WealthTechs succeed by managing wealth and not the wealthy

The current state of wealth management services has one fatal operating flaw: they are managing rich people instead of wealth. “We have conflated this issue of wealth management to managing the wealthy as opposed to actually providing wealth management services to individuals,” Leon Ong, partner, financial services advisory at KPMG Singapore, told Asian Banking & Finance. “Most people now see there’s a gap in the wealth management market, which is to serve the most underserved segment of the market: people like you and me, who earn more money than we spend.”

Although not flush with cash, the mass affluent market has the capacity to save money, Ong noted, but does not meet all the criteria to qualify for traditional wealth management services. Traditional wealth managers often have their eyes locked on servicing high net worth (HNW) and ultra-high net worth (UHNW) clientele-people who own at least US$1m and US$30m in liquid financial assets. This snubbing of the mass affluent market is a massive missed opportunity that wealth technology or WealthTech firms have readily filled in. WealthTech firms have notedly enabled lower cost, easier and simpler access to wealth management services and products that were traditionally available only to HNW individuals at a higher cost, noted Theron Lam, head of product development Southeast Asia, Schroders; and Sin Ting So, chief client officer, Endowus.

Singapore as WealthTech hub Lam and So, representing Singapore Fintech Association’s (SFA’s)’s WealthTech subcommittee, particularly highlighted how WealthTechs have helped democratise access to private assets by allowing individuals to access them via lower minimum investment amounts.

“With high rates of adoption of digital financial services, this new generation of investors has more access to information and demands more sophisticated products and more control over their wealth journey,” Lam and So said.

“These clients, with relatively smaller amounts to invest, were subject to high fees, poor access to investment products, and lack of aligned advice. [They] now collectively form a key market, which encourages traditional financial institutions to rethink their models and service offerings,” they added.

WealthTech firms have particularly found a haven in Singapore, taking advantage of its location, regulatory environment, and reputation to attract investors across the region.

“Asia, in general, is the second largest wealth hub in the world after Europe; [and] Singapore has long been a regional hub of wealth,” Ong said. Demographics are another key factor. “The city has an increasing population of middle-class and high net-worth individuals,” Ong noted. The financial regulator, the Monetary Authority of Singapore (MAS), and organisations such as the Singapore Economic Development Board also encourage innovation. “They provide grants and funding to kind of get startups off the ground to sort of accelerate their growth.”

All these, along with Singapore’s stable economy, and its position as a financial services hub make the city attract venture capital funding, and therefore startups, to set up shops in Singapore.

In a report, the SFA and PwC identified WealthTechs as one entity that will increasingly shape the asset and wealth management sector in