I recently published a market map of the fintech ecosystem and got a ton of great questions and feedback. It’s hard to do each section justice in such limited real estate so I’ve been testing video as a way to dive deeper into each subsection. Substack just launched video (in beta) so I’m excited to add what I’ve been working on with Corporayshid here. In this post and subsequent ones I’ll try to highlight some of the nuances and exciting trends in each segment.
In this inaugural post I’m kicking off with a consumer segment - Trading and Wealth Planning. Click on the video for the full take and check out the highlights below.
What is it?
Consumer trading and wealth management includes anything from brokerages to equities to alts. I'm really excited about this category because I've seen a significant trend towards consumers wanting to be more actively involved with their finances. I've talked to so many people who are just looking for a more automated, consumer focused product. I mean, honestly, if I never had to talk to another person at a bank again, that would be awesome. This desire for something new, tech forward and automated creates huge opportunities for new startups to innovate in so many aspects of financial management.
A hot take
I don't think RIAs, or registered investment advisors, go away, nor does everything get totally automated away. I think it's going to be a hybrid approach where consumers are going to want a more personalized, hands on experience when they're making such an important decision. And so when it's kind of on set it and forget it mode, they just want to be able to make decisions and actions async on a really great UI or app without having to call someone up. I think that also means consumers’ bar for the expertise they want from the people on the other side of the phone is higher. We're going to see companies continue to be more specialized and focused on specific segments like doctors or lawyers, where they can really understand and be value add to their customers.
Prediction for the winner in the space
I don't think there's just going to be one winner because there's so many elements of financial management like tax planning, stock trading alternatives and more. And whether that gets bundled or unbundled is going to depend on the segment of the consumer. I think each of these is so hard to do well in and of itself. For the foreseeable future, we're going to see specialization.
Companies on the rise
Tendies is a portfolio company focused on social investing for options traders. A few companies are focused on making PE and VC fund investing accessible to retail investors. And I'm really excited about this trend and the democratization it's enabling.
What am I most excited about?
I think most of the companies to date have focused on the emerging investor. A few of them have focused on people who are a little bit later in their wealth journey. I'm really excited for the number of companies in this segment to grow. I think a key challenge for companies I've seen in the space has been unit economics. It's really hard to automate these services enough to operate profitably while offering this service at a more accessible price point. I'm not really sure where the pendulum lands, but I'm excited about companies targeting this later segment of the market. For that reason, I think they're still underserved, but you can charge them more and therefore maybe you don't have to make it as automated and you can still make some money.
Thoughts on this format? Would love to hear your take. If you’re not subscribed already, do so below for future videos and posts.
Fintech Market Map: A Video Series