Over the past several years, numerous aspects of finance have become digitalised. New attitudes and innovations have paved the way for the digital evolution of self-wealth management.
The percentage of online banking users in Great Britain has more than doubled in a decade[1], Monzo now counts 450,000 UK-based users[2], and over 65 peer-to-peer companies have been launched and maintained in the UK alone[3].
With the continuous advancements and developments in the world of technology, it is no surprise that the field of self-wealth and the way in which individuals can manage their personal finances has evolved.
There’s a lot of information about the various options open to individuals with personal wealth to manage. Despite this, an increasingly popular trend is emerging; that of entrusting platforms to manage user funds as they see fit. While this does have advantages, including an assured rate of return and a certain removal of responsibility, it is an interesting development in an industry that was founded upon the idea of giving the power to the people.
The element of choice is one of the greatest powers we have as consumers. We value the liberty we have, in weighing up options, comparing prices, analysing our needs, and deciding what to purchase, where from, and when. Why then, are we entrusting fund managers with our money and savings?
In the past, this idea of passing the proverbial buck was understandable. Accurate, factual, unbiased information was often hard to come by. Independent Financial Advisors were professionals who had access to information unavailable to the average person. Now, however, new tools make it quick and easy to analyse financial performance, and we desire to pay less margin to intermediaries. Most platforms, including ours, have dashboards with information relating to each applicant business, as well as explanatory documents, frequently asked questions pages and risk information.
Consumers are now at a point when they can take control and undertake self-wealth management. HENRYs – a term coined by Fortune Magazine in 2003 to describe High Earners, Not Rich Yet – are one key target group, along with millennials and recent retirees. The latter include members of an ageing population, who are taking early retirement and looking to actively manage their savings, in order to create a passive income from interest earnings. The millennials in question are a demographic unit that forms part of the gig economy. While this has advantages, in terms of work-life balance and lifestyle, it does also mean a potential reduction in income; leading to a desire and necessity to carefully manage savings and investigate investment options.
It’s not just millennials who want to make their money go further; silver surfers remember the days when interest earnings once generated a passive income. With a little work managing online P2P lending activity, our lenders, many of whom are semi-retired, have been able to generate 9.6%[4] average net returns pa. For many, this has become a dependable complimentary income.
Traditionally, we have been conditioned to believe that we need a professional to manage our finances for us. This, in keeping with the modern finance world in general, is gradually changing. Conventional elements of the industry will need to adapt and adjust to keep up with the ever-evolving financial landscape, and the personal wealth management sector is no exception.
