Deep-pocketed technology companies, such as Amazon and Google, can make a killing if they begin offering wealth management services, French technology services giant Capgemini has predicted.
If they head down this road, an estimated US$12 trillion could come in their way, as they are more ideally positioned than traditional asset managers to launch hybrid advice models that blend human and digital interaction.
With technology disrupting every economic sector, wealth managers are finding an urgent need for arming themselves with innovative technologies such as intelligent automation and artificial intelligence.
“We are seeing that returns alone cannot sustain a wealth management business,” says Anirban Bose, member of the Group Executive Board and Head of Capgemini’s Financial Services Strategic Business Unit.
“Hybrid models are gaining popularity because high net worth individuals (HNWIs) can tap into financial planning services in a modular, pay-as-you-go manner and take control of their wealth management journey.”
In the survey, nearly 60% of HNWIs globally said they would be willing to begin a wealth management relationship with a large tech company within a six-month period, with around 80% saying they would consider a hybrid model within a year.
Today, large tech companies cannot jump onto this bandwagon right away, as there are many barriers, namely privacy and reputation issues, on top of regulatory constraints. Nevertheless, Capgemini says, their entry is a case of “when” rather than “if”.
Some of them have already made their interest clear. Amazon has partnered with Berkshire Hathaway and JP Morgan to look at wealth management in the American healthcare market.
In China, Tencent has secured a licence to sell mutual funds to WeChat’s one billion users, and Alibaba already has a wealth management arm called Ant Financial.