Understand how tech has advanced new paths of investing

Wealth creation has been disrupted by the impact of technological innovation; this is clear in the types of businesses that have been built on its evolution. A glance at companies such as Uber and Airbnb proves that the business of wealth creation has become accessible to more than just the uber-wealthy.¹

New modes of wealth creation

The internet has powered the investment industry too, and investors now can use trading software and apps as wealth tools.² The accessibility of these tools allows investors to shape their wealth journeys by simply having access to a working internet connection and a mobile phone, tablet or laptop. The convenience and ease of tech has allowed new opportunities for investors in how to make money and preserve it.

A combination of tech innovation and the human element

While tech has certainly disrupted traditional methods of managing wealth, it’s fair to say that a mix of tech innovation and human relationships is still necessary for wealth advice and enabling insightful investment decisions.³ Many investment businesses operate in this market and offer a platform for wealth advisors to use the advantages of tech and assist clients with specific advice. Indeed, while a small portion of investors have enough experience and knowledge to make these decisions without focused investment advice, the benefits to the investor are multifold when a hybrid of tech and human advice intersects holistically.

The future of wealth creation from an investor viewpoint

EY’s Global Wealth Research Report 2021 investigates how the current landscape post-pandemic has changed investors’ focus and perspectives from an audience of 2,500 wealth management clients in 21 geographies.⁴ The research found that investors favour less risk, with a larger intention to achieve financial goals that are aligned with their own values and purpose. There is more emphasis placed on diversifying investments, financial security and wealth protection.

1. FinTech providers stand to benefit the most from client relationships
   
   This is in part due to two reasons; clients want access to a full range of financial services in one place and are less likely to change wealth management providers. With tech advancing so quickly, the financial platforms that have brought this on board and implemented it as a business model are at an advantage.
   
   The report found in 2021, just 28% of clients globally expect to move wealth relationships over the next three years.⁵ According to the survey, it seems that fewer investors are willing to change their wealth managers. However, when investors did make the change – an average of 38% of their assets were transferred to a different provider.⁶
   
   Part of the reason for the change can be attributed to the range of services on offer from their wealth management provider, as nearly half of that global research audience wants to achieve more of their financial goals through one provider.⁷
   
   
2. Concerns about a lack of investment knowledge
   
   Investors worry a lack of investment knowledge will hinder their ability to achieve personal financial objectives. “Two-thirds of wealth clients have met their financial goals or are well-prepared to do so, but younger and less knowledgeable clients feel notably less confident.”⁸
   
   Businesses need to prioritise digitisation as the competition within the digital sphere is fierce. There is a plethora of information and tools available online to investors, and this offers a valuable opportunity to gain real-time data on individual investor needs and wants. Investors are increasingly looking for a tailored experience when it comes to investment providers and are willing to give more personal information to receive it.⁹
   
   
3. A preference for performance-based fees
   
   At least 42% of the audience fears hidden fees.¹⁰ Improving the transparency of investment costs and providing a clear fee structure will build trust with investors. In fact, 53% of investors are willing to pay more towards fees that deliver value for a more personalised experience in terms of service and products.¹¹
   
   This shows the changing attitudes towards performance-based fees, with investors revising what they are willing to pay for, and the value placed on those costs.
   
   
4. Select a wealth management provider based on holistic reasoning: service, engagement and purpose
   
   All the above factors are considerations for investors when choosing where to invest. While services that relate to fees, products and performance are still top priorities, investors are looking for more integrated financial services by looking into a provider’s branding, reputation and digital offering.¹²
   
   As investor beliefs connect with purpose, more is expected from the services and products they are willing to purchase. For instance, sustainable investing has become a real reason for clients to invest and these types of perspectives will continue to shape how investors choose wealth management providers.¹³

This quote from Deloitte’s 2015 report on 10 Disruptive trends in wealth management still seems to hold true,

Here are 10 questions investors should be asking wealth managers:

1. How is my digital information protected?
2. How are your fees charged?
3. How often will we meet and how will you communicate with me?
4. What process do you follow to determine my needs?
5. What services do you offer?
6. What is your investment approach?
7. What asset allocation will you use?
8. How do you manage my wealth?
9. What are your investment benchmarks?
10. How do you stay up to date with industry trends, regulations, and innovations?
    

