The global wealth management industry is booming, projected to reach approximately $US145tn in assets under management by 2025, according to Capgemini. 

And the firm says the wealth management landscape is poised for a significant transformation as firms navigate the dual pressures of evolving consumer expectations and technological advancements. Digitised client journeys are on the rise, and as affluent investors increasingly seek tailored, low-cost digital services, traditional wealth management firms are compelled to rethink their strategies, often turning to partnerships with WealthTech companies to stay competitive.

Industry growth - estimated at 8-10 per cent annually - will be driven by rising affluence and the intergenerational transfer of wealth.

This intergenerational shift is also transforming the way wealth is managed, as customers influenced by world-class digital experiences in other areas of their lives now expect similar standards when managing their money.

The Rise and Rise of Consumer Wealth Apps

With the wealth management experience ripe for modernisation, over the past decade venture capital-backed founders across the globe have launched a volley of self-directed wealth apps to capture the hearts and minds of young and old alike. Being offered a tone of voice and user experience more reminiscent of social media or eCommerce than investment management, millions of consumers have jumped on board, as local heroes have emerged such as Robinhood in the USA, eToro in the EU, Spaceship and Superhero in Australia and Sharesies in New Zealand.

These apps have thrived by attracting typically younger users with user-friendly platforms that empower them to trade and save on their own. Their fees are low, with revenue models ranging from modest recurring fees to no fees at all - and in some cases, with the Piper being paid from a cut of the spread on trades and forex.

And now the race is on to see if a global leader will emerge.

This evolution marks a significant departure from the idea of "The Thundering Herd," a term first coined by Merrill Lynch in the 1940s to brand its brokers and advisors in a way that showcased the company's strength. The Thundering Herd also epitomised the traditional full-service brokerage model, which emphasised personalized relationships and a commission-based advisory approach.

A Tale of Two Trailblazers

Today's emerging digital wealth management platforms have democratised access, removing the need for a considerable initial investment. The new class of digital providers target a broader market - anyone with discretionary income and a desire to invest. Here are two case studies.

Founded in 2007, eToro is now global, with 38m users worldwide. Launched as a basic trading application, eToro evolved into a social trading network, introducing "copy trading" in 2010. This was a game-changer, enabling users to replicate the trades of experienced investors, and helped establish eToro as a global leader in social trading.

In 2013, eToro introduced Bitcoin trading, expanding further into crypto in 2017, coinciding with a surge in global interest in digital assets. The platform now offers equities and aims to grow its brokerage business while localising offerings in key markets.

At the other end of the world Sharesies, a New Zealand headquartered platform, also exemplifies the shift. Co-founder Leighton Roberts recalls a conversation with co-founder Sonya Williams while they were both still executives at Kiwibank, who asked him where she could invest $50 - a sum that would have been dismissed by traditional firms.

It wouldn’t have even covered the brokerage fee on a trade at Merrill Lynch.

 When Sharesies launched in the middle of the last decade, Roberts said that millennials were not being marketed to in ways they found appealing. “People want to engage with something online and fast; they expect great user experiences that employ today's technology,” he said.

The traditional wealth management sector, however, was largely uninterested. “For customers, it was almost like you were being anti-marketed,” Roberts explained. “If you went to the traditional places, they would try and get rid of you because you just didn’t have enough money. It was the opposite of being sold to; you were being repelled.”

Sharesies focused on ease of use, great customer experience, and innovations based on what Roberts calls a “minimum lovable product.” In its first year, the platform facilitated a million dollars in trades; today, more than 750,000 customers trade $40m daily. 

Managed Wealth Platforms

While the new age self-directed apps duke it out to win consumers over, the stalwarts of the managed wealth sector continue to build and refine their own software products, serving a different set of customers: the industry.

These platforms are typically more mature and are embedded into professional wealth management practices across the globe, helping them to run their businesses and provide investment advice. Market leaders like FNZ (global), Orion (USA), Xplan (Australasia, UK) and intelliflo (UK, USA) operate on traditional software or SaaS revenue models, with revenues in some markets – especially the USA – derived from both software fees and funds inflows.

In a variation of the theme, Australia’s Hub24 and Netwealth platforms provide the infrastructure for advisers to manage client investments, offering features like portfolio administration, tax reporting, and access to a wide range of investment options.

Tech Round-Up asked Harry Mitchell, Deputy CEO and Head of Wealth at Iress (the owner of Xplan) to explain how his product works. "Xplan is an advisor desktop. It's a full stack, end-to-end solution that offers advice, wealth, and practice management to financial planners.” He described the traditional platform as a monolith and says the next wave of innovation will reflect the need for greater composability and integration into client tech stacks. “We're looking at how we present the Xplan product in a way that the user can integrate it into a broader tech stack. They may use some of our tools for the process, but not all of them.”

The Allure of Southeast Asia

At face value, Southeast Asia's wealth management dynamics look attractive, with large populations whose investment capacity will only grow over time. For those of us who are students of Southeast Asia, the rise and rise of the emerging tigers is well-documented. As GDP rises, so does the local consumer’s ability to buy their first mobile phone, their first online shopping experience, their first plane ticket, and so on. As in other sectors, the increased uptake of technology-based solutions promises to disrupt traditional Wealth models, driven by low-cost entry and user-friendly technology.

Michelle Ferrario, CEO of StashAway in Singapore, recently told our partners at GP Bullhound that younger generations in Southeast Asia hold more investable wealth than their parents. Using technology to reduce servicing costs makes online wealth platforms more appealing, even though many markets in the region still exhibit low investment levels.

When will it all happen? - is the question du jour. Currently only 43 percent of people in Southeast Asia can save about 10 percent of their income. That will need to increase for the self-directed Wealth apps to scale and move into profit.

