The top 10 wealthtech stories of 2021

When Gary Gensler was confirmed as chairman of the SEC during the wake of the so-called meme-stock trading frenzy, he pledged to target the gamification and marketing techniques employed by online brokerages like Robinhood. The SEC has since issued a request for public comment not only for digital brokers, but also for robo advisors and the client-facing technology used by financial advisors.

The regulator also stepped up enforcement actions against digital advice providers. SoFi paid $300,000 to settle conflict of interest charges with the SEC, and Charles Schwab set aside $200 million for an SEC probe into its robo advisor. Schwab’s robo is also facing a class action lawsuit from clients alleging it violated a fiduciary responsibility by over-allocating portfolios into cash.

The SEC isn’t the only regulatory body taking action. FINRA levied a record-setting $70 million penalty on Robinhood, which is also continuing to fight against Massachusetts’ state fiduciary rule.

This was the year direct indexing, a formerly esoteric investing strategy only accessible by the ultra wealthy, finally went mainstream. Throughout 2021, asset managers and custodians acquired technology to make direct indexing, which seeks to replicate the performance of an index fund by purchasing the underlying securities, available to a wider selection of investors. After Morgan Stanley acquired Eaton Vance (which owned direct indexing pioneer Parametric) in late 2020, BlackRock picked up Aperio, JPMorgan Chase bought Open Invest, Vanguard grabbed Just Invest and Franklin Templeton scooped up O’Shaughnessy Asset Management.

On the custodian front, BNY Mellon Pershing announced plans to acquire Optimal Asset Management to develop direct indexing functionality for independent advisors. Charles Schwab executives made direct indexing a core theme of the annual IMPACT conference and plans to introduce the service in 2022. Fidelity introduced support for fractional shares, which helps reduce the minimum investment required for direct indexing, to its custodial platform, but has not made specific plans to offer the strategy to advisors.

As cryptocurrency continued to capture the imaginations and wallets of retail investors, financial advisors found themselves on the outside looking in. They could invest in crypto, but the infrastructure just didn’t exist for them to provide advice on the digital assets or incorporate them into their practices. 

Entrepreneurs are eager to fill the gap. In May, Tyrone Ross launched Onramp Invest, which aims to be a one-stop-shop for everything RIAs need to access and research crypto markets. Trading software like AdvisorPeak, which Addepar acquired in October, added on new functionality to trade cryptocurrencies and manage them alongside traditional assets, and MassMutual-owned fintech Flourish introduced a new service for advisors to open and manage bitcoin portfolios for clients. Still others, like Alto IRA, have platforms to let financial advisors add cryptocurrency into retirement plans.