Established investment banks would typically offer financial advice to only high networth individuals (HNI), i.e., individuals with a certain basic minimum cor-pus, usually thousands of dollars and above, available for investing. Increasing wealth of the middle class globally and multiple avenues available for financial literacy including the Internet, has resulted in dramatic increase in the new gen-eration of investors. FinTechs have been able to capitalize on this increase by using digital channels for financial advice and planning instead of luring investors through a face-to-face meeting that most established investment banks do. One of the interesting things about such tools are that they help you manage your long-term finances. A salaried individual would typically be planning from month-to-month or in some cases for an entire year as well. To have a long-term goal planning that spreads over multiple years including retirement usually requires a tool. The tool would typically help a person to keep updating his/her financial situations and goals as life situations evolve. Additionally, using these digital plat-forms over the Internet and mobile devices, FinTechs have been able to keep their operational costs low. The same is reflected in low joining and maintenance fees for the investors from these FinTechs.
Some of the FinTechs are using a mix of digital tools and personal advice for an individual to help him/her do financial planning. These companies also provide targeted financial advice for individuals registered with them. Once an individual has registered with them, they ascertain a score for the individual based on the financial information provided by the user. The score determines the financial dependency and the possible risks an individual would face while achieving the goal. The platform also helps an individual to define the financial goal, provide targeted advice to improve the same and keep track of steps taken to achieve the same. All these platforms provide a dashboard where one can see how his/her financial actions are updating the scorecard, and track their progress for achievement of the targets. Regular advice from these digital and personal financial advisors enable an individual to assess if he/she needs to con-tinue pursuing the same set of financial steps or tweak/change the same. Some of these companies have also built gamification elements as part of their product portfolio. Using gamification to help millennials and young investors under-stand financial planning makes their platform more engaging as compared to only providing financial advice. Therefore, the FinTechs are transforming the manner in which financial advice and planning is done using digital channels and gamification.
Some of the other FinTechs are revolutionizing the entire digital financial advice space by providing financial advice on mortgage management. The idea of helping somebody to manage their mortgage is in itself quite innovative. More than two-thirds of the world is currently under debt and they would want a digital solu-tion that can help them look at how different mortgages could be handled properly. Additionally, there are people with disposable incomes who are not servicing their debt in the right manner. Inadequate financial literacy is making the same further complex. These FinTechs have a personal advisor algorithm that calculates and lets a customer know how they can handle their mortgages. Besides this, they have the option wherein you get financial advice over a phone or in person. Since they use a digital platform for providing the advice, the money they charge is also not significant. Using API, these platforms have made this functionality available to other application developers who can integrate the platform capabilities in their applications.
There are other FinTechs that are changing the way financial management is done for the common man. These FinTechs have made their applications available as an online application and a mobile app as well, thus enabling financial planning as a self-service. The most innovating thing about these platforms is they link all the financial accounts of an individual and monitors the same in real time. The finan-cial accounts could be checking accounts, retirement accounts, etc. Another inter-esting aspect about some of these FinTechs is that they give free consultation from a financial advisor either during the trial period or within the free versions of their application. The financial advisor provides portfolio recommendations by looking at an individual’s investments. In the paid version, they additionally manage the personalized portfolio as well as advise. They have very reasonable fees which range from 0.5% to less than 1%, and the same is quite nominal as compared to large investment firms. Additionally, these firms have multiple tools and utilities that help do retirement calculations and manage daily budgets. These platforms have digitally aggregated all the silos of financial data for an individual and provides real-time analytical recommendations for managing his/her goals, finances and investments. One of the most tiring exercises for a mid-level earning individual is to manage tax implications across his/her portfolio of investments. A large number of these FinTechs uses different tools to analyze the tax implications for an individual and then recommends possible ways to regroup the investments. The regrouping of investments is done to provide the maximum benefit to an individual by reducing the overall tax liability. Almost all of the financial advice platforms do a risk bal-ancing and scoring across portfolios and provides a track of investment goals being achieved or not. These platforms also manage users expenses and income, and addi-tionally provides alert from time bound financial activities like paying EMI, paying other bills, etc. Besides helping in financial management and budgeting for goals, they additionally provide free credit score monitoring. Interestingly, some of these platforms use gamification elements to showcase factors that are impacting the credit score for that individual.
Some of the above-discussed platforms, with the information and advice cov-erage they provide, are slowly becoming the go-to financial advisors for most of the earning individuals. These products provide the platforms, toolsets and advice desired by most well earning middle- class populations who have small amounts to invest and get advice/alerts for events that require decision making.