This article follows a piece I wrote that looked at six fintech ideas from the first decade of fintech that failed to go mainstream — algorithm-based buy/sell/hold advice, trade mimicking, P2P lending, P2P insurance, on-demand insurance and standalone financial planning apps. But there’s more to the story. Given the intense interest in the fintech sector, it’s worth examining three more concepts that initially seemed promising but largely failed to change the financial services industry.
Before diving in, it is important to once again first define how we are categorizing “failure.” This article is not focused on highlighting the demise of individual high-profile fintech startups or various failed fintech initiatives undertaken by large corporations (such as BloombergBlack or UBS’ SmarthWealth).
These ideas rolled out with hype and momentum, but they ultimately failed to change the way the average person manages their money.
Rather, this piece will focus on fintech ideas that received some degree of initial hype and momentum but ultimately failed to change the way the average person manages their money. So, with those caveats, here are three more fintech concepts from the last 10 years of fintech that did not succeed.
Independent financial adviser search and matchmaking tools
In the early 2010s, approximately 15 firms launched an online search or matchmaking service designed to help individuals find a financial adviser that best met their needs. The traditional approach to financial advice — where wealthy individuals usually find an adviser through friends, family or a local financial adviser’s proactive sales outreach — lags behind modern online product search trends. Every day, consumers shop online and pour over user reviews. The logic behind this early wave of startups was that the experience of finding a financial adviser should mimic the way consumers look for other products and services online.
Financial adviser matchmaking startups generally took one of two approaches. The first approach was to offer a search tool that let users find local financial advisers based on parameters such as assets under management, experience, rating, gender, etc. Here’s an example of a financial adviser’s profile on the now-defunct financial adviser search tool Tippybob.
The second approach was to offer an online financial adviser matchmaking service. Prospects were asked to enter basic information about their income, age, assets, needs, etc. and the firm would introduce them to a local financial adviser who was selected as a personalized fit for their needs.
As of 2023, there are still a few independent sites (such as SmartAsset and Zoe Financial) offering some kind of financial adviser matchmaking tool. And of course, Googling “financial advisers in my area” will yield paid ad placements. In general, however, independent financial adviser search and matchmaking tools failed to go mainstream. Most wealthy individuals still find their financial adviser via traditional methods rather than relying on web-based approaches.
This idea failed to catch on for two reasons. First, these startups were unable to overcome the difficulty of building a two-sided network for a product with a slow sales cycle. Advisers didn’t want to join these matchmaking services unless there’s a large number of users on the platform. Without a significant number of advisers on the platform, however, these services struggled to attract users. This chicken-or-the-egg problem was compounded by the very slow sales cycle of financial advice.
Secondly, financial advice is fundamentally different from other types of goods and services sold online. There are potentially massive negative consequences if a consumer chooses the wrong financial adviser and they receive bad investment advice. Ordering a pizza or a pair of shoes online does not carry the same level of risk.
Consumers who would like to work with a financial adviser seem inclined to only want to hire someone with whom they have a high level of personal trust. Thus, the financial adviser business model has proven resilient to disruption by online product search and comparison services that have upended so many other industries.