The benefits of investing through Wealth Migrate

Our FinTech solution allows investors to use a single platform that offers globally diverse investments, and this contributes to its appeal. Not only does it offer real estate and alternative asset investments, but also the ability to crowdfund institutional-quality deals that wouldn’t be available to most investors, except the top one per cent.

Advancing investor education

Managing wealth shouldn’t be a secretive process; we’re upfront about allowing our investors to make educated decisions when it comes to wealth creation and protection. Our platform offers a host of investor resources from live and recorded webinars on specific deals or discussions with industry or business leaders. Investors can peruse investment deal cards in the meta-marketplace that offer full disclosure of profitability and risk before investing and personally speak with our team of Wealth Consultants. Plus, investors can sign up for complimentary access to an exclusive range of content from blog articles to podcasts and more.

Safe and secure financial transactions

The know your client (KYC) process is an important step in the trust-building relationship between Wealth Migrate and its investors, as it allows potential investors to identify and verify themselves.¹⁵ This forms part of Wealth Migrate’s due diligence and ensures that our investors have peace of mind with their financial transactions, and that Wealth Migrate is a licenced company that upholds the laws applicable to its business and investors.

Wealth Migrate has a valid Category 1 licence (FSP 47394) as granted by the Financial Services Conduct Authority, and this allows Wealth Migrate to provide its crowdfunding offering through intermediary services using shares as a financial product category. Our business needs to be certain it’s not dealing with investors that may be involved in illegal activities such as money laundering or fraud.¹⁶

A crucial part of this process is by aggregating our global investors into compliant special purpose vehicles (SPVS) to create an investment network. This system screens and regulates anti-money laundering and KYC processes upon member registration.

Through our partnership with our European wallet and cash custody provider Lemonway, we provide a digital wallet that is accessible and secure for investors to create and preserve wealth. The financial transaction system handles all payments from investors and distributions back to investors.

Investment fees

Our fees are transparent and come into play at the point of an investment transaction. We only charge a 3% initiation fee at the start of the deal. If a deal does not successfully close, this fee isn’t charged, and investors will receive their originally pledged investment amount back in full.

View a breakdown of the fees we charge and how they impact our investors:

• Platform services (1%)
  
  This includes the costs of sourcing and completing due diligence on the deal, member services and investor onboarding, in-house operations, maintaining the digital wallet and transactions on the platform, and the ongoing development of our marketplace technology.

• Structure services (1%)
  
  Investing in a deal offshore can be challenging for an individual investor. Our fee covers the costs of setting up and maintaining dedicated international SPVS for each deal. This includes the costs of the lawyers, accountants, advisors and compliance officers required to create and administer these structures. With these structures, we provide a simpler, cost-effective and tax-efficient investing experience.  

• Investor acquisition and marketing (1%)
  
  As a global marketplace, we operate in many different countries, each with different rules and regulations on marketing our deals to investors. To be able to accept investors from these countries, we are often required to work through regionally based partners that are licenced by their government regulators.

The insights from EY’s Global Wealth Research Report are particularly important to Wealth Migrate as we continue to provide value to our investor community. We’ve built our FinTech platform to address the changing needs of investors, with the intention of elevating investors’ experiences in the long term.

The next article will focus on the asset class of structured notes and analyse the benefits of investing in debt securities.

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¹  Osztovits, A., Nagy, B., Kőszegi, A., et al. (2014). ‘Sharing or paring? Growth of the sharing economy’. Retrieved from PwC. 
² iTWire. (November 2021). ‘How is technology changing the way we make money?’. Retrieved from iTWire. 
³ Sasfin Wealth. (March 2018). ‘How technology is changing wealth management’. Retrieved from Moneyweb. 
⁴ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY.  
⁵ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
⁶ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
⁷ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
⁸ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
⁹ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
¹⁰ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
¹¹ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
¹² Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY. 
¹³ Nanayakkara, N., Wightman, M., Birkin, A., et al. (2021). ‘EY Global wealth research report: where will wealth take clients next?’. Retrieved from EY.  
¹⁴ Vincent, G., Goldstein, J., and Cunnif, S. (2015). ‘10 Disruptive trends in wealth management.’ Retrieved from Deloitte. 
¹⁵ Chen, J. (June 2022). ‘Know Your Client (KYC).’Retrieved from Investopedia. 
¹⁶ Chen, J. (June 2022). ‘Know Your Client (KYC).’Retrieved from Investopedia.