Wealth management is a large part of the fast-growing financial technology (fintech) investments space, highlighted in my last blog. Investments in wealth management technologies make up nine percent of the number of fintech deals nationally.
Investments in automated investing advisory or “robo-advisors” make up a large part of the wealth management space. New York-based Betterment, one of the biggest players in the growing world of automated investing advisories, raised $32 million last year in a Series C round that listed investors, including Citi Ventures and insurer Northwestern Mutual.1 Researcher Aite Group expects $60 billion to be managed by automated investing advisory by the end of 2015.2
Insurers use such automation to select investments that meet customers’ risk tolerance and goals with very low fees. They’re easy to use and increasingly popular, especially among millennials—an important growth segment for life insurers. For low-complex portfolios, automated advisory is replacing traditional, labor-intensive processes with algorithms that determine the best portfolio for the investor–bringing more sophisticated advisory services to a historically underserved sector. Along with also changing the one-to-one communications insurers typically use to manage relationships, automated advisory and other innovations within the fintech community are helping insurers meet the needs of a challenging customer base, lower costs, comply with changing regulations and compete more effectively with new competitors.
As ubiquitous and relatively inexpensive technologies continue to lower barriers to entry and costs to operate, life insurers have an opportunity to lead the way in fully embracing fintech and using new technologies as a critical step towards becoming more digital.
- Fintech New York: Partnerships, Platforms and Open Innovation report
- Fintech—Part 1: High level of investment