How Fintech Provides Opportunity for Investors and Financial Advisors

By: Zak Boca

I can recall my feeling as an investor in 2008, thinking: I have to have an advisor, because I have no idea what I’m doing. I don’t have the access or the tools to do what they do. 

But a lot has changed since then. And so has the idea that investing is too complex. Fintech has found steam. With that, the notion that investing is too complex and that investors are incapable of managing their own sophisticated portfolios, is being broken down. 

Instead, technology is providing massive amounts of opportunity for both individual DIY investors and independent wealth advisors, including: 

1) Fintech will continue to make alternative investments more accessible.

Alternative investments have continued to become more mainstream, though we often hear at the large financial firms they still aren’t available to clients. Or if they are, they’re often only available to qualified ultra-high-net-worth clients, which is really a client segmentation problem. Essentially, the bank has decided to offer a small set of alternatives to a smaller set of clients. 

Independent wealth advisors continue to see this opportunity in the marketplace. And when their clients want access, advisors should make alternative investments available for them. But instead, many still aren’t.

Clients are finding that other firms outside of their traditional advisory firms, such as iCapital and ourselves at AltExchange, are focused on serving that exact need. 

The DIY high-net-worth investor is also increasingly being given more access to alternative investments through platforms like Crowdstreet, Yieldstreet, upcoming Moonfare, and many others. Yieldstreet recently announced the offering of structured notes. While we don’t advocate for specific investments, we appreciate that these products continue to become available both to the DIY investor and the wealth advisor looking to go independent.

In short, this inaccessibility problem is being solved. Wealth advisors should continue to look to alternative investments as a way to differentiate and gain access to wealthier clients, and technology gives them the ability to do so.

2) Wirehouses will continue to lose the appeal of “one-stop-shop” lending benefits. 

I recall a conversation I had as a client with my Morgan Stanley rep: That I’m lucky to bank with them, and that as a valued client, I’ll benefit when it comes to borrowing money. 

Lending can come in the form of mortgages, commercial lending, cash management, and securities-based lending (margin loans). DIY investors may feel like they’re missing out on these benefits. 

But competitive lending solutions are increasingly becoming available outside of the wirehouse. 

TriState Bank is an example of an innovative solution designed for registered investment advisors (RIAs). Through TriState, clients have access to London Interbank Offered Rate (LIBOR)-based variable rates and fixed rates against their investment accounts. 

For the DIY investor, you’re in luck as well. LoanAdvance will lend up to 70% of the market value of your investment account. 

These are examples of massive benefits that have traditionally been exclusive to large wirehouses. But fintech is continuing to break the barrier. 

3) Wealth management platforms provide consolidated reporting and back office support.

Keeping track of investment performance is not easy – even for stocks. 

As a Morgan Stanley client, I used to get real value in sitting down once quarterly to go over my portfolio performance. But not as much anymore, as fintech has made this process far more simple. 

Investors (and their wealth advisors) want web-based access in real-time. While traditional investments have been digitized, others, such as alternative investments, are behind. 

It’s absurd that at this stage, investors and advisors are still manually compiling reports – the standard for alternative investments. But now, reporting, back-office improvements, and automation are being made available by fintech leaders in wealth management platforms for both DIY investors and advisors. 

AltExchange is here to further break down the barriers for investing in alternatives for both wealth advisors and DIY investors.

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