Amazon’s entry is not a joke and it could happen soon according to a Vanguard executive who was in town last week for the Vanguard investment confab. Not only that, a number of prominent retailers could launch wealth management offerings as financial advice is scaled even further to reach the smallest investor. Costco and Walmart come to mind. The executive acknowledged that Vanguard is actively planning to compete with technology-driven companies that have never been in wealth management. They take the threat seriously.
Bloomberg, CapGemini and Ant
Bloomberg writes that people would consider using Google and Amazon to manage their wealth. CapGemini’s 2017 World Wealth Report says that more than half of high net worth investors would consider using a Big 4 technology firm for wealth management services. Executives can debate how to enter the wealth management business – from the very top or the very bottom – but it’s clear to me that the big tech operators are coming. Outside the US it’s already happening; China’s Ant Financial manages $350 billion of investments. Ant just completed a $10 billion capital raise valuing the company at $150 billion. There is no current law that prohibits non-US companies from managing US individual money. Switzerland’s UBS has been trying it for years. Clearly, there are big numbers at stake, representing the nest eggs of millions of investors.
I agree with Vanguard that using technology to continually drive down costs is a great investment strategy and smart business. In 14 short years, Osbon Capital has proactively reduced the underlying investment cost for clients by half. I expect our cost-cutting to continue. In my opinion, the large bank-connected US firms like the one I used to work for are lagging badly and are ripe for picking. The question is, what does all this industry activity mean for me, the wealthy US investor?
Jeff Bezos is not managing your money
If Amazon announces wealth management through its AWS cloud division you can be sure they will not suggest that Jeff Bezos is the portfolio manager. Jeff’s algorithm may get the title, however. The Amazon name is powerful – if not loved by all, at least admired as a company that delivers on time with technology that is always improving. I do think State Street, BlackRock, Vanguard and Fidelity are up to the competitive threat. Most of the competition will center on the $10k to $500k account size. Capturing the $1m -10m individual is much harder since those people want real human beings to talk to and to strategize with.
More pluses than minuses
After assessing the industry changes coming our way Max and I remain focused on keeping Osbon Capital right where it has been since 2005: servicing no more than 100 wealthy families, with equal emphasis on personal attention and cost control through the smart use of technology.
We emphasize language and ideas no tech behemoth algorithm, or even the big sales-driven banks, can replicate. Concepts like “investment journey,” “value proposition,” “tax efficiency,” “trust” and “experience” are best delivered by real people. Add in “trust and estates” and “financial literacy” and you have a better idea of why we exist.
Competition is good for our industry because it gives our clients more choice and forces all providers to work harder. I welcome a conversation with any individual investor in our asset range about these important industry trends.
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