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RAPPORT

Beyond automated advice

How FinTech is shaping asset & wealth management

Asset and wealth managers should watch FinTech companies closely and adopt a responsive digital strategy. Otherwise, they face losing part of their business to new entrants.

After leading the way with technology in the 1980s, asset and wealth managers (AWMs) have become dismissive of technology innovations and disruptions to their industry. During the emergence of online brokerages, wire houses gave the upstarts pejorative titles, such as “discount brokers”, holding the belief that these new business models would fail to take off, and the risk they posed to businesses was low.

In reality, these new competitors commoditised trade execution, significantly dropping the price that companies can charge per trade. Eventually, they introduced new pricing models by splitting advice from transactions – full service brokers started to charge on a fee per assset under management (AuM) basis versus fees per trade.

History could repeat itself again with the ongoing disruption caused by FinTech companies. Much like online brokerages, “robo- advisors” have been disparaged as less valuable than human professional wealth advisors, and so far have been focusing mainly on low balance accounts. But the innovations under the umbrella of “robo-advisors” are becoming more sophisticated and, thus, enable advisors to service higher net worth accounts. In fact, “robo-advisors” create an opportunity for asset managers to target the mass affluent who are looking for cheaper alternatives to receive advice on how to manage their assets.

Participants in PwC’s global FinTech survey view asset and wealth management (AWM) as the third most likely field to be disrupted (35%), while 60% of asset and wealth managers think that at least part of their business is at risk to FinTech – lower than most other financial sectors.

By being too complacent, investing mainly in self-serving automation and ignoring the imminent technological revolution, asset and wealth managers might lose touch with their core clients. Additionally, they might miss the opportunity, already tapped by FinTechs, to win the mass affluent market. Keeping abreast with how FinTech is reshaping the industry seems like the most reasonable way forward...

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