Capital One, Goldman Sachs Jump on Wealthtech Bandwagon


Capital One is the latest legacy financial institution to jump on the wealthtech bandwagonOpens a new window with its recent acquisition of United Income, a robo-adviser focused on helping retirement-age savers manage their wealth.

The banking and credit card giant joins Goldman Sachs and Northern Trust in acquiring digital platforms to provide financial advice. United Income, which will remain independent under its current management, has $746 million in assets under management in 750 accounts.

No surprise that the newly-acquired company says it has plans for significant expansion. Capital One had taken a 10% stake in the robo-adviser last year before taking full control on undisclosed terms.

I, Robot

The move of banking giants into wealth management for the mass affluent underlines their focus on creating new profit centers as earnings from trading and lending fade. Their idea is to let the robo-adviser handle routine interfaces with the client and free up highly-paid humans to have more face time for discussion of values and long-term objectives.

Robo-advisory firms — there are more than 200 in the US alone — are expected to reach more than $1 trillion in assets under managementOpens a new window next year and around $4.2 trillion by 2022. They are exponentially expanding the market for financial advice, bringing the benefit of algorithms programmed for individual investment profiles to individuals who cannot afford the hands-on services of live advisers.

Revolutionizing wealth management

Goldman Sachs has acquired United Capital, a technology-driven investment adviser based in Newport, California, that serves high-net worth individuals and has $22 billion under management. The acquisition, valued at $750 million, fits well with Goldman’s traditional clientele but also will work for its downmarket online bank, Marcus.

Northern Trust recently acquired Belvedere Advisors, which has a robo platform, Emotomy. The idea is to pair Belvedere technology with Northern Trust’s expertise in asset management for financial institutions.

The term wealthtech also comprises micro investment services such as Robinhood and portfolio management tools. Just as the broader fintech industry is poised to revolutionize bankingOpens a new window , wealthtech is ready to transform asset and wealth management.

Global innovation

FinTech Global, which sponsors an annual wealthtech summit, published its first WealthTech 100Opens a new window in April after a panel of industry experts reviewed more than 1,000 firms. Four of the five top companies were located in Europe or the US, which accounted for 29, followed by the UK with 22 and Switzerland with 11, then by countries including Australia, Germany, India, Israel, Singapore and Canada.

The top 100 list ranges from 3rd Eyes, a financial planning platform that works with robo-advisers to provide more sophisticated solutions, to YCharts, a research platform that dismisses Bloomberg and Reuters as antiquated.

For what it’s worth, neither Capital One’s United Income nor Goldman’s United Capital was on the list, which was based on the firm’s use of innovative technology to solve a complex industry problem, generate cost savings or efficiency improvements across the value chain — as opposed to target audience or market share.

Buffett, should I buy gold?

In the view of many experts, the current ferment in innovation and fragmentation of services is merely a prelude to a reorganization of the financial services industry.

Lex Sokolin, global director of fintech strategy at Autonomous Research, foresees a “massive re-bundling”Opens a new window as robo-advisers provide bank accounts, payments apps incorporate automated investing and digital lenders offer insurance. This could all soon lead to automated virtual financial assistants providing a “mass-customized AI-enabled experience.”

Since the introduction of Amazon’s Alexa, Apple’s Siri and Google Assistant, the potential for voice-activated marketing of financial solutionsOpens a new window has been evident.

Maybe the next step in wealth management will be a voice assistant called Buffett that can provide sage advice on what to do next.