The breakneck pace of innovation in financial technology over the last few years has been due in no small part to the rise of Application Program Interfaces, or APIs. APIs enable programmers to leverage the existing work of other developers to get their products to market as quickly as possible. More specifically they are designed with various “hooks” and “endpoints”, which allow them to pull the features of one application into the code of another. For example, rather than painstakingly building data feeds to every financial institution in North America before offering a budgeting tool, a developer can instead use Quovo’s Aggregation API to integrate financial data from thousands of institutions with the click of a button. Similarly, if your app needs to facilitate bank transfers you can leverage an API from Stripe or Dwolla to painlessly send and receive money. This shift has been transformative as it cuts months (if not years) off the development cycle for technology companies.
Thinking About the Impact of APIs on Wealth Management
As APIs transform the fintech world, there are second-order effects on the wealth management industry as well. The flexibility of APIs to power robust digital products gives advisors a myriad of ways to differentiate themselves — leveraging new, innovative technology to break away from the pack and provide unique offerings. If you thought your clients were impressed when you showed them a flashy new client portal, wait until you offer them a goals-based view of their investment decisions through that same portal, or a bespoke budgeting system that allows you to keep track of spending in real time.
Timing couldn’t be better for advisors who have been looking to expand their practice to the newest generation of earners — millennials. As the advisory industry begins to interact more frequently with millennials, technological sophistication has become an increasingly important piece of an advisor’s value proposition. While older clients likely grew up playing outside, millennials grew up playing on a computer, so it shouldn’t come as a surprise when millennials are frustrated that Amazon gives them better spending tips than their credit card company, or when it’s easier to access their Netflix account than their bank account.
An Opportunity for Financial Advisors
Access to good tech is a must-have for millennials. In a recent study 57% of millennials reported they would change their bank for access to a better technology platform — revealing that technological frustration plays some role in millennial’s irritation. It’s plausible then, that as advisors adopt better technology featuring modern UI/UX these “cultural mountains” may turn out to be “cultural molehills”.
As technology continues to bridge the gap between financial advisors and millennials, there will be profound impacts on the wealth management industry more broadly. Just as consolidated reporting and client portals forever changed how advisors serviced their clients, so too will the newest API-enabled innovations in fintech change how today’s advisors engage with millennials. As fintech APIs continue to play an important role behind the scenes, it’s only a matter of time before the next fintech innovation becomes the new industry standard. While it’s still too early to tell which piece of technology will become ubiquitous next, it seems safe to say that the biggest winners will be both financial advisors and their clients.
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