Adapting Wealth Management for a BigTech World
HNWIs maintained interest in the hybrid advice model, as first highlighted in the WWR 2017 with more than 50% globally said it was highly important. Hybrid advice forms a critical top-line growth enabler for firms with 68.7% of HNWIs globally saying hybrid advice is a significant factor regarding decisions related to asset consolidation with their primary wealth management firm.
The pace of wealth management firms’ hybrid advice transformation is speeding up with each interviewed firm making progress in its hybrid business model transition compared to the 7.3% of firms who showed no progress last year. However, the pace of progress is not fast enough considering the decline in HNWIs’ satisfaction with hybrid advice propositions and the potential threat from BigTechs.
Widespread global entry of BigTechs into wealth management remains uncertain, although is likely to be a case of “when” rather than “if” with certain entry barriers including privacy and reputational issues, on top of regulatory constraints. There is a consensus among wealth management executives that BigTech entry will be led by Asia-Pacific, followed by North America, and, eventually, Europe.
The most-likely approach for BigTech entry into wealth management will be based on "collaboration" or "frenemy" models. Regardless of the BigTech entry model and time horizon, wealth management firms must transform the way they invest for the future with leading firms heavily investing in innovative technologies such as intelligent automation and artificial intelligence (AI) as they attempt to prepare for an industry in which BigTech firms play a larger role.
Progress Made by Firms on Hybrid Advice Transformation by Stage, Q2 2017–Q1 2018 (Global)
Note: Question asked: “Where is your firm with its hybrid advice strategy?”
Source: Capgemini Financial Services Analysis, 2018; Executive Interviews 2017, 2018