How fintech business models might disrupt traditional wealth management

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Digital disruption has by no means ended with Netflix and the closure of your local video store. In fact, the process of upending traditional industries with digital solutions is arguably just getting started. The next wave of digital disruption is likely to be about automation, algorithms and robots, and these areas offer incredible potential to change our lives and the way we do business.

One area of digital disruption that is simultaneously in the process of developing and already successful is fintech, and that dual process makes it unique interesting as a case study. What we mean by that is this: Fintech is everywhere, it’s already a multi-billion-pound industry; millions of people around the world use it, many without even knowing; but it’s also an industry that looks like it is only taking the first steps in its journey, albeit one that is accelerating exponentially.

Fintech has opened new world to novice traders

By fintech, we mean financial technology and the raft of new businesses that wish to harness the power of tech to change how we think about finance. Yet, it’s interesting to note that fintech both complements and challenges the traditional financial industry. Indeed, it’s not as if we are seeing tons of job losses among bankers and wealth managers in the City of London as a result of disruption by fintech. But that might change.

Fintech companies, specifically those who deal with trading and investment, are designed to open financial products to the layman. By layman, we mean those who would not have the means or experience to enter into the traditional world of finance. The businesses do this by offering affordable trading options, meaning you can invest and trade small amounts of money without the sometimes-extortionate fees charged by traditional wealth managers.

Access to free data and trading advice

While the cost-effectiveness of fintech is important, it is the access to investment tools, data and analysis that is crucial for inexperienced investors. This, of course, covers a broad spectrum. It could be something like updates and trading tips from an expert like Adam Lemon, chief analyst at DailyForex, or it could access to copy trading tools, i.e. those that allow you to mimic expert trades, and technical indicator alerts. The point is that you get access to the advice and data that was once considered the purview of expert traders alone.

So, why then has Wall Street, the City of London et al not seen huge job losses? Why are those traditional financial industries still flourishing? It would take more than a short article to answer that question, but it’s sufficient to say this is a path that has a long way to go. Can you really envisage going to a stockbroker on the high street 10, 20 years from now? The industry will change, it’s just a matter of how quickly.

Obviously, these changes do not need to necessarily have negative impacts on the established finance industry. The lessons learned from digital disruption that has already occurred is to embrace change and not resist it. Financial institutions must wholly embrace fintech, and then weave it into the fabric of their industries. Will they be successful at this? Or will the traditional financial industry’s business models become obsolete? For the moment, it’s all theory, but don’t be surprised to see big changes coming soon.