Big Tech firms readying to muscle in to wealth management is a major concern for financial advisers, according to a new report.
Although the Big Tech firms – Google, Amazon, Apple, Ali Baba and Facebook – have yet to announce a move into giving financial services advice, traditional IFAs and investment managers suspect the move is not far away.
Their worry is the Big Tech firms are much better at efficiency, innovation and transparency that give them economics of scale when operating an online advice platform.
The concerns came to light as outsourcing firm Capgemini asked IFAs and investment advisers about the high net worth clients.
Collaboration v competition
They found besides tipping the scales in satisfaction rates, collaborating with Big Techs could cement the loyalty of wealthy clients in the lower wealth band (between US$1 million and US$5 million in assets).
While they were benefitting from using Big Tech services, wealth managers also see them as a business threat.
“While Big Techs have not formally announced their wealth management entrance, incumbent firms are aware of the competitive threat, yet have different perceptions about the potential impact,” says the report.
“Big Techs could emerge as formidable competitors if they decide to enter the wealth management space by hiring experts and building their own capabilities. However, they could also act as true partners to wealth management firms, helping them to overcome tepid satisfaction rates among high net worth clients.”
Worries about costs
Managers also fear their wealthy clients believe they are paying too much for their services and may elect to switch to a Big Tech offering if the service is similar but cheaper.
Anirban Bose, Head of Global Banking and Capital Markets at Capgemini, said: “Firms that are able to combine their wealth management expertise with Big Tech customer experience skills could lead the way by offering truly innovative services.”
Wealth management firm collaboration with Big Techs could trigger widespread disruption in the industry, explained Bose.
“It also has the risk of evolving into outright competition with Big Techs in the future. It is imperative, therefore, that wealth firms focus on developing their capabilities in scalable technologies to retain a competitive edge against any future solo ventures by Big Techs,” he said.