In a recent Accenture survey, 69% of wealth management consumers in the U.S. and Canada said they would consider using Google, Apple or Facebook to manage their money if these channels featured a wealth and money management offering.1 Apparently many clients today want to receive advice on personal wealth with the same level of customization, ease of access to information, and integration of personal data that the Big Techs use to present and market their products and services.
According to Private Banker International’s 2021 Global Wealth Managers Survey, in the US “87% of wealth managers in the country perceive big tech companies as a key threat” as they already have “technical expertise and an enormous amount of data on users’ spending habits [allowing them] to provide a highly customized user experience at low costs.”2
Big Techs continue to make bold moves
These developments should keep wealth firms on-guard as many Big Techs are trying to ease their way into the financial services space more and more. Both Google Pay and Apple Pay continue to grab market share in the payment industry for example. In 2020, Apple Pay alone accounted for 10% of all global card transactions.3 Specific to wealth, PayPal released a feature that allows consumers to buy, hold and sell cryptocurrency,4 and more recently, Amazon released a wealth management service to 50 million customers in India through a partnership with advisory services startup Kuvera.5
It will surely take some more time before any of the Big Tech companies could offer the breadth of products many wealth management companies currently offer to their clients, but with how fast technology continues to progress, it could be a lot closer than one might expect.
Considering this, my firm belief is that wealth management leaders should think through how to hold a competitive edge. Perhaps even by gleaning from the rapid rise of Big Techs and using some of their experience and practices to their advantage. I would consider the following three areas to be good ones to start with.
1. How Big Techs have been able to gain such a large customer base
By and large, Big Techs have captured consumers by designing products and services through first principles thinking. They have reverse-engineered and streamlined complicated processes to provide straightforward interfaces for consumers that are easy to navigate and aesthetically pleasing. Just look at the FinTech space, where some companies have been largely successful because they also have started drawing on this approach by making their platforms easily accessible via an app and offering investment options through a simplistic interface with little to no upfront cost. The question is how could wealth management firms utilize a similar line of action to maintain and grow their market share?
2. How Big Techs have operationalized an integrated way to deliver products and services
While Big Techs don’t have legacy systems like most of the established wealth companies, they are data-centric and have huge data lakes on consumer spending habits and preferences. Coupling the vast amount of data with the technical expertise that each Big Tech possesses provides them with a competitive edge particularly in their operating models. The question is how could wealth companies evolve to become more data centric to e.g., develop new services?
3. How Big Techs have constantly driven innovation
Observing the environment Big Techs operate in, many would say that organizationally they are structured to adapt and evolve with clients’ needs. Employees are never standing still and generally have access to real-time business metrics. This allows teams to incubate innovation, solve client problems or design new solutions. With that in mind, how could wealth firms break down more siloes to foster continued innovation to meet existent and evolving client needs?
The way forward for wealth management firms
Overall, the advancements from the Big Techs are posing a threat to the wealth management space. And on top of that, new tech entrants are also trying to disrupt the existing business models. The most prevalent example being probably Robinhood who is offering commission-free trading6 to capture new investors thus decreasing the cost to invest and forcing established firms to rethink their cost structure as well.
To stay ahead, wealth firms should act now by beginning their journey towards a new state of advice. This means moving beyond offering solely investment management, but instead delivering products and services within the right context of a client’s financial, emotional and social goals. A compelling digital and personal engagement model, powered by analytics, will be needed to deliver against clients’ expectations. How else could wealth management firms utilize their infrastructure and experience to stay ahead of their new competitors and flourish within the new wealth landscape?
I hope you found this in interesting and feel free to connect with me on LinkedIn to catch up on more of the latest wealth management trends.
Special thanks to Nicholas Shore, Accenture Senior Analyst – Capital Markets, Wealth Management, for contributing to this blog.