3 fintech trends that could signal sector downturn

With half of 2025 in the books, I’ve found myself having oddly similar conversations with RIA leaders about fintech. 

The wealth management industry is booming, we agree, with RIA acquisitions and mergers continuing at a record pace. Fintech firms continue to launch and market new point solutions to help advisory firms gain efficiency. Venture capital is flowing — both directly to finance RIA consolidators and indirectly to back fintechs and service providers.

Yet in my talks with colleagues at conferences and meetings, I sense something akin to exhaustion. It’s as if the ultracompetitive RIA marketplace combined with the rapid evolution of often AI-infused fintech and wealthtech (the subset of fintech focused on wealth management) has firms unsure of where to invest their technology dollars. Many seem frankly overwhelmed by the number of options they need to evaluate and consider.

My decades of experience in financial services tell me that — without putting a time frame on it — we are coming due for a shakeout in the financial technology space. Such a reckoning will likely be a result of pressure coming from multiple sources.

With that in mind, watch out for these three trends.

1. Aggregators consolidate their stacks

The many RIAs acquired by aggregators in recent years could mean the pool of candidates is changing. 

A Mercer Capital report notes that while the number of deals is up, the total AUM of the deals in Q1 is down. That means that, on average, smaller RIAs are getting acquired. Aggregators are now ready to bring together the firms they have bought on a single tech stack to start gaining efficiencies of scale.

READ MORE: What’s wrong with the big RIA model, straight from advisors’ mouths

2. Fintech solutions consolidate

For aggregators and large wealth managers, managing and integrating lots of little tech solutions is a costly, complicated and ultimately unsustainable proposition. 

Look for smaller fintechs to sell to larger tech firms; merge to offer more integrated solutions to solve the multiple needs of wealth managers; or, in some cases, to simply shut down if they don’t reach a critical mass of clients. This is especially true of venture-cap backed firms, which have a “shot clock” — a time by which they want to turn a profit or cut losses.

3. Robust tech firms left out in the cold

In case of a downturn, even thriving tech firms will need to get nimble — particularly those that get a disproportionate amount of revenue from a single, big client. Should that client decide to go with a new solution, those firms may need to contract. 

To prevent this scenario, fintechs may aggressively recruit new clients to reduce their dependence on their biggest contract. The resulting surge of new deals and offers will put more pressure on the other solution providers.

Partnering in a crowded field

Where does that leave stressed wealth managers trying to choose from an exhaustive list of tech partners? I suggest three criteria.

Longevity. Firms that have been around for some time can be evaluated based on how they’ve innovated and adapted to solve new challenges in the past.

Ownership. Smaller, PE-backed firms that have been slow to sign on new clients may be vulnerable to sale, merger or other transition, potentially disrupting your wealth firm. Publicly traded tech companies may get external pressure to scale back due to market conditions. Privately held companies (full disclosure, such as mine) may have more leeway to follow their plans.

Scalability. A solution that works fine for small wealth managers but can’t keep up when the firm expands can cause a bottleneck on that growth. Having a tech partner who can evolve with you can make all the difference.