Betterment, Scivantage Fight to Bring Innovation to Wall Street
Technology continues to surge through the financial world like a gust of wind. But at times, it’s taken a bit of coaxing to bring about change.
At the New Jersey Technology Council’s recent FinTech Conference in Jersey City, technologists and financial experts discussed how wealth management platforms, mobile transactions, and other tools are reshaping this very mature sector.
Jon Stein, CEO of Betterment in New York, discussed “Innovation on Wall Street” alongside Adnane Charchour, president and CEO of Scivantage in Jersey City; Ted Myerson, managing partner of Triangle Ventures; William Rhind, managing director with investment firm ETF Securities; and Luis Valdich, global head of markets strategies for J.P. Morgan. Michael Cichowski, principal at Edison Ventures, moderated the discussion.
Stein said mobile technology, for real-time trading and other transactions, has introduced new ways for the public to participate in the financial world. It’s a trend that his company, Betterment, is capitalizing on with its online financial advisor service, which has raised $13 million in funding from Menlo Ventures, Anthemis Group, Bessemer Venture Partners, and others.
“Technology today has an opportunity to help people invest better and make better decisions by giving them real advice that is actionable,” Stein said.
Scivantage’s Charchour raised some concerns though about the layperson understanding this rush of financial content that technology offers. “What’s lacking is the ability to make sense this flood of data,” he said. Scivantage, founded in 2000, develops wealth management software.
Platforms that provide access to information, Charchour said, might not necessarily help people make more informed investment choices. “For the self-directed person it is still like the Wild West trying figure out where to put your money,” he said.
While some people turn to online communities and social media to share ideas about the financial scene, he questions the veracity of such methods.
“That is not a sound, strategic process,” Charchour said. As more people demand technology from their financial institutions to see what is happening in the market, he is concerned there is a lack of analytics to help the public understand it all.
Getting an advisor’s expertise is useful, he said, and pointed to companies such as ETF Securities as an example. “You don’t have to worry about understanding commodity trading,” he said.
Adoption of mobile technology is picking up steam on Wall Street, Charchour said, but the transition is not without its kinks. “It’s going to hit slight bumps from an infrastructure perspective,” he said.
In spite of some initial pushback from wealth management professionals as mobile devices became more prevalent, Charchour said more advisors are adopting such technology to interact with their customers.
Mobile also offers deeply rooted institutions a chance, Myerson said, to quickly evolve beyond the legacy systems they have relied on. “It’s a lot easier for these firms to jump right into mobile,” he said.
Some firms have adopted entrepreneurial strategies, Myerson said, by rolling out mobile platforms that may have rough edges but are refined with the help of customer feedback. “That’s the way some of these firms end up adopting new technology,” he said. “With some of these legacy areas, you can’t get that same rate of return.”
Myerson said high-frequency trading is one area of financial technology that once was a hotbed of disruption that is now moving towards consolidation. High-frequency trading uses algorithms to make trades at breakneck speeds via computers.
Though these upstart firms rose in the early 2000s, Myerson said few new players have emerged in the past two to three years in this segment. He attributed that in part to a fall-off of business as larger firms traded more with each other. “That extra edge these [HFT] firms had disappeared,” he said.
In spite of that, Myerson said high-frequency trading firms have left their mark on the brokerage community by reducing the fees that firms often charged. “Cost pressure completely went down,” he said. “We’re not going to see that return.”
He expects to see consolidation among HFT firms combining their infrastructure and data centers. “We see a shift going from trying to be the fastest in the market to now looking at this vast amount of data,” he said.