The global wealth management industry is subject to permanent change and struggles to master complex challenges. At the same time, an increasing number of well-funded startups is stirring up the market with disruptive business models. New firms like Betterment, FutureAdvisor, Wealthfront and Personal Capital are continuosly skimming potential and existing clients from the established wealth management top dogs like UBS, Bank of America and Morgan Stanley. These incumbents each still handle between $1.5 and $2 bIllions of assets under management (AUM). However, fintechs are eager to seize the moment and grab their share of the market with customer centric, intuitive approaches to wealth management that attract especially the younger generation of high net worth individuals. As the wealth management market become more and more characterised by a high degree of heterogeneity, fintechs offer a wide range of important benefits.
Wealth management fintechs initially target niches such as the „Henrys“
The secret of the fintechs‘ success is the result of many factors. Founded and run by the young, aggressive and eager entrepreneurs, the new kids on the wealth management block target niche markets thei understand better than their established competitors such as the „Henrys“, folks with „high earning, not rich yet“. They therefore do yet overlap with the multi-million-dollar target customer segment that the big shot wealth management firms address. Yet. Backed by powerful banks and investors like Citi Ventures and Black Rock, they are expected to venture into the incumbents‘ space rather sooner then later. Given their highly automated advising algorithms and offers that cater exactly to the needs of their target customer group, fintechs offer information at the private investor’s fingertips whenever the customer decides to use it. As their customers grow from high earning to high net worth, the likelihood that they stay with their fintech wealth manager is high. And there is one more important aspect: FinTechs not only put the user in control but also score with small fees and low minimum investment sums.
Fintechs are a huge opportunity for banks
While some banks might see fintechs as a threat, they also are a huge opportunity that can be seized if approached intelligently. Anything from a benchmark to cooperations, acquisitions and integrations is possible. The one thing banks should not do on but unfortunately often fall back to is sit back and watch until one day they realize that they are too late in the game. Unfortunately, the vast majority of banks are moving too slow to keep up with the fast-paced fintech world. Some adopt new approaches to old business models like those players, who already use our online-platform to sell their non-performing loans. While we certainly do not reinvent the wheel, taking NPL-trading online speeds up the transaction process, lowers coordination cost and increases transaction prices due to direct and visible competition between the investors. A sexy package that is tough to beat. This being said, it always takes a banker who is not imprisoned in old behavior and open to innovative business models. We are convinced that in five years from today, only banks with these kind of bankers will stand a chance to survive in an ever-fiercer financial markt.