Fintech vendors hit brick wall in trading & clearing space

Patrick Bunsci

5 July 2023

Financial technology, or ‘fintech’, has been roundly embraced by the US adviser community, with 95% of surveyed advisers reporting that they use software solutions for either trading and clearing, portfolio rebalancing, or investment analytics.

The survey results, published as part of the MI Market Metrics Fintech Study by financial industry researcher and analytics provider ISS, revealed that only 3.8% of surveyed advisers in the US are currently not using fintech for the purposes of trading and clearing.

However, with the market now almost entirely saturated and largely dominated by in-house software “provided by home offices”, the report revealed, it is likely that many third-party fintech vendors in the trading and clearing space will struggle to make headway in the US.

Software for investment analytics appears to be a riper area for third-party fintechs to grab market share, with only around a quarter (26%) of advisers making use of asset tracking software. Indeed, of those using this software, less than half (41%) are provided by third-party fintechs.

BlackRock was the vendor of choice for investment analytics software amongst the largest cohort (26 per cent) of surveyed asset managers. This, ISS noted, was a full 10 percentage points ahead of the second-place getter, JPMorgan.

Asset managers saw considerable uptake of their software for direct indexing and portfolio construction, with 24% and 29% of advisers, respectively, using their digital solutions for these functions.

Vanguard proved to be the most popular platform provider for direct indexing, with one in five surveyed advisers reportedly using their software. However, as ISS reported, ‘Wirehouse’ advisers – “the most enthusiastic adopters of direct indexing relative to other distribution channels” – reported Morgan Stanley as their preferred platform.

Surveyed advisers cited ‘ease of use’ as a key selling point for fintech tools, with 80% reporting it as a top three factor in their selection of a software solution. ‘Best-in-class features’ and ‘level of integration’ were cited by just under half (43% and 44%, respectively) of surveyed advisers as key factors.

ISS also noted that relative unimportance of peer recommendations as well as existing reputation and longevity in advisers’ decision-making on their choice of fintech solution.

ISS’s Fintech Study was based on interviews, conducted in May, with 814 US-based financial advisers. The study is part of ISS’s broader Selling Retail Investment Products Through Intermediaries survey, which measures adviser’s interest in fintech provided by asset managers, home offices, and third-party sources.

ISS Market Intelligence (MI) is a specialist provider of data and analytics solutions for the global wealth industry.