The Economist recently ran an editorial on Wealth Management, making the claim that “Wealth Management is fragmented and ripe for disruption”. According to the article the key reasons are:
- No clear leaders - UBS, the largest WM has a tiny 3% market share
- Firms are somewhat technophobic and inefficient
- Customers are unahppy with fees and service
If all this sounds familiar, it's because it matches the signs that an industry is ready to be disrupted. The question is who will be the disruptor; and how can incumbents protect themselves?
Big Bank, FinTech - or BigTech?
Conventional industry wisdom says that disruption would come from a big bank “getting it right”. A company like Goldman Sachs has the resources to succeed where others have failed. Or perhaps a FinTech like Nutmeg or Scalable will make a successful pivot from mass affluent to HNWIs.
My own estimate is that the biggest threat comes from Big Tech. Google or Apple have financial muscle; brand recognition; data and personalization capabilities. For now, they have restricted themselves to payments - but investment management could well be in their radar.
What can traditional WMs do to ensure they thrive once BigTech moves in? They already have portfolio and account management expertise. Fast-tracking their digital transformation journey would ensure they can match competition in their own game by:
- Prioritising digital customer experience and hyper-convenience
- Leveraging the Cloud to drive security and agility
- Acknowledging that Data is one of their most valuable assets
The industry is indeed ready for disruption - by the Big Finance, Fin Tech or Big Tech. Either way, it is crunch time - and traditional firms have to think in novel ways in order to thrive in this new world.