You can’t read industry news now without fintech innovation stealing the headlines. Fintechs, digital from day one, are agile enough to not only innovate, but innovate with speed. And with 291.3 million fintech users projected by 2022, I don’t expect those headlines to slow down anytime soon.[i]
Despite the focus of recent media attention on fintech firms, I predict 2018 will see a resurgence for wealth management incumbents who are now making headway on their own digital wealth platforms. Many of them are partnering with fintechs in client-centered business ecosystems. Increasingly, I see fintech players becoming vendors in service to the incumbent players.
Industry momentum requires a balance—driven by the big players who are aggressively changing, but also by the new players that own key niches, significantly driving down the cost to serve. For more on this type of successful partnering, see Scott Reddel’s recent blog on why building the wealth platform of the future takes a village.
Established firms themselves tell us they are moving full steam ahead, with half of large financial services entities expressing interest now in developing their own digital platforms (compared to 33 percent just two years ago).[ii] While it is sometimes hard to discern the changes taking place in the platforms of the market leaders, from my experience, I see that many set their focus and investment on modernizing their technology to provide a new type of client experience and value proposition.
And rightly so, because when a balance between incumbents and fintechs is struck, clients become the winners. They get the best of both worlds—technology and a very human focus on the customer.
What’s driving the digital platform explosion?
The next generation of investors is partially behind the drive to digital platforms. Roughly half of firms surveyed by market analyst Aite Group recently said they are targeting Gen X, Millennials and children of existing clients with a move to digital.[iii] Hence, powerful digital platforms could be a springboard to better serving multiple client segments, creating targeted value-add services and a robust client data layer. In the same survey, wealth advisors said they would use a digital platform to:
|Improve clients’ digital experience||46%|
|Acquire a new segment of clients||40%|
|Automate processes (onboarding, portfolio management)||39%|
|Offer clients more service options to best fit their needs and preferences||39%|
|Serve some of our exciting clients more cost-effectively||34%|
|Meet the needs of clients/prospects… who prefer passive/low-cost portfolio management||32%|
Source: Aite Group survey of 369 financial advisors, Q2 2017
The numbers above show that incumbent wealth management firms are poised to enter the digital space. They bear the right goals and vision for their digital platform to be able to deliver services that clients demand.
291.3 million fintech users will be upon us before we know it. Despite this growth, I have no doubt the incumbents will be playing a leading role in the digital landscape—many in partnership with the fintechs.
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[ii] Aite Group survey of 369 financial advisors, Q2 2017 and 403 financial advisors, Q3 2015