Module 7: Wealth Management & Robo-advisors

Wealth Management

The industry focused on financial planning, portfolio management, and related services for individual and institutional investors.

Assets Under Management (AUM)

The total market value of assets managed by an investment firm or advisor on behalf of clients.

Financial Advisor

A professional who provides investment advice, financial planning, and portfolio management services to clients.

Registered Investment Advisor (RIA)

A regulated individual or firm that provides investment advice and is legally required to act in clients’ best interests.

High Net Worth (HNW)

Individuals with investable assets of one million dollars or more.

Back-Office

Operational functions such as accounting, reporting, compliance, and settlement that support front-end client services.

Customer Onboarding

The process of bringing new clients onto a platform, including account setup and verification.

Know Your Customer (KYC)

Regulatory procedures used to verify client identity, assess risk tolerance, and determine investment suitability.

Anti-Money Laundering (AML)

Rules and processes designed to prevent money laundering and terrorist financing.

Customer Relationship Management (CRM)

Systems and tools used to manage client interactions, data, and relationships.

Digital Wealth Management

The use of technology to automate and enhance how financial advisors serve clients.

Wealthtech

Fintech applications that use technology to improve wealth management services and reduce costs.

Robo-Advisor

An online platform that uses algorithms to provide automated investment advice and portfolio management.

Robo-Advice

Automated investment recommendations generated by algorithms based on client inputs.

Robo-Advisor Fee Model

Low advisory fees typically ranging from 0.25% to 0.50% of AUM.

Hybrid Robo-Advisor

A model combining automated investing with access to a human financial advisor for a fee.

Economies of Scale in Robo-Advice

The need for large asset bases to survive due to low fees and high customer acquisition costs.

Customer Acquisition Cost

The expense associated with attracting and onboarding a new client.

Barrier to Entry in Robo-Advice

The difficulty of acquiring customers rather than building technology.

Exchange Traded Fund (ETF)

An investment fund that trades on a stock exchange and holds a diversified portfolio of assets.

Exchange Traded Funds (ETFs)

Low-cost, liquid investment vehicles commonly used by robo-advisors for portfolio construction.

Mutual Fund

A pooled investment vehicle that is actively or passively managed and priced once per day.

Management Expense Ratio (MER)

The annual operating cost of a fund expressed as a percentage of AUM.

Passive (Index) Investing

An investment strategy that tracks market indices and minimizes fees rather than attempting to beat the market.

Active Investing

An investment approach that relies on security selection and market timing to outperform benchmarks.

Modern Portfolio Theory

A framework developed by Markowitz and others that supports diversification and passive investing.

Automatic Rebalancing

The periodic adjustment of portfolios to maintain target asset allocation.

Disruptive Innovation Strategy

A strategy that gains a foothold by targeting underserved or price-sensitive customers.

Underserved Customers

Customer segments historically overlooked by incumbents, such as young investors with low initial AUM.

HENRYs

High earners not rich yet, a key early target market for robo-advisors.

Value Proposition of Robo-Advisors

Low fees, ease of use, automation, transparency, and access to advice.

Legitimacy Challenge

The difficulty start-ups face in gaining trust and credibility in regulated industries.

Incumbent Response in Wealth Management

Strategies where traditional firms build, license, or acquire robo-advisory services.

White Label Robo-Advisor

Robo-advisory software built by one firm and branded by another.

B2C Wealthtech

Fintech models that deliver investment services directly to retail investors.

B2B Wealthtech

Fintech models that sell tools and platforms to financial advisors and institutions.

Regtech

Technology used to help financial firms meet regulatory and compliance requirements.

Technology-Enabled Advisor (eAdvisor)

A financial advisor who uses digital tools to manage more clients and higher AUM.

Advisor 2.0

A hybrid model where human advisors are augmented by technology rather than replaced.

Digital Client Experience

24/7 access to investment dashboards, reporting, and communication through apps or web portals.

Sustainable Finance

Financial activities that integrate environmental, social, and governance considerations.

ESG Investing

Investment strategies that incorporate environmental, social, and governance factors into decision-making.

Sustainable Investing

Another term for ESG-focused investing aimed at responsible capital allocation.

Gross Written Premiums

The total premiums collected by an insurance or investment product before deductions.

Insurtech Comparison

A parallel fintech sector showing similar challenges of scale, trust, and regulation.

Payment for Order Flow

A practice where brokers sell customer trade data to market makers in exchange for compensation.

Robinhood Business Model

Commission-free trading funded primarily through payment for order flow.

Transparency Risk

The reputational and regulatory risk arising from opaque monetization strategies.

Industry Co-Evolution

The process by which technologies, firms, regulations, and competitors evolve together.

Competitive Advantage in Wealthtech

Achieved through scale, trust, partnerships, and integration rather than technology alone.

Profitability Challenge

The difficulty wealthtech start-ups face due to low fees and high operating costs.

Hybrid Future of Wealth Management

A model combining human advisors with automated tools to improve service and efficiency.