When wealth management executives are asked, “what keeps you up atnight?” or “what are you most worriedabout?” their usual responses haven’tbeen about their fears of losing marketshare to current rivals or any of theannoying startups backed by venturecapital. Rather, their real anxieties arelaser-focused on what could happen ifthe big tech titans like Amazon, Googleor Apple finally turn their disruptiveappetites on the business of financialservices.
After all, these goliaths have hada devastating history of wiping traditional industries off the face ofthe planet and replacing them withtheir brutal efficiencies, cost savings,elegant interfaces and middle-mancrushing technologies to provide abetter customer experience. In fact,if they even start sniffing arounda particular industry, stock pricesget hammered. Case in point: WhenAmazon acquired Whole Foods, allbets were off in the traditional industry of food distribution.
To date, wealth management hasbeen insulated from the reach of thetech titans by, of all things, regulation.These titans have said many timesthat they don’t like highly regulatedindustries and there are so many morefruitful markets still waiting for themto dominate.
Also — and probably the biggest
barrier to entry — is that the current
wealth space already is an oligopoly of
trillion-dollar companies. These firms
are highly entrenched brands that have
invested massively in technology, driv-
ing many costs to zero; much of the
middle-man distribution inefficiencies
have been commoditized, dramatically
In many areas of financial services,thought, there are expensive, clunky andmanual processes that remain part ofproduct manufacturing and distributionin the legacy businesses of mutual funds,insurance products and the like — andthis does open the door for a non-tradi-tional goliath to exploit.
Let’s consider the one 800-poundGorilla that hasn’t made the list ofwhat keeps wealth management leaders up at night: Walmart. The world’slargest retailer typically isn’t thoughtof in the same disruptive categoriesas the tech titans, yet the potential isthere for it to completely re-write thedistribution and delivery of financialservices, forever altering the comfortable, highly profitable world in whichmany of the industry still lives.
Thus, when news broke in Januarythat Walmart had created a new fintechstart up with venture capital firm RibbitCapital to develop and offer “modern,innovative and affordable solutions,”the REM sleep cycles of asset manager,broker-dealer and insurance companyexecutives probably were cut in half.
“For years, millions of customers haveput their trust in Walmart to not onlysave them money when they shop withus but help them manage their financial needs,” said John Furner, presidentand CEO of Walmart, in a statementannouncing the new strategic partnership with Ribbit Capital.
Of particular worry to the wealthmanagement industry is that RibbitCapital has real experience in this area,having been behind fintech startup suc-cesses such as Robinhood, Credit Karmaand Affirm. This means the combination of Walmart and Ribbit could be thebeginning of something truly disruptive.
“When we combine our deep
By Tim Welsh
What if Walmart Had a Robo Advisor?
Being a highly regulated industry may protect wealth management from
this new threat … or maybe not.