The Age Of Enablement
New investors saw no need for traditional wealth products – and flocked in millions to the likes of Robinhood, PayTM Money, Zerodha, Freetrade, or Etoro.
Few will challenge the contention that the world of wealth management of the future will be very different from today. But what will that future look like?
I believe that the Wealth Management is heading for a major disruption in the next 2 decades. This disruption will be driven by demand for new services from a new kind of customer. The current wealth value proposition will remain but the dominant demand will be for an entirely new set of services that do not exist today.
My view is that the industry today is not equipped to meet this new demand and unless they change, customers of tomorrow will vote with their feet by simply going somewhere else.
Let me explain …
Lockdown has triggered a fundamental change in how people invest
We have seen a global explosion in retail investing during lockdown. India has added 20 million new accounts, US 10 million, UK, 4.5 million and so on. What makes this trend significant is that these are new-to-market, digital, DIY investors who do not trust banks, prefer their own research, do not want advice, do not want someone else managing their portfolios.
They need guidance (not advice) and want to make their own investment decisions.
Wealth management is not focused on DIY investors
We all know from personal experience that wealth management is a product centric business. The industry makes its money on managing discretionary portfolios and giving advice. Self-directed investors get short shrift because they don’t seek advice and pay very little.
But as a customer, I am most engaged while making my own investment decisions – an area my wealth manager has no interest in.
This imbalance came into sharp focus during lockdown. New investors saw no need for traditional wealth products – and flocked in millions to the likes of Robinhood, PayTM Money, Zerodha, Freetrade, or Etoro.
This divide will only get bigger as the new, digital investor segment accumulates more wealth from rising incomes and inheritance – our internal models suggest that these investors will control as much 30%-50% of global wealth in the next 20 years.
There is a new generation of customers coming and their needs should matter to the wealth industry.
The future is wealth enablement, not management
What will these new generation of investors need? I believe they will need tools and services that will allow them to do what they want – this is what I call Wealth Enablement.
A Wealth Enablement business model will require services based on digital completion of autonomous self- discovery journeys; non-advisory but “guided” investment process; powerful but invisible technology that enhances customer experience; AI augmented, “smart” decision making with intelligence on demand; contextual knowledge and interactive learning in small bites; broad range of investment choices that are personalised for each user; pay as you go pricing with no fixed costs; unquestionable value for money; full asset class coverage including crypto; frictionless, no hassle investing; no barriers to entry for sophisticated products; strong peer validation from communities of like-minded investors … none of which fit within the current model of wealth management.
A tennis player knows the need to move to where the ball is going to be, not where it is. That is the existential challenge facing the wealth industry – how to move to where the customers are going to be, not where they are today.
How the wealth industry reacts will determine not only its success but its survival. But as with all discontinuous events, it is a moment of great risk and of great opportunity but also an exciting moment that will define the future of the wealth industry.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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