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Glossary of Wealthtech Terminology You Should Know

Responsive AI
January 25, 2023

As wealth management continues to be transformed by the advancement of technology, there is a growing need for wealth advisors and other advice providers to familiarize themselves with emerging Wealthtech terms. With technologies such as big data analysis, blockchain-based tools, AI decision making algorithms and more transforming the industry daily, it can often feel overwhelming trying to keep up with the latest lingo. To help provide clarity on these concepts, this article offers an in-depth glossary of key terms so you can navigate the world of Wealthtech like a pro.

Let’s start with the term “wealthtech” itself.

We found a good definition for “wealthtech” here: "Wealthtech is an amalgamation of the words “wealth” and “technology.” The term “WealthTech,” also known as wealth technology, refers to the application of cutting-edge technology, such as artificial intelligence and Big Data, to give an alternative to traditional wealth management organizations. The overarching goal of this technology is to make
wealth management and investing services more efficient and automated."

Here are some more key terms:

Algorithmic Trading
"Algorithmic trading strategies involve making trading decisions based on pre-set rules that are programmed into a computer. A trader or investor writes code that executes trades on behalf of the trader or investor when certain conditions are met." For more information, see Corporate Finance Institute.

Alternative Investments
Non-traditional assets such as real estate, private equity, and hedge funds that are not typically found in a standard investment portfolio.

API (Application Programming Interface)
“API stands for Application Programming Interface. In the context of APIs, the word Application refers to any software with a distinct function. Interface can be thought of as a contract of service between two applications. This contract defines how the two communicate with each other using requests and responses. Their API documentation contains information on how developers are to structure those requests and
responses.” For more information on APIs, see What is an API?

Artificial Intelligence (AI)
The simulation of human intelligence in machines that are capable of learning, problem-solving, and decision-making.

Asset Allocation
The process of dividing an investment portfolio among different asset classes (such as stocks, bonds, and cash) in order to achieve a desired level of risk and return.

A decentralized, distributed ledger technology that allows transactions to be recorded and verified securely and transparently.

Cloud Computing
The delivery of computing services, such as storage, networking, and analytics, over the internet, allowing users to access and use them on-demand.

A digital or virtual currency that uses cryptography for security and is not controlled by a central authority.

Digital Brokers
"Digital brokers include online platforms and software tools that put stock market information and the possibility of investing within anyone’s reach. Some of the most successful formats in this category of wealthtech are the “social trading” investment platforms." For more information, see What is Wealthtech?

Digital Asset
A digitally-native or digital representation of value, such as a cryptocurrency or a security token.

Digital Wallet
"A digital wallet is a software-based system for making e-commerce transactions. By using a digital wallet, online purchases can be done easily through computers, tablets or smartphones. In general, bank accounts of individual users are linked with their digital wallet. In a digital wallet system, user credentials are securely stored and verified during transactions." For more information, see Digital Wallet on Investopedia.

ESG (Environmental, Social, and Governance) investing
A type of investment strategy that focuses on companies with strong environmental, social, and governance practices.

ETF (Exchange-Traded Fund)
A type of investment fund that tracks an underlying index, commodity, or basket of assets, and can be bought and sold on a stock exchange.

Financial Planning Software
A type of software that helps individuals or businesses create and manage a financial plan, including setting goals, tracking expenses and income, and making investment decisions.

A term used to describe technology companies or solutions that are focused on the financial services industry. This can include a wide range of products and services, such as payment systems, financial planning tools, and investment platforms.

Impact Investing
A type of investment that aims to generate both financial returns and positive social or environmental impact.

Investment management platform
A digital tool or platform that allows users to manage their investments, including buying and selling stocks, bonds, and other financial assets.

Machine Learning
A type of AI that involves algorithms that can learn and improve from data without being explicitly programmed.

Portfolio Management
The process of creating and managing a collection of investments, often with the goal of achieving a specific investment objective or target return.

A term used to describe technology companies or solutions that are focused on helping businesses comply with regulations in the financial services industry.

Risk Tolerance
An individual's willingness to accept the potential for losses in their investments in exchange for the possibility of higher returns.

"Robo-advisors (also spelled roboadvisors) are digital platforms that provide automated, algorithm-driven financial planning services with little to no human supervision. A typical robo-advisor asks questions about your financial situation and future goals through an online survey; it then uses the data to offer advice and automatically invest for you." For more on robo-advisors, see Investopedia.

"Robo-retirement platforms are an extension of Robo-advisor platforms. Here, the platforms employ algorithms to manage a client’s retirement plan. The Robo-retirement platform helps the client create a retirement portfolio. It allocates and manages different assets using artificial intelligence and machine learning algorithms. For more information on robo-retirement, see WealthTech: Technologies in the Wealth Management Sector.

Smart Beta
A type of investment strategy that uses alternative weighting methods, such as volatility or fundamental factors, to construct a portfolio.

Quant Trading
"Quantitative trading (also called quant trading) involves the use of computer algorithms and programs—based on simple or complex mathematical models—to identify and capitalize on available trading opportunities." More information on quant trading is here.

Quantitative Investing
A type of investment strategy that uses mathematical models and algorithms to make decisions about which assets to buy or sell.

Social Trading
"Social trading allows traders of various expertise levels to share their strategies and follow each other’s trades. Within the social trading platform, traders can check the historical performance and the risk level other traders are taking to achieve their current trading performance." For more information on social trading, see A Complete Guide to Social Trading.

Responsive AI