CEO at Wealthface. I advise millennials on digital investing — the new way to go.
When it comes to investing, many people are comfortable with the traditional ways of doing things. In order to change the status quo, it requires vision, time, effort and, most importantly, there needs to be a legitimate solution for a problem.
The world of investment management can be complicated to understand, and the limited accessibility to this practice can be a red flag to the average person, as they may feel investing is only for a certain niche of people.
But as the CEO of a digital investing platform, I’ve seen that with the digital world governing much of our daily lives, investing is becoming more and more attainable. Since digitalization came to life in the investment field, it made what was impossible yesterday possible today. Before, those interested in investing often needed to take the time to open an investment account and work with a financial advisor at their office. But from my perspective, there are now fewer limitations the average person must overcome to take the first step, start investing and build a customized portfolio to achieve their financial goals. I believe this helped make the accessibility to markets easier when it comes to investing in discretionary and non-discretionary services.
To me, digitalization has made things more transparent and efficient as well. In addition to this, technology has made room for investment solutions like fractional shares, thus creating the possibility to trade high-value stocks with a small amount of money. (Full disclosure: My company provides fractional share features, as do others.) According to Forbes, “Fractional shares are a relatively new development in investing — only a few years ago it was almost impossible to buy less than single shares of stocks and ETFs.”
In a nutshell, with technology, there are not as many of the traditional limitations to accessing financial products. And thanks to the internet and the advancement of online trading platforms such as Robinhood, Fidelity, Stash and SoFi Invest, essentially anyone who wants to invest may now do so.
What does digital investing still need to overcome?
The digital investing space is something that I believe has made a positive impact on the financial industry. However, the investment sector still needs to make sure transparency is present within the industry and that clients’ best interests are the focus. To start, companies in this industry can consider charging a fixed fee. This can help avoid a conflict of interest while you are serving clients and ensure you aren’t charging any hidden fees.
Furthermore, fintech companies should ensure they are providing hybrid solutions that offer a combination of digital and human advice. I also recommend focusing on developing application programming interfaces, integrations and open banking technology that makes things effective, faster and efficient for clients. As you work to develop these solutions, strive to provide a flawless onboarding process so that you know your client’s risk profile and appetite. You can do this through a questionnaire.
I would also advise supporting and providing space to other fintech startups. From my perspective, we need the thinking of these future young leaders who are offering incredible value to the industry. Rather than competing with them, help them innovate and find solutions to the problems clients are facing.
After all, when it comes to opportunity, the fintech industry is a very promising space of innovation for entrepreneurs. However, the industry is still not at its maturity level, and I believe it will keep evolving in the coming years, so the door is still open for new ideas and solutions that tackle existing and future problems. For example, one of the main challenges I’ve seen in digital investing is funding. But funding needs to be involved from the outset because of the complexity of scaling and advancing a fintech business. Some other challenges can be problem regulation and geography in certain countries.
As such, entrepreneurs need to have a clear vision and estimation of the time, cost and team they need before developing their minimum viable product. You must also make sure you are taking into consideration practices that mitigate risks so you can secure more investors. Some practices I recommend include:
• Embracing problem-oriented thinking.
• Designing according to value and cost.
• Accelerating design-build-test-learn cycles.
• Considering intellectual property protection.
This digital investing field is still in its early stages, and no one knows the size or shape of the wave that is about to hit. But I believe it is approaching.