Mobile apps push wealthtech funding to record highs

The wealthtech sector is booming, with record levels of global funding pouring into wealth management technology firms last year — much of it going to new retail investing apps.

The $14.6 billion in investments in 2021 was almost triple the amount of funding during the prior year; it was spread out over 486 deals, a total that jumped 46% from just 332 deals inked in 2020.

The first quarter alone netted $6 billion in new wealthtech funding, which accounted for 41% of the total funding raised last year, according to CB Insights senior analyst Elif Yayla.

Robinhood Markets Inc. alone raised a total of $3.4 billion ahead of its IPO in the first quarter of the year, she added. Other apps, such as Public Holdings Inc., Webull Financial and Stash Financial Inc. also raised some of the largest rounds of the year.

“Retail investing apps drove a significant portion of funding in 2021,” Yayla said. “[They] played a big role in the year-over-year funding jump.”

According to research from Deloitte, 6 million people downloaded trading apps in January 2021 alone, and they represent new investors who are younger and more tech-savvy than previous generations. Overall, hours spent on finance apps were up 90% year over year in 2021, while downloads of online apps jumped 20%, according to a report by Bloomberg last year. 

But the activity slowed toward year-end. Wealthtech deals actually dropped 16% in the fourth quarter from a record of 132 deals in the previous quarter, and funding dipped from a record high of $5.8 billion in the first quarter of last year.

Because of the early funding rounds, the U.S. received more dollars than all of the other countries combined, according to the CB Insights research.

The boom is also due in large part to demographics, said Grant Easterbrook, a consultant and co-founder of the retirement fintech Dream Forward, which was acquired in 2020.

“Demographic trends are driving changes in consumer wealth management,” he said. “The industry has traditionally relied on a network of in-person financial advisers giving advice and distributing products. But those advisers are rapidly aging.”

Easterbrook cited data from Cerulli Associates that estimated more than 111,500 advisors, representing more than one-third of the entire workforce, will retire over the next decade.

“The need to transition to serving more tech-savvy Gen X and millennials creates demographic pressure to adopt wealthtech,” he said. “Advisers will simply have to use technology to be more efficient.”

The biggest round of the fourth quarter went to Aspiration Partners, a personal finance company based in Marina del Rey, California, that offers a host of banking and investment products with a focus on sustainability and curbing climate change. The private equity funding topped $315 million, according to the research. 

TradingView Inc., a charting platform and social network for traders and investors, raked in $298 million in a Series C round. And Masterworks, an alternative investment app that offers opportunities to invest in fine art, also ranked in the top ten with $110 million.