By Julie Verhage and Hannah Levitt
(Bloomberg) --As the biggest banks continue spending millions of dollars on financial technology to transform decades-old wealth-management offerings, funding declined in the third quarter for startups that have sought to transform the industry.
Financing to VC-backed wealth-tech startups slumped 49 percent to $272 million from the second quarter, which had seen a better-than threefold surge in deals, according to a report issued Wednesday by CB Insights. The most recent period compares with the first quarter’s total of $292 million, the report shows.
The biggest wealth-tech investment in the third quarter went to Betterment LLC, the largest independent robo-adviser, which took in $70 million and is now valued at $800 million, CB Insights said. Large banks, including Morgan Stanley, JPMorgan Chase & Co. and Goldman Sachs Group Inc., discussed digital enhancements to their wealth offerings on recent earnings calls.
The future of Morgan Stanley’s wealth business will “be a mix of technology and digital with the personal element of the advice channel, and we think that’s the winning element going forward,” Chief Financial Officer Jonathan Pruzan said Tuesday. Morgan Stanley is investing in automation to reduce expenses and boost revenue, he said.
Ellevest, an online investing platform launched by Sallie Krawcheck, a former Citigroup Inc. and Bank of America Corp. executive, also recently raised funding without disclosing a valuation.
CB Insights, a technology industry researcher, analyzed funding to private, venture capital-backed companies for its report on fintech financing.