Wealth management isn’t only for the wealthy—at least, not if you ask the up-and-coming generation of fintech startups who are using technology to make it possible for everyone to optimise their savings.
Do you want to travel the globe? Take a year’s sabbatical? Retire early? No matter what you’re dreaming of, the fintech company Dreamplan wants to help you achieve it. The startup knows that dreams cost money and therefore takes all of your finances into account to figure out the best way to make those dreams a reality.
I discovered that 70 percent of Danes who work in retail banking don’t really optimise their finances. Although there are many products available to help with this, the otherwise-skilled bank advisors don’t seem to know much about them. Our digital solution takes all of your finances into account and assesses how you can get more out of your savings or your debt and, eventually, realise your dreams,
Stine Kalmer Jørgensen, CEO and co-founder of Dreamplan
Dreamplan looks at your personal finances, mortgages, savings and pension, in order to build a full picture of your wealth and debt. The next step is to calculate how your dream can be achieved fastest. For example, would it make more sense to invest in shares, save up for a pension or focus on repaying your mortgage first? And can you pay less tax depending on which option you choose?
“Culturally, we’re very used to the narrative that debt is bad, but this isn’t always the case,” says Kalmer Jørgensen. “Sometimes, it pays to pay up, but other times it’s better to invest in stocks, or turn your dreams into reality. Thanks to technology, we’re able to scale up so that the most skilled experts can provide advice to many customers for a much lower price.”
Wealth management for everyone
In recent years, robot investors like Danske Bank’s June, Nordea’s Nora and the startup Nord.Investments have grown tremendously in popularity. The latter went live in 2017 and has since amassed 4,000 customers and now manages a portfolio of 1.1 billion DKK.
Technology has made the stock market accessible to the general public and there seems to be an audience for wealth management assistance, if only people knew where to find it. What’s more, the new generation of digital wealth management solutions are not just helping customers to invest in stocks, but taking care of our fortunes in more ways than one.
Where Dreamplan takes a longer perspective on saving throughout life, the startup Tobi focuses on managing child savings accounts better.
When it comes down to it, a long-term savings account for your child or children is very similar to having a pension, but the majority of parents still save up for their children with old school cash. This was why we started Tobi. We couldn’t understand how children—who are so important to us—don’t have better-managed savings,
Jacob Munk-Stander, CEO and co-founder of Tobi
Munk-Stander’s journey began several years ago when he found himself opening a savings account for his children, but was unable to find one that would offer a reasonable return. As it turned out, he wasn’t alone. After just a few months on the market, Tobi has created savings accounts for 1,000 children and has invested 10 million DKK in shares and bonds that are expected to provide a much better return than traditional child savings accounts.
There’s nothing immoral about investing your children’s savings in stocks—at least not more so than any other money you’d invest. Tobi stands out because they make it easy for parents to do so. The digital onboarding process allows customers to get started by themselves and Tobi helps them report properly to SKAT, the Danish tax authorities.
“In the past, only ‘high net worth’ customers would have received this service, but we’ve removed the immediate barriers to getting started. Most parents haven’t known enough about investing, or where to do it, when it comes to their children’s savings. But the easier we can make it, the more parents we can encourage to save up in a better way,” Munk-Stander says.
The democratisation of wealth management is also what Dreamplan has in mind. Although the company plans to charge for the advice it gives—if anything, to preserve their impartiality—Kalmer Jørgensen promises that the price will be “Netflix-like”. Despite the fact that 70 percent of current users have become at least 500,000 DKK wealthier over the course of their lives, thanks to Dreamplan.
“For us, it’s all about democratisation. Wealthy people are generally good at tax optimisation, but the rest of us are left to fend for ourselves in a complicated playing field where there are a lot of rules. Many of our customers are highly educated, but unless you spend your life diving into the details, you’re unlikely to gain a comprehensive understanding of how it all works. There are many things that are counterintuitive, for example it can be difficult to comprehend that it might make sense not to pay off your debt,” Kalmer Jørgensen explains.
A win-win for both market and consumers
Although investment robots have made the stock market accessible to more people, they have also been met with some scepticism. What happens when robots start trading against each other or encounter a software glitch? Could that destabilise the stock market?
There are possible downsides to the robots, according to Frederik Lundtofte, professor and Head of Finance Research Group at Aalborg University Business School, but overall, technology has been good for the stock market. Opening the market up to more people also means more money in the market.
Robots give the markets higher liquidity, because they introduce people to the stock market at a higher rate, thanks to the ease of access and lower cost of trading,
Frederik Lundtofte, professor and Head of Finance Research Group at Aalborg University Business School
It is still early days and difficult to predict how the latest wealth management tools will impact the market and each individual’s finances. However, Lundtofte is reassured that there is nothing from the first technological wave that suggests robots will turn out to be a bad thing for the market. Probably the opposite.
“Technology increases accessibility. It allows companies to scale up their best advisors, so more people can get advice on how to manage their wealth. We’ve seen in recent years that more people are investing, and wealth management tools might just be the thing to take that to the next level. Generally we find that people invest too little and are unwilling to take risks when it comes to their long term savings. Wealth management for the many could potentially boost the stock market—which is good for the market as well as retail investors,” he says.
A market in the gap?
For Tobi, there is no doubt that they’ve found a gap in the market with their stock-based child savings accounts. The question is whether there is also a market in the gap.
“Parents today can choose between Tobi or no child savings in stocks at all. Children in Denmark currently own 15 – 20 billion DKK—of which two-thirds is still cash. But in wealth management, this isn’t a huge sum,” says Tobi’s Munk-Stander.
This is why Tobi doesn’t only just want to help parents save up for their children, they also want to serve as a generational facilitator that can encourage children, parents and grandparents to talk about finances together. Opening a child savings account is just the first step. In the long run Tobi will also take care of the regulations and practicalities involved in inter-generational finance, especially inheritance.
“We want to make it accessible and encourage families to have those conversations. Technology is a great help, but it’s also about seeing the need and removing all the unnecessary barriers, to make things easier for everyone,” Munk-Stander explains, and continues, “It hasn’t yet happened that the wealth management industry has been as disrupted as, say, the payment industry, but it’s only a matter of time.”