We have all heard that the wealth and asset management industry is being disrupted by the technology and e-commerce giants that dominate today’s digital world.
This idea has been expressed so often in recent years that it has become widely accepted, even if it is not yet matched by reality.
According to this view, smart and agile technology companies are poised to sweep away longstanding relationships, overturn the distribution of investment advice services and reduce even the most successful investment managers to the status of anonymous product suppliers.
So why is this still yet to happen? After all, no one doubts that technology companies have compelling capabilities in data analysis, artificial intelligence and user experience — not to mention levels of customer trust that many financial organizations would envy.
Why tech firms haven’t swept away the traditional wealth and asset managers
I suspect that the prospect of financial regulation, and its associated costs and risks, has restricted technology firms from making a full-scale assault on the financial advice market — so far.
That does not mean that investment firms can afford to relax. Technology is already changing the world of financial advice, and I expect disruption to accelerate.
But I don’t expect to see the largest technology firms transforming into asset managers, or rebranding as investment intermediaries.
Instead, they will likely offer two of their world-class capabilities — managing data and understanding customer behavior — to help enhance the work of wealth and asset managers.
Collaborating to compete
More specifically, leading technology firms will use their unmatched ability in data management and analysis to give investment firms totally new ways to segment, understand and interact with investors.
Delivering these types of insights will not be easy. For one thing, investor data will need to be managed in ways that keep technology firms outside the perimeter of traditional financial regulation. But I’m sure they will find a way to make it happen.
Capabilities like this will not only allow advisors and managers to give investors more customized advice, but also to tailor how they provide it — helping them to give every investor the perfect combination of human and digital contact.