the camps of “agree” and “strongly agree.” However, if you begin to scratch the surface of how those experts believe the industry will change you’d begin to find variation. Furthermore, if you ask experts what structural evolutions will take place within the industry to catalyze the change they described in the prior step, you would accumulate a Jackson Pollack of disparate conjecture. In other words, most people agree that the wealth management industry will change significantly in the coming decade; however, there is a lack of consensus about what that change will look like and how it will be achieved.

The following examples provide context about several people who are very successful and know the industry incredibly well, and yet have disparate views about the industry’s future (some are even mutually exclusive).

The Automated Takeover

I know a FinTech entrepreneur who has has built succesful startups and had succesful exists (those do not mean the same thing). Furthermore, he has built an investment platform for RIAs that oversees several billion dollars. We had coffee a couple months ago and he told me that he shutting down the platform. When I inquired further and asked, “why would you shut down operations if you’re continuing to land sizeable clients and gain traction in the market?” His response, “in 15 years there won’t be Financial Advisors as we know it. There will be automated investment firms with Financial Advisors on staff, and those automated investment platforms build their own tech.”

I was gobsmacked. This was a very successful entrepreneur (yes, I’m jelly…), building a successful company with traction and revenues (again) and he was closing the doors because — even though he could make money now — he didn’t feel like there was an outsized opportunity long term. In his highly esteemed and expert opinion, Financial Advisors as equity holders and owners of the firm were not going to be around in 15 years.

It should be clearly noted that in this view of the future there are still Financial Advisors, they are, however, W-2 employees of automated investor platforms and not equity holders of the firm as is currently the case (more on that on later Phases).

Silly Machines… Planning is for People

I was doing a presentation on WealthTech at the Institutional Investor Conference in Chicago, and the panel before my presentation had the CEO of a Multi-Family Office (“MFO”) that worked exclusively with leadership in tech companies (many of them successful startups with exits). During the panel he continually spoke about how the core of what his firm does is planning not investment management and asset allocation. As someone who’s intimately familiar with machine learning and predictive models, I posed a question directly to him at the end of the panel:

Me: Do you think we’ll see machine learning algorithms that can provide planning capabilities as good as human advisors in the next 5 years?

MFO CEO: No, we’re at least 10 years away from those capabilities being built

I strongly disagree with that statement (that’s me trying really hard not to say, “he’s wrong”), so I pressed him further.

Me: So even though we’ve created machine learning algorithms that are able to beat world champions at Jeapordy, you’re saying those same algorithms couldn’t do the sophisticated planning that takes place in the UHNW market?

MFO CEO: Because planning is something that is so unique to each individual, and each plan is so sophisticated in that you’re trying to optimize multiple objectives at one time like estate planning strategies, cash flow management, tax harvesting strategies and the like, we’re at least 10 years out from those capabilities.

In his view of the world, the heavy lifting done by FAs is, and will continue to be, planning. Communication might be enhanced through text, chat, video conferencing, etc. but these will be incremental improvements, not leaps of functionality (e.g. Horizon 1 not Horizon 2 if you’re into McKinsey’s Horizons of Innovation).

AlaKaZaaam … Let it Be Deeply Personal!

I read an article written by the Chief Digital Officer at one of the big wirehouses (yes, you can follow the link and find out who it is … but you can see that I’ve tried to not personally throw anyone under the bus, so why start now).

The article refers to how big data analytics and technology will provide advisors the ability to know their clients even more intimately and be able to provide curated, personal advice at scale. In a world where advisors are unencumbered by administrative tasks, capacity will increase. Advisors will able to custom tailor plans for a larger client base and leverage new technologies like text, chat, and video conferencing to communicate more effectively (and efficiently) with clients.

In her view of the world, the technology enabled advisor is the harbinger of the future. Technology and Big Data enable a deeply personal planning and financial oversight experience, and advisors are able to expand their capacity (more on technology that needs to be put into place before any of this can realistically happen in future Parts of the Series).

The Takeaway

This is anybody’s game … we’re at a crucial point of inflection for wealth management and there is no consensus as to what the future looks like. Do automated investment platforms that use Financial Advisors as W-2 employees end up owning the industry (“The Automated Takeover”), or are top RIA firms able to build “machine enabled advisors” that expand capacity and personalization of advice (“AlaKaZaaam … Let it Be Deeply Personal!)? Or, does financial advice provision change very little — especially for the Ultra High Net Worth (“UHNW”) — because of its complexity, where advisors are providing a unique service that looks largely the same as it did in at the turn of the century?

… read on to future Part’s of the Series as I explore the big industry trends, driving forces, and likely outcomes.