By Tobie van Heerden
Technology, properly applied, can be an incredible democratising force. It’s already played that role in media, publishing, collaboration, access to information, and so many other areas of our daily lives. More recently, it’s helped democratise areas of finance that were once the domain of small groups of specialists.
Buying and selling shares, for example, can now be done with a few taps of your smartphone. It’s almost as easy as ordering a pizza from your favourite food delivery app. Technological advances have also made it easier and more affordable to send money across borders and access cutting-edge financial insights, among other things.
The technologies that enable these functions fall broadly into a field called wealthtech. A subset of fintech, wealthtech can best be understood as a grouping of technologies that specifically focus on wealth management and investment services. It aims to make these services more accessible, affordable, and efficient.
As with any emerging technological field, wealthtech brings both opportunity and risk. The opportunities lie not only in its ability to democratise investment and wealth management but also in delivering more personalised investment strategies, greater automation and efficiency, and data-driven decision-making. It may even improve financial literacy (something sorely needed in South Africa). The risks, meanwhile, lie in cybersecurity threats, a lack of human interaction that some investors may be uncomfortable with, algorithmic biases, and regulatory lag.
Despite those risks, the opportunity for wealthtech to transform the retirement investing space in particular is immense. Applied correctly, wealthtech can help ensure that the kind of wealth creation needed for a comfortable retirement is increasingly accessible and attainable.
Advances especially critical for South Africa
Before digging into what some of the most significant advances are, it’s worth pointing out how necessary this kind of democratisation is within the South African context.
In simple terms, that’s because the vast majority of South Africans cannot and will not be able to afford to retire comfortably. As our 10X Retirement Reality Report for 2023/2024 reveals, just six percent of the population is on course to retire comfortably.
While there’s no doubt that wide scale improvements in tackling joblessness and poverty are key to bringing that number up, democratising the retirement investment space could make a significant difference too. Every working South African should at least be able to retire at the level of comfort they’ve achieved through their working lives. The right technology, integrated into the right products can help them do so.
A more informed relationship with advisors and providers
One key way that technology has democratised the retirement investment landscape is by simply making information more accessible. Not too long ago, investors wanting an update on how their portfolio was doing would have to call up their advisor or wait for their annual portfolio email. Today, platforms allow them to see what’s happening in real time.
This, in turn, allows for a much more flexible and agile relationship with their advisors. The same, broadly speaking, is true for providers. Being able to instantly compare how much different providers charge in fees, for example, can go a long way to ensuring that you’re getting the most out of your retirement investment products.
Some might see this enhanced access to information as a reason to take a DIY approach. If they’re prepared to take the risk, there’s nothing wrong with that. For those that aren’t, however, advisors and intermediaries still hold immense value in the wealthtech era, especially when it comes to reining in their clients’ most extreme impulses.
Improved products
Technology has also helped improve the products that providers can offer. Artificial Intelligence (AI), for example, means that retirement product providers can pick up market signals far quicker than they’d be able to manually.
It’s additionally allowed them to offer products that are much more appealing to their customers. Easy-to-use retirement calculators, for example, can be much more accessible than trying to follow an advisor’s calculations in person. Similarly, comparison tools can make it easier for someone to tell whether they’re getting the best possible returns from their current provider or should consider switching.
Technology has also made it easier for the providers of retirement investment products to operate more efficiently. These efficiencies, in turn, will lead to a reduction in costs for managers. That should, in turn, lead to these cost savings being passed on to individuals as they invest. Another advantage provided by these efficiencies is that they have the potential to simplify the landscape, meaning fewer products, but which better serve individuals’ investment needs.
Wealthtech trends point to a brighter South African retirement future
The enhancements that wealthtech brings to individuals and providers alike are undoubtedly making investing easier and more convenient, both of which are critical in today’s customer-centric environment. As it continues to evolve, it will only become more powerful and useful. Robo and quant advisors will become more common as AI and machine learning become more sophisticated while trends such as micro-investing (investing small amounts or buying fractional shares) and social investing will help make the investment space more personal and tangible. It should also allow for easier access to private markets such as private equity and credit. Those could all prove vital in improving the retirement investment landscape in particular.
While it may be difficult to imagine now, given the widespread economic uncertainty at home and abroad, I believe that continuing advances like the ones outlined above will fundamentally alter the South African retirement picture.
We are, after all, at the very earliest stages of wealthtech’s evolution. As it continues to evolve and develop, its ability to democratise investment and wealth creation will only grow too. There are many millions of South Africans who stand to benefit from these advances which, if utilised effectively, could dramatically change their lives and retirement prospects for the better.
* Van Heerden is the CEO of10X Investments.
PERSONAL FINANCE