The financial services sector is among the market's most stubborn holdouts when it comes to the influence of disruptors.
"There are only three industries software has not disrupted yet—financial services, health care and education," said Wealthfront CEO Andy Rachleff. "We are the last three frontiers."
At last, the frontier of financial services is being disrupted.
Wealthfront is among the financial services sector disruptors to be featured on the inaugural CNBC Disruptor 50 list.
Leveraging a disruptive feature that has become common across industries—from transportation to retail and health care—it's the power of software and algorithms that has spurred Wealthfront to $240 million in assets in less than a year-and-a-half, attracting clients from the new rich in Silicon Valley, including 100 Facebook employees.
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There is an estimated $29 trillion of consumer household investable assets up for grabs in the U.S.—$12 trillion in the individual investor market—and Rachleff is betting that algorithms will continue to take more of these investable dollars from the manned private banks and wealth managers.
"A physical advisor can't constantly get better. Software can," Rachleff said.
He added, "[Charles] Schwab said when he started off he focused on the exact same client for the exact same reasons. Now his average client is in their 50s. The discount broker model when he started it only appealed to crazy young people."
In fact, it's the slow demographic churn of the Baby Boom generation and the rapid rise of technologically able younger generations that is behind Wealthfront's game plan and many of the other financial services sector disruptive companies, as more and more people with money not only demand access via the web and mobile, but prefer it. "Some of our clients said they would pay us to not talk to them," Rachleff said.
(Read more: Disruptors Moving the Health Care Market)
Where Wealthfront is doing for wealth management what Charles Schwab did for the brokerage industry, companies such as Kickstarter, Lending Club and CircleUp are engaging clients in online models that break with the status quo of raising funds and borrowing money to get a business started.
Peer-to-peer transaction capabilities are part of the Lending Club story, a company that is stepping in where banks have let the market down, making loans and matching those loans with debt investors. CEO Renaud Laplanche said, "Disruption is about upending the status quo to deliver a profoundly better solution." So far its solution is working well.
Lending Club revenue increased more than five times from 2010 to 2012, reaching $34 million in 2012. The company turned the corner on profitability in the first quarter 2013, and projects $90 million in revenue for 2013. It's already loaned out $1.7 trillion and paid investors $151 million in interest. While creating a new platform for loan investors, Lending Club is attracting more big investors to its concept: Google just took part in a $125 million secondary equity offering executed by the company's early backers.
Kickstarter and CircleUp, in particular, have created two of the most successful early models for crowdfunded startup capital.
Kickstarter likes to think of itself as a creative project funding mechanism rather than an alternative to VC, but the line is being blurred. Gaming company OUYA, which raised $8.5 million on Kickstarter, recently graduated to a $15 million round of venture capital led by Kleiner Perkins Caufield & Byers. Kickstarter now has 31 projects that have raised more than $1 million.
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CircleUp now has the most accredited investors of any crowdfunding site in history. It also has something few startups can boast about: Clayton Christensen, "the father of disruptive innovation," is an investor.
"A disruptive business model expands participation in the market by lowering the cost to serve previously unprofitable customers, typically through the introduction of a new technology or business process," said Ryan Caldbeck, CircleUp CEO.
Caldbeck's "previously unprofitable customers" are all over the financial services disruptor map. It's the clients that Wealthfront is after whom would never get the attention of private banks. It's the independent filmmakers funding projects through Kickstarter—among the most heavily funded project sectors for the platform—who would never see a dollar from the major entertainment market investors.
All of these companies are creating new market disruptions within finance and funding by reaching clients who never before "existed" or were "inferior" clients not worth the attention of the fatcats on Wall Street. Rachleff said new market disruptions are uneconomic for an incumbent to compete with, and that's an important advantage.
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The barriers to entry in financial services and capital formation have come down, and downscale. In retail, Rent the Runway lets you wear the same dress as the nominated actress at the Oscars. Even if you don't dress like a bond trader or banker, with the help of algorithms, Kickstarter "gift" givers, and peer-to-peer networks, these days it's possible for the crafter, independent filmmaker, Facebook employee and CEO of teen skincare product company Willagirl (a CircleUp company) to take a disruptive walk down Wall Street.