The democratization of wealth management

Privileges that used to be reserved exclusively for HNWIs are becoming available for regular investors and bank customers.

It all started with wealth advisory and wealth planning.

Why so? The advisory service was the main target of the latest regulatory tightening in the area of investor protection (e.g. MiFID II, RDR) – which led to higher transparency in products and fees. It also restricted or even eliminated the inducements banks and wealth managers used to get as their revenue.

This, in turn, made many banks switch from pure product-focused recommendations toward standardized advice based on diverse product packages. Such a move gave an extra opportunity to offer investment advice to a wider clientele – affluent and mass affluent segment included. These customers tend to have more straightforward investment needs, possible to be met by standardized wealth planning model. Or so it seemed.

Another thing is, many banks had actually no choice but to widen the customer target group and offering, staying on the hunt for new revenue streams from recurrent advisory fees instead of commissions. But this approach can bring two long-term effects, and good ones at that: customer loyalty followed by extra money if one day the affluents turn into HNWIs.

What also contributes to the proliferation of wealth management services is the advancement of technology and the rise of non-financial players. They offer low-cost, automated investments, trying to mimic traditional portfolio management in the form of proprietary algorithms managing customer portfolios.

The number of robo-advisors that have entered the financial market, their user-friendly services and low cost strategy have acquired a certain portion of worldwide wealth that did not qualify for regular wealth management services. And while many in the industry were expecting robo platforms to endanger high-end wealth management, or even take over its market share, the platforms ultimately cater to investors with lower assets. This brought a new kind of customer to the wealth management digital marketplace.

The liberation of investing and wealth planning

Banking and investment services are expected to be regular consumer services

The liberation of investing and the trend of accessing online platforms for wealth planning purposes have also been fueled by the change in demographics and people’s habits.  

Today, banking and investment services are expected to be regular consumer services - easily purchased and maintained, priced in a transparent way and accessible for everybody. What is now expected to happen is the entry of commercial giants, such as Amazon or Apple, into the industry.

Take the successful story of Yu’e Bao, a money market fund that is being offered to Alibaba customers through Ant Financial, formerly known as Alipay. The advantages of such non-financial players are their strong distribution channels and advanced analytics to probe customer preferences. This results in creating ecosystems in which the new players’ customers can be catered to thoroughly, also financial and investment-wise.  

The evolving banking landscape has exerted even more pressure on regular banking players, as if shrinking margins, legacy systems, or fragmentation of processes and services were not enough.

Are banks ready for this new, affluent client and new distribution models gaining in popularity each day? What is their digital strategy? How will they compete against tech giants – if they ever have to?

What is surely positive about the current situation of wealth management is the digital progress the industry has made. Nowadays, more and more financial institutions deliver investment services online, either as an add-on or as a full-fledged alternative which makes it already the first move and incentive towards lower segments of clients. In fact, the democratization of wealth management does not mean a necessity for banks to reshape towards pure online platforms offering robo advisory or portfolio management. Technology is there for enabling automation and giving the operational possibility to span services across various customer segments. Technology is one of the main enablers to cater to the banking “middle” class, either in a fully digital mode, or a hybrid one, mixing human touch with online offering.

The segment’s population is growing

But is catering to affluent individuals even worth it? The segment’s population is growing and holds a significant amount of the world’s personal wealth. At $17.3 trillion investable assets in 2017, it makes over 30% of the global wealth. According to Boston Consulting Group, the affluent segment is currently represented by approximately 72 million people being the burgeoning “middle” class. What’s more, some affluents will become the millionaires of tomorrow – as reported by Forbes, the biggest wealth transfer in history is expected to happen over 30 to 40 years to come. To successfully cater to those people, financial institutions must offer an efficient service model but also show significant strength in new digital technologies. The time for light, agile and democratic investment proposition is now.


Anna Sacha
Anna Sacha
Business Solution Manager at Comarch

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