How fintech opens the door to alternative retirement investments

By 2025, the fintech industry’s estimated global market value is on track to exceed $300 billion. Indeed, fintech has earned its share of press, often focusing on topics such as cryptocurrency and digital-only banks. However, fintech extends to many other areas, including pension investments.

I believe that retirement investing has been ripe for disruption for a long time. It is not a bank on stocks, bonds, shares, traditional currencies or financial advisors and wealth managers. It’s just an honest assessment based on the different needs of yesterday’s investors versus today’s.

How have investors changed? Just a generation ago, most people were content to leave alternative retirement investments to the wealthiest individuals. The average person might have dreamed of investing in fine wine or commercial real estate one day, but he or she knew it wasn’t possible without joining the high net worth club.

Now fintech is slowly leveling the playing field. The average person can own and trade Ethereum, art or non-fungible tokens. All it takes is the right kind of platform and a surprisingly modest amount of money. According to research from alternative investment firm Rocket Dollar, nearly two-thirds of Americans would earmark more funds for retirement — if they felt they had more choices. Fintech makes these choices accessible, understandable and attractive.

In the book “The Disruptive Impact of FinTech on Retirement Systems,” editors Julie Agnew and Olivia S. Mitchell note that retirement is undergoing a revolution. They add that the revolution can be successful. The key to success, according to Agnew and Mitchell, lies in well-thought-out market development.

So far, the development of pension-based fintech startups has been a bit more sudden than Agnew and Mitchell might recommend. Despite this, many investors come along. What they find is that fintech can be a gateway to alternative pension investments in several compelling ways.

1. FINTECH DEMOCRATIZES STOCK INVESTMENT

The democratization of pension investments has taken place with little push. Investment sites like Robinhood instantly removed barriers to entry for countless people. There were people who were once banned from being able to buy or sell stocks easily. No more. Now a wider network of users can confidently try to grow their wealth by investing in stocks that align with their beliefs.

How do app trading platforms like Robinhood, Acorns and Betterment work from the back end? At their core, they are all basically discount brokers. However, each has created user-friendly experiences that empower individual traders. As a result, these traders can feel more comfortable moving their money around in real time and watching it grow.

2. FINTECH DRIVES CRYPTOCURRENCY EDUCATION

Bitcoin, Ethereum and other cryptocurrencies have made their way into everyday conversations – and also everyday investments. Where did the peace of mind and confidence around crypto come from? Fintech entrepreneurs, as well as gamified approaches that make learning about crypto more fun and less complex.

Cryptocurrency-focused fintech tools can help demystify the crypto buying and selling process. By providing secure digital spaces where consumers can easily buy cryptocurrency, fintech companies can enable people to creatively supplement their retirement accounts. Best of all, they can do so with a higher sense of financial literacy.

3. FINTECH OPENS DOORS TO PROPERTY INVESTMENT THROUGH CROWDFUNDING

One thing fintech does exceptionally well is make crowdfunding feel natural and rewarding. Accordingly, many fintech companies are helping investors from all backgrounds put their money towards commercial real estate purchases.

Being able to buy a percentage of a property on a site like RealtyMogul allows for less risky real estate investing. Plus, while the real estate market can fluctuate, it has a history of stabilizing over time. Therefore, it can pay to invest long-term in professionally managed, pre-screened properties.

4. FINTECH HAS INTRODUCED AND NORMALIZED THE ROBO ADVISOR

Just a few years ago, it would have sounded far-fetched to imagine people trusting their retirement portfolios to machines. Not now. AI-powered robo-advisors are rapidly changing the retirement landscape. Their role is to provide financial advice adapted to the individual’s taste. This includes alternative investments.

Consider Wealthfront, a leading robo-advisor. Wealthfront presents a buffet of à la carte investments to choose from. Cannabis. Clean energy. The automated investment services firm makes investing seem more personal, even though it has taken the human out of the equation.

The digital age has affected all industries and especially finance. With fintech, alternative pension investors are finally getting the chance to explore investment opportunities that were not available until recently.

Chalmers Brown is Chief Technology Officer at Due.