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5 FinTechs To Watch: WealthTech

USD$657 million dollars. This is the amount of venture funding that went to FinTech subsector WealthTech last year, across an unprecedented 74 deals. WealthTech refers to the class of asset and wealth management tools that have been sprouting up over the past decade, signalling the emergence of alternatives to traditional wealth management firms.

Whether investing for the future or budgeting today’s expenses and bills, these tools blend wealth management with a modern approach: online platforms and mobile apps to handle them on the go.

Their elegant app interfaces can be deceptive of the complex processes underlying them, including investment algorithms that track markets rather than individually stock picking. This is a strategy shown by research to produce greater returns over time.

Given our close involvement in the inception and growth of Australian robo-advisor Clover, at YBF we keep a close interest in the movers and shakers of the sector.

Following our previous articles on 5 Payment startups and 5 Insurtech startups, these are the 5 startups you need to know in the world of WealthTech.


WEALTHFRONT (Robo-advisor, United States)

90% of financial advisor revenue comes from the top 20% of clients.

This leaves the remaining 80% susceptible to substandard advice, as ex-trader Daniel Carroll found when inspecting his parents’ financial standing in the aftermath of the 2008 global financial crisis. To fight the information asymmetry in financial advisory he started Wealthfront with Andy Rachleff, co-founder of famed Silicon Valley venture capital firm Benchmark.

Wealthfront democratises access to sophisticated financial advice through software. It works by giving users a quick questionnaire to establish their risk tolerance. After this, a personalised investment portfolio is built for them consisting of low cost, passive ETFs (exchange-traded funds) in up to 11 asset classes, automatically rebalancing to maintain the desired ratios. This leaves the investor with a hands-off approach designed to maximise long-term portfolio value.

This passive approach was first popularised in investing classic ‘A Random Walk Down Wall Street’ by Burton Malkiel, who acts as Wealthfront CIO alongside his position as a senior economist at Princeton University.

The software also harvests tax-loss benefits, adding up to an extra 2% on annual returns. With a $500 account minimum and free management of the first $10,000, Wealthfront is realising its aim of making investing easy for all, regardless of background or net worth.

Today, the startup is a market leader with 100+ employees and USD$7.5 billion currently under management. And yet, it remains one of the only investment services still fully automated, with no plans to introduce a human offering as per most competitors.

Instead, with a growing user base and increased competition in robo-advice from traditional institutions since it began, Wealthfront has diversified this year. New products include Path, a software-based financial planner which helps save for life events like college and retirement, alongside a line of credit products.

This effort is leading a fresh wave of users to its platform as Wealthfront steps up its efforts in facing a worthy competitor that recently usurped its status as the Fintech holding the highest dollar value of AUM (assets under management).

Which brings us to our next company.


BETTERMENT (Robo-advisor, United States)

Betterment is known as the largest and fastest growing automated investment startup, with USD$10 billion under management. It was founded by Jon Stein, who built his career advising banks and brokers on risk.

At first glance it seems very similar to Wealthfront. Both were founded in 2008 and pioneer the robo-advisory space, both operate a self-balancing portfolio with tax loss harvesting, and both charge some of the lowest fees within financial advisory.

Perhaps the biggest difference is that Betterment’s approach does not eliminate humans from the picture entirely, with a team of financial advisors available for contact at any time through the in-app messaging service.

As account balances exceed $100,000, users can also obtain comprehensive advice from CFP professionals on outside investments, alongside life events such as marriage, retirement and family planning.

This goal-oriented focus begins in the initial user questionnaire, which suggests target amounts for either a safety-net fund, retirement savings account or an investing account. It then recommends asset allocations for each, choosing from ETFs in up to 12 asset classes. Other unique features include the option for a socially responsible investment portfolio and matching custom goals with account types, e.g. giving a shared goal a joint taxable account.

Betterment’s underlying assumption is that investors will want a human looking at their accounts alongside software, especially as account balances begin to increase. The Premium offering specifically targets the higher end of the market. Further proof of this strategy lies in the waiving of fees to investors with account balances exceeding $2 million. As for those just getting started, Betterment allows customers to buy fractional shares of the ETFs it uses, meaning you can begin investing with a dollar.

When Betterment began, it was formed to help new investors who did not know how to get started. Nowadays the strategy is looking much more comprehensive. The company has publicly stated its interest in offering services like life insurance, student loan refinancing and granting loans in the near future, further differentiating its current standing as a one-stop shop for financial advice.


MINT (Online personal finance management, United States & Canada)

Born in 2006, Mint is best known for its rapid ascension from inception to acquisition, exiting for a cool $170 million to Intuit in late 2009.

The sale was criticised in some quarters as a gross undervaluation, speaking volumes as to the perceived quality of the company. The startup also holds the title of first ever winner of TechCrunch Startup Battlefield, celebrating its 10th anniversary this year.

