Filling the gaps in Canada's wealth space

While the wealth industry has accelerated its adoption of technology across multiple areas, there are still many lingering pain points and emerging issues for firms to address, according to one prominent wealth tech leader and entrepreneur.

“I have talked to hundreds of financial advisory firms over the last few years, and we kept hearing really much a very consistent story,” says Dr. Dan Rosen, CEO and co-founder of d1g1t.

Founded in 2016, d1g1t is an enterprise wealth tech platform that equips financial client-facing advisors with the information they need in real-time, back-office teams with operational efficiencies, and senior management with a full picture on investments and the entire business.

According to Rosen, most wealth firms have a tech stack with several siloed, costly-to-maintain legacy systems for doing investment proposals, client reporting, trading, and other functions. That means when a client comes in with a question, the advisor has to open several excel spreadsheets, draw information from multiple sources of truth, and ultimately take days to get back with an answer.

“They have a really hard time answering questions in real time, and getting the information they need to understand their whole stories,” Rosen says. “The client’s life is complex, and the markets are complex, particularly in the last few years … Having the tools to do that becomes crucial.”

More and more advisors want to give their clients the best digital experience, Rosen says, which includes going much further than the traditional reporting documents. While some older traditional advisors might be satisfied providing their clients with 25-page PDF reports every quarter, he argues that clients are now increasingly demanding a digital experience that provides them up-to-date information on demand, and allows clients to interact with their statements, navigating or clicking through to the information they want in seconds.

“Security is also a very important topic. Sending emails with PDF files of reports is not the most secure way to send your clients information,” he adds. “Investors now expect much more secure ways, such as delivering the statements through a modern client portal or mobile application with proper authentication.”

Prior to d1git, its founders built R2, which served institutional investors including top hedge funds, banks, and regulators that wanted to know every investment in their portfolios in the greatest detail possible. After exiting R2 they noticed a void in the Wealth Management space and founded d1g1t. In the early days, he says the idea of full disclosure in reporting was very radical for many financial advisors, who were concerned about the questions clients would ask.

With the developments in CRM2 rules and client-focused reforms, as well as the increasing demand by clients for live digital experiences, he says advisors today are far more ready to embrace the idea of transparency in reporting as a way to build trust with clients. By providing advisors with the ability to curate and show information on a need-to-know basis, he says wealthtech tools like d1g1t allow advisors to have fulsome conversations with clients while avoiding the risk of overwhelming them with information.

“Sometimes not all your results are going to be perfect, and that's part of the story that I think every investor should understand,” Rosen says. “There's no investment that makes lots of money every year. It just doesn't exist, unless you’re talking about [Bernie] Madoff, and we know how that went. … What’s really important is to look at the entire picture, particularly on the wealth side, over longer horizons, and in the context of the investor’s goals.”

Following the painful correction in stock and bond markets in 2022, demand for alternatives has risen among both advisors and investors. While the opportunities for alts have typically been more available to the high-net-worth and ultra-high-net-worth space, Rosen sees that changing as the wave of democratization in private markets continues.

“Traditionally, there have been limitations in wealth tech platforms’ ability to deal with alternative investments correctly,” he says. “As you go into private equity, you’re dealing with liquidity, you’re looking at capital calls, you have capital that’s locked up for a certain amount of time, and you have distributions coming in at some unknown points in time.”

With the rise of alternatives, Rosen says there’s an increasing urgency to develop platforms that can capture different asset classes in a consistent way. d1g1t built a true multi-asset platform that can aggregate all holdings – liquid, illiquid, and even off-book assets – for advisors to give their clients the whole picture of their portfolio, and help chart the path to achieve their financial goals.

“I think that's a very, very important theme. It requires for the platform to really borrow from what we have done and learned on the institutional side,” Rosen says. “I think over the next few years, we're going to be seeing more and more platforms address this, as opportunities for alternative investments open up to a broader group of investors.”