Four Ways FinTechs Are Capitalizing on the Silver Tsunami

Andrea You
Cathay Innovation
Published in
6 min readMay 20, 2024

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Building for an Aging America

The impending “generational wealth transfer” has become a sensation, giving way to a mind-boggling ~$70T in assets to be passed down from the Silent Generation and aging Baby Boomers to their Gen X, Millennial and Gen Z successors in the next 30 years. As younger generations increasingly face financial insecurity with rising inflation, growing debt and prolonged pandemic headwinds, it may seem evident that many look forward to inheriting life-changing sums of money to alleviate their financial qualms.

Unfortunately, this simply isn’t the case — an estimated ~70% of the wealth transfer (~$50T) will come from households with a minimum of $1M in assets that can afford wealth planning solutions to help facilitate this transfer, with less than 7% of US households meeting this threshold.

Additionally, the number of financial advisors serving such extraordinary demand continues to slide. The average age of today’s financial advisors is 51–55 years old, with nearly 40% expecting to retire in the next 10 years. Less than half have reported any form of succession planning to service the wave of wealth transfer that is just starting to occur.

The subsequent consequences are threefold:

  1. The underserved majority (93%!): today’s wealth management solutions are primarily geared towards the <10% of Americans who can afford advisory services as they meet investment minimums and seek investment optimization, tax planning and so on. Our back-of-the-envelope math indicates a gap of ~$20T in transferable assets that will go to the 93% of Americans who remain unaccounted for by traditional advisors.
  2. The unprecedented wealth transfer that is just beginning to unfold is only further exacerbating the tech gap and financial advisor talent shortage: most incumbent solutions today, e.g., the Schwabs and Vanguards of the world, have been around for decades with little tech advancement and are primarily focused on wealth planning and investment management vs. wealth transfer and succession planning.
  3. Aging = new costs: the influx of elderly clients brings new concerns to advisors as they often require higher servicing needs, drive up new client acquisition costs as older clients “age out” of the system and potentially expose firms to more legal liability that hike firm overhead costs. Furthermore, it would be naive to overlook the cost of aging and associated healthcare overhead rapidly depleting a significant portion of the wealth that would otherwise be passed down to heirs.

While these trends point to considerable challenges, they give way to exciting pockets of opportunity for fintechs. These include building wealth management for all Americans beyond just the wealthy, digitizing legacy Registered Investment Advisor (RIA) services, creating tools that are purpose-built for the nuances of aging and empowering seniors to age more affordably and confidently.

Fintechs are tackling these gaps in various ways — we’ve distilled what we’re excited about into four core themes:

Building wealth management for the everyday American

As access to pensions continues to decline and Social Security dries up, coupled with increasing longevity, Americans now bear more responsibility than ever for their long-term financial welfare. Historically, investing and wealth management has only been accessible by high-net-worth individuals ($1M-$5M+ in investable assets) to meet advisory firms’ minimums. However, the pandemic led to a 72% increase in fintech app adoption following the outbreak. For the first time, digital-first solutions like Robinhood, Stash and Acorns proved their ability to usurp the traditional Wall Street model, giving rise to a new investor economy that is younger, has fewer assets and is eager to leverage new technologies.

Wealth management built for the masses has since followed suit, with companies like Range, Truehold, and Retirable that span the entire consumer financial journey from investment management and optimization, to retirement planning and wealth decumulation. There is more opportunity for fintechs that are putting power in the hands of the 90%+ of Americans that aren’t looking to advisory services to perhaps figure out how to cash out their Nvidia shares in the most tax-efficient way, but rather find answers to more fundamental questions like, “Am I putting enough in my emergency fund each month?” Or “How much should I be saving today to afford raising kids in Silicon Valley in five years?”

Empowering financial advisors to do more with less

A recent report found that the number of new financial advisors entering the workforce annually no longer offsets the high burnout rate. The upcoming decade will see ~38% of advisors retire, taking over 40% of total retirees’ investable assets with them, with the 5-year rookie attrition rate at over 70%.

With fewer bodies in seats and the growing expectation from clients for personalized, data-driven advice and products, advisory firms are opening their checkbooks to invest in solutions that enable their stagnating base of managers to service more clients with better products, without meaningfully increasing firm overhead costs. Fintechs are filling the gap. For example, Morgan Stanley recently launched a financial advisor assistant that it created in partnership with OpenAI. Dispatch is putting client data intake and maintenance on auto-pilot, Moment offers automated fixed income trading, Thematic offers AI-powered investment research and portfolio construction, and Farther delivers process centralization and workflow automation.

Leaning into succession planning to own the full wealth management journey

Financial advisors are taught to acquire middle-aged to older clients with significant liquid assets to boost assets under management (AUM) and, subsequently, firm valuation. However, as clients are and begin to draw down on these assets or decumulate their wealth, assets under management fall in tandem with little prospect of net new inflows.

These dynamics have created compelling areas of opportunity that startups are already beginning to tackle. Forward-thinking advisors are leveraging succession planning to boost client retention, average revenue per user, and overall firm value, with startups like Ribbon and Wealth.com enabling RIAs to offer digital-first inheritance experiences to capture the full spectrum of their clients’ wealth planning journeys. On the flip side, DTC models like Alix are focused on settlement/the post-planning process to empower families to streamline a logistically taxing and disjointed process. Customer acquisition platforms like VRGL are helping automate manual data processing and client acquisition tasks, setting advisors up for success to win more clients with more personalized, targeted proposals. Lastly, as elder fraud becomes increasingly top-of-mind, startups like Carefull specifically monitor accounts for elder fraud, empowering advisors, clients and families with the peace of mind they need to ensure that their hard-earned assets are in the right hands.

Making long-term care more affordable

The average 65-year old needs about $160K post-tax to cover health-related expenses in retirement, with ~60% of lifetime healthcare spending occurring after age 65. The problem only balloons as retirees age. Healthcare not only grows more costly, but cost increases continue to outrun inflation and increases in Social Security payments. More people than ever are living past their 80s today and many will see their retirement savings dry up faster than ever before, making the need for affordability solutions more pressing. Startups can empower patients to get more value out of their health spending benefits (e.g., Sika Health, First Dollar). Affordability solutions can make the cost of long-term care more manageable (e.g., Paytient, PayZen), and platforms can enable caregivers to deliver higher-quality care more efficiently and affordably (e.g. Mon Ami).

A final word

The convergence of FinTech and SilverTech presents promising opportunities to address the financial needs of an aging population and facilitate the transfer of wealth between generations. By leveraging innovation and a commitment to inclusivity, fintechs are reshaping the future of wealth management and empowering seniors and their families to build towards a brighter financial future.

Written by Andrea You, Cathay Innovation; first published in [99%Tech]

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