Indonesia serves as a good example. It may be Southeast Asia’s most populous state, with 280 million people, but its average wealth levels are low with GDP per capita under $5,000 in 2023. Growth expectations are high, with online wealth management anticipated to grow robustly for the same reasons as everywhere else in the world - just from a lower base.

Picking your timing is critical and the journey isn’t always easy, as ASX-listed Raiz has learned. The company exited or closed its Asian JVs in 2024, after struggling to generate sufficient profitability.  As one Indonesian VC told us, “We know that growth will come, but we don’t know whether it will take five years or 15 years before there is enough investment activity to provide a Wealthtech platform with a really valuable business.”

Still, there is significant investment interest in the opportunity.  Across Asia (excluding Greater China), at least 60 online wealth management platforms have collectively raised $1.7bn in equity, with over 70 per cent of that amount coming from the top 10 platforms, including Indonesia’s Ajaib and Bibit, and Folio and WealthNavi in Japan. Notably, six of the ten largest raisings were for companies headquartered in Singapore, many of which have customers throughout the region.

Most participants remain privately held, with Japan’s WealthNavi being a notable exception. It raised $70m in private markets before listing on the Tokyo Stock Exchange and raising an additional $173m in 2020. Despite a decline in share performance since its April 2021 high, WealthNavi continues to grow and announced a strategic alliance with Mitsubishi UFJ Financial Group in February 2024, when MUFG acquired a 15.5% stake for $100m, with the stated objective of combining MUFG's vast customer base with WealthNavi's expertise in automated investment advice. MUFG is also making strategic investments in startups across the region, including Endowus and Malaysia’s Gotrade.

Prosus and Insignia Ventures are similarly investing in this space, with both backing Endowus and other platforms like Bibit, Chocolate Managed Account, Ajaib, and StashAway, all based in Southeast Asia.

The Red Pill, or the Blue Pill?

In the 1999 movie The Matrix, where the protagonist, Neo, is offered a choice between two pills, one allowing him to remain in the comfortable but illusory reality he knows, where nothing changes, and the other opening his mind to "reality" as it truly is - revealing the hidden, often uncomfortable truth.

So, here’s the question: will the two domains converge? Will self-directed wealth apps, innovating at speed, encroach on managed wealth market, and if so, when?

We think so. As digital-savvy investors increasingly demand more personalized, intuitive tools, self-directed platforms have cultivated a unique, empowered user base, catering to those who may not have historically accessed wealth management services. Their strengths lie in great user experiences, innovative features, and low-cost, transparent models, all of which appeal to younger and first-time investors.

Traditional wealth management software, on the other hand, remains deeply embedded within the advisor and institutional ecosystems, designed to handle complex, high-touch advisory needs, regulatory compliance, and portfolio management.

As the broader wealth management industry shifts to accommodate tech-forward, self-directed features, we think that forward-thinking traditional software providers will build user-centric features from self-directed platforms to stay competitive, while innovative consumer platforms will gradually add more sophisticated advisory tools to cater to wealthier clients and more complex needs.

The winners will likely be hybrid models - companies that combine the accessibility and UX of self-directed platforms with the depth and sophistication required by traditional advisors. They’ll attract a broader audience, from retail investors to professional advisors and will offer seamless integration of AI, data analytics, and personalized user experiences.

Toro, Toro! Here Comes the Consolidation.

Consolidation is afoot across both the self-directed and managed Wealthtech markets. Private equity’s fingerprints are all over it.

In the USA, perhaps the fastest-growing developed market for managed wealth software, the market-leading platforms in managed wealth are now typically owned by private equity. Orion Advisor Solutions is owned by Genstar and TA Associates. In 2024, in two landmark deals Bain Capital acquired Envestnet and GTCR acquired Assetmark. In the UK, Invesco owns market leader Intelliflo, and there are no signs of the consolidation slowing down. Meanwhile at FNZ, which serves 650 financial institutions and 12,000 wealth managers, private equity shareholders recently stumped up ~$1bn in new capital and installed one of their own as CEO.

And the rush is starting in the self-directed consumer Wealth app market as well. In November 2024, eToro completed its acquisition of Australian investment app Spaceship in a deal valued at up to A$80 million.

Founded in 2017, Spaceship serves over 200,000 clients and manages more than A$1.5 bn in funds. Its core services include superannuation funds under Spaceship Super and professionally managed investment portfolios via Spaceship Voyager.

eToro, established in 2007, boasts over 38m registered users across 75 countries and views this acquisition as a pivotal step in broadening its long-term savings and investment offerings globally. Yoni Assia, eToro's CEO and Co-founder, stated, "We are expanding our long-term savings and investing proposition for our users globally and this acquisition is a key step on this journey."

Spaceship was advised by North Ridge Partners on various funding rounds and on its eventual exit to eToro.

Takeaways:

• The WealthTech juggernaut is a large, diverse, and fast-growing global market.

• It comprises different layers of applications serving both consumers and advisors in distinctly different ways.

• Expect some convergence between these market segments over time.

• Regional differences mean that what works in the USA or Australia today won’t necessarily work in fertile ground like Southeast Asia - and perhaps vice versa.

• Expect a fight for supremacy among the self-directed Wealth apps.

• Battle lines have already been drawn in the long-established managed wealth space.

• Consolidation is inevitable (but we would say that, wouldn’t we?).

 

Disclosures:

1. North Ridge Partners acted for Spaceship in its recent sale to eToro.

2. North Ridge Partners founder Roger Sharp chairs Iress, owner of Xplan, and is a shareholder in Sharesies.