Wealth tech sees sharp decline in new entrants - Business Insider - Business Insider

are among a slew of incumbents that have launched their own robo advisors, for instance. And while not all have been successful — Investec shuttered its robo platform in May 2019 — these efforts have enabled incumbents to better compete with and counter startups.

A grueling competitive pricing climate among fintechs also likely had an impact. These fintechs have struggled to make their businesses sustainable amid high customer acquisition costs and limited per-customer revenue. This is because they tend to have lower requirements, likely to attract young customers: Wealthfront, for instance, has a minimum deposit requirement of $250, 200 times less than the $50,000 required by Vanguard. This likely helped deter new upstarts from entering the space.

The challenges facing the wealthtech segment will drive existing players to shift their business models and focus on strategic partnerships with incumbents.Given the sustainability challenges wealthtech players face, especially those operating direct-to-consumer models, we expect a number of these players to tweak their businesses. Many will likely be forced to shift to business-to-business models, offering their technology to incumbents that have significantly greater scale and resources.

Others, we anticipate, will focus on partnerships with incumbents. This approach could be particularly useful, given how incumbents like Investec have failed with their digital wealth management platforms. Startups can lean on their established partners' resources and wide customer bases, while incumbents can tap into startups' technical expertise to deliver hybrid offerings that bring together the cost reduction of digital wealth management with consumers'

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