Mint is a free, web and mobile-based personal financial management service. It was created by ex-software architect Aaron Patzer, who was left frustrated in late 2005 by Intuit’s Quicken product, a similar tool initially released in 1983. He found that setup took too long – it took clicking through 29 screens just to link one credit card and bank, for example – and too much manual work was asked of the user in data categorisation and reconciliation.

The result was a startup designed with simplicity and speed in mind, along with a ‘secret sauce’: an algorithm for automatic financial transaction categorisation given a simple text description, with 95%+ accuracy. This would help the user know exactly where their money was going each month, with helpful tips on saving provided.

Advertised with emphasis on its ‘bank-grade security’ given the lack of precedence in customers handing over their financial data to startups, Mint soon began acquiring customers at a rapid rate with an enviable cost of acquisition lower than $1.

With Patzer stating it ‘seemed wrong’ to charge customers money for a software aimed at helping their situation, the solution was made free, with revenue only made off successful referrals linking other service providers listed on Mint through to customers.

Today, Mint thrives as a wealth management tool on the same positives that made it so popular in the first place. The tool succeeds in its ease-of-use, showcasing a clean UI, simple tutorials for first-time users and colourful charts providing deep insights on money movement within all linked accounts.

And although Aaron Patzer has since left Intuit – moving to New Zealand to start new ventures – his genius lives on, with Mint now boasting over 20 million users.


WEALTHSIMPLE (Robo-advisor, Canada)

Ranked the Best Canadian Robo Advisor 2017, Wealthsimple was founded in 2014 after founder Daniel Katchen’s previous company was acquired. As investment suddenly became the million-dollar question for his colleagues, Daniel produced a spreadsheet for them with tips to set up portfolios. He returned to Toronto the following year, developed the prototype, raised $2 million in 2 and a half weeks and launched Wealthsimple in September.

Wealthsimple combines robo-advice with access to live advisors. After a 5-minute onboarding process involving a risk questionnaire, each user is matched with an investment advisor who tailors ETFs to long-term goals and risk tolerance. The resulting portfolio is monitored daily and rebalances automatically.

Tax-loss harvesting, dividend reinvestment and insurance of up to $1 million CAD are provided as well as account syncing with Mint’s budgeting software; both startups became partners in May.

A ‘Wealth Concierge’ team remains on hand to help clients discuss financial goals and objectives, while users investing above $100,000 can schedule an in-depth financial planning session.

The two-tier structure was introduced in January, and since then Wealthsimple has continued to move forwards at unrelenting pace. Expanding its offering, it announced its socially responsible investments portfolio in March this year. Despite some believing the target market would be too small, it proved an enormous success.

Last month Wealthsimple launched its Halal investing portfolio designed for Muslims adhering to Islamic laws – another group underserviced in the financial services industry. Given competing options are limited and tend to carry high account size minimums and expense ratio fees, this too looks a smart move.

Wealthsimple hit $1 billion CAD under management in May this year. Its slick, well-designed website and mobile app both help to ‘make investing easier for millenials’, and with 80% of Wealthsimple’s client base being under the age of 45 it continues to successfully deliver on this aim.


ELLEVEST (Robo-advisor, United States)

Women have different wealth management needs to men. They live 5 years longer on average, possess unique income cycles with many taking maternity leave during their careers, and sadly still receive lower incomes overall. Their preferences are also different due to a more risk-averse profile, with nearly 1 in 2 women primarily investing to conserve wealth for long-term goals such as retirement.

All these factors can manifest in lower lifetime savings, a gap Ellevest is trying to close by tailoring wealth management solutions to the needs of women.

Launched in 2016 with a US$10 million seed round, former Wall Street executive Sallie Krawcheck’s startup is a digital platform that puts female investors’ money in low-cost ETFs based on a chosen set of goals. The onboarding form asks for a few details including age, education level, number of kids and salary, before prompting the user to choose the goals they want to start working towards. The 7 options include starting a business, having kids, retirement, buying a home, creating an emergency fund, investing for a once in a lifetime splurge, or simply investing to make more money.

The next step is to prioritise the chosen goals and input bank balances, before the user is given exact monetary figures required to meet those goals, accounting for inflation. Using an algorithm specifically tailored to women’s income and life cycles, the platform can personalise to factor in gender differences in pay, career paths and lifespan. No minimum is required to start and no penalty is charged on withdrawals.

The startup counts Venus Williams among its first investors and recently raised a US$34.6 million round of funding from Rethink Impact, a VC firm specifically investing in female leaders using tech to solve the world’s biggest problems. This has allowed it to launch its newest product Ellevest Ascent, a premium service introducing users to human financial planners for help with tax planning and insurance.

Currently an online financial planner, expect to see Ellevest on the app store soon.


If you are a Melbourne-based FinTech and would like to get connected to our ecosystem of industry leaders, entrepreneurs, thinkers and community builders, feel free to reach out to us via if you’d like to learn more about how we can support your Fintech startup.