What if Google, Amazon or Facebook Did Wealth Management?

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In Dave Eggers’ fictional account of a mega social-network corporation, “The Circle,” a thinly disguised Facebook or Google has, in the words of the New Yorker, “become the technological architect of daily life — arranging conversations, restocking pantries, making payments and ranking human beings.”
At one point, the Circle dispatches a team to count the grains of sand in the Sahara desert. Mae, the novel’s protagonist fleeting asks, “Did the world need this?” but soon “understood it as most Circlers did: as a show of strength, and as a demonstration that with the will and ingenuity and economic wherewithal of the Circle, no earthly question would remain unanswered.” (The Circle, Dave Eggers)
Least of all questions about stock choices and asset management.
Here’s another story:
“It’s March 11, 2020. As Wei boards her train in the suburbs of Beijing, heading for her office in the capital of the world’s biggest economy, she checks her mobile device. She has been sent a message from the international dating company eMatch’s sister site, eMatch investments.
The technology-based financial adviser has analyzed her financial strategy and automatically matched her dating style with the fund and companies most likely to meet her future needs.
One of the recommended funds in the SearchCo Asset Management (SAM) Global 80 Big Cities find, so Wei clicks on her SAM app and plays a video that presents key information about the fund. California-based SearchCo, an internet search engine used by more than half the world’s population, moved into the funds industry in 2015, and by 2020 was registered in more than 40 countries as an investment adviser.”
This excerpt isn’t pulled from a novel, but rather the introduction to PwC’s recent look into the future of the wealth industry, Asset Management 2020 A Brave New World. It’s bullish about the future dominance of digital brands, be they social networks, search engine giants or e-retailers.

Might Google, Facebook or Amazon really ever become a bank or investment manager?

I certainly wouldn’t bet against it and neither would the chief executive of BBVA, Francisco Gonzalez, who took to the Financial Times just before Christmas to issue a stark warning that “banks need to take on Amazon and Google or die.”
Gonzalez disagrees with bankers and analysts who think the Internet giants won’t enter a highly regulated, low-margin business, and says that banks that are not prepared for such new competitors will be terminated.

Banks will become less important in the future

PwC also sees banks becoming significantly less important in future but crucially predict that asset management will move center stage. PwC expects that “the rising cost of capital will curtail the ability of banks and insurers to provide and recycle capital” and believe this will “create a vacuum into which the asset management industry will step and place itself at the center of efforts to reinvigorate the world economy.”
Rising to that challenge is likely to mean asset managers working with – or facing competition from – a new breed of competitors who built their brands online and now want a slice of the financial pie to add to their core business.
The future for asset management, described by PwC, is remarkably well aligned with the skill set that the Amazons, Facebooks and Googles of this world bring to the table:
Asset management in 2020:

  • Technology will play a key role in cost efficiency
  • CRM capabilities will be crucial – both for customer satisfaction and operating model efficiency
  • The use of data will set winners apart from losers
  • Clients will expect firms to identify emerging needs through data mining and social media and offer timely products and services in response
  • The distribution map will be re-drawn
  • Ongoing regulatory change and new standards in portfolio-level disclosure will demand huge capabilities in managing fund data

Partnering with a tech giant might well make sound business sense for many global wealth managers — but would Google or Amazon be interested in partnering? Why wouldn’t they simply grab the whole opportunity for themselves?
Yes, regulation is a barrier, but it’s not insurmountable and Google has a far better track record at implementing change and overcoming obstacles than most global banks.
And then comes the final, most important, piece of the puzzle, the client. Asset management is first and foremost about customers not numbers. As competition heats up, building a brand that can successfully convey what’s special about your firm vs. the many others queuing up to manage a portfolio will become much more important. Here’s where the entire financial sector faces an uphill challenge.

The next generation of wealthy investors

The next wave of wealthy investors will have grown up with Facebook and Google. Amazon will have helped them buy more conveniently and save money. Facebook will have helped them connect with their friends or access brand discounts. Google will have been their go-to guy for finding out just about anything and banks… well, banks were the bad guys credited with bringing the world almost to its knees during the global financial crisis.
Who would you choose?
So perhaps we shouldn’t be shocked that “the rising generation of young Americans have little loyalty to banks. Many also believe that traditional financial institutions are on their way to irrelevance, according to a survey from Scratch.”

  • Over half (53%) of millenials say that nothing sets their personal bank apart from its competitors
  • Roughly half of respondents said that they are “counting on tech start-ups to overhaul the way banks work”
  • 68% said that the way people access money will be completely different within five years
  • 33% predicted that they won’t need a bank at all in the future
  • An overwhelming majority, 73%, report that they would be more excited about new financial services options from Google, Amazon, Apple, PayPal or Square than from their own nationwide bank

So yes, there’s a brave new world there for the taking. Yes, asset management has a huge opportunity to steal the stage and overtake retail banks and insurers. Seizing the chance will depend on firms adopting an innovative, collaborative approach to new technology.

Who will the winners be?

The winners will be those who start laying the foundations now, partnering with tech vendors who can help provide the service that clients expect and building a brand that customers identify with and value.
And if that innovation and technological disruption doesn’t happen, then it’s only a matter of time until the tech disruptors take on wealth management. It’s already happening in China were Alibaba’s Yu’Bao internet money market fund is showing exponential growth. And it can happen where you are too. Sooner than you think.

hazel mchugh

hazel mchugh