knowledge of technology-drivenfinancial businesses and our abilityto move with speed with Walmart’smission and reach, we can create anddeliver financial offerings that aresecond to none,” added Meyer Malka,managing partner of Ribbit Capital, inthe announcement.
THE FALLOUT
What will this mean to us in the cushyworld of wealth management? Whathappens if Walmart does launch a roboadvisor or a robo insurance platform?
Should we be worried? Afterall, financial advisors — for themost part — have been immuneto the technology changesdriven by the entrance of digital players over the last decade.
In fact, many of the innovations developed by these earlyVC-backed entrants largelyhave been embraced, extendedand commoditized by the bigfinancial services brands, suchas Vanguard, Schwab, Fidelity,and Merrill Lynch. So what’sthe big deal?
Before we answer that question,let’s review the data that highlightsWalmart’s massive reach. In terms ofrevenues, Walmart generated $524 billion in its 2020 fiscal year. That’s a staggering number compared with revenuesone of the financial industry’s largestplayers, Fidelity, which had a touchunder $21 billion in that same time period. And in terms of yearly e-commercesales, Walmart had nearly $40 billion, soit’s no slouch in the digital arena.
Also, Walmart employs 1. 5 millionpeople and has nearly 5,000 physicalstore locations in the United Statesalone. In comparison, Schwab-TDAmeritrade has 400 offices, and Fidelityhas 180 locations. When it comes toclients, Walmart is truly an outlier, serving more than 265 million people eachweek, while Fidelity serves just over 30
million investors across its many business lines.
To sum up, Walmart is roughly 25times larger in revenues, 30 times largerin terms of the number of physical locations and nearly 10 times bigger whenit comes to the size of its customer basethan one of the largest financial servicescompanies in the world. That shouldkeep all of us awake at night.
WHO WIN? WHO LOSES?
Of course, there is some history thatshows what happens when a physical retail operation wades into financial services. The answer: not good.Remember the “socks and stocks”debacle that retailer Sears attemptedin the 1980s by placing stock brokersin its stores after its failed attempt todiversify into financial services with itsacquisition of Dean Witter? Overstock.com launched a robo advisor two yearsago to much fanfare, yet it yielded zeroassets.
Is this time different? Probably, giventhe track record, reach and potential ofthe new Walmart fintech venture. Whowill be the winners and losers at thisinflection point?
Winners are professional advisors
focused on financial planning, rela-
tionships and a behavioral finance
approach, who once again should rise
above and continue to separate them-
selves from any techn offering, regard-
less of distribution reach. Experience
has shown over the last robo-decade
that advisors have successfully har-
nessed new technological innovation
for their own businesses, and when it
matters most, people will pay a pre-
mium price for professional help in
managing their money. They simply
want to talk to a human when it comes
to the very personal issues involved
in meeting their goals and making the
most of their financial resources.
In fact, as Walmart builds out a massive investor base, these types of advisors may very well partnerwith the Walmart venture togarner referrals for Walmartclients who have more complex needs as their wealthgrows. However, those advisors who only sell productsand are transaction-based mayvery well be pushed out of themass affluent marketplace, astechnology and distributionreach replaces this transactionbusiness with a much lowercost-structure and devastatingoperational efficiencies.
Other potential losers square in thesites of this Walmart-fintech juggernautlikely will be any firm in the financial services distribution game, including broker-dealers, asset managers andlife insurance product manufacturers.As Ribbit Capital’s Malka says above,knowledge + speed + reach = victory.
Regardless of what happens, thisdevelopment confirms one thing: Weare still in the early stages of ourindustry’s evolution as technologycontinues its digital transformationof everything and economies of scalebecome more powerful.
Timothy D. Welsh, CFP, is president, CEO andfounder of Nexus Strategy, LLC, a consultingfirm to the wealth management industry andcan be reached at tim@nexus-strategy.com oron Twitter @NexusStrategy.
Potential losers … likely will
be any firm in the financial
services distribution
game, including broker-
dealers, asset managers
and life insurance product
manufacturers.
