WealthTech disruption across the wealth management value chain

fintech circle

By FINTECH Books Contributor, Boudewijn Chalmers Hoynck van Papendrecht
Follow on Twitter: @BouChalmers

Innovation occurs as a result of unmet market needs and the amount of innovation activities has never been higher delivering better experiences, at a better price for the client and at a lower cost. WealthTech’s/FinTech’s start to compete with incumbent wealth managers across the end-to-end wealth management value chain.

The WealthTech/FinTech disruption can be looked at in two ways:

  • New entrants as complete organisations trying to disrupt the existing value chain
  • New technologies that are likely to be adopted by existing players

Three questions are:

  • What are drivers of disruption within the wealth management industry?
  • What are current FinTech developments across the wealth management value chain?
  • How can existing wealth managers address the FinTech challenge?

Key drivers of the change

Client profiles are one of the drivers of disruption in today’s environment. Many organizations are still looking to optimize services to existing clients. Wealth managers shouldn’t ignore the fact that future clients will look dramatically different. Other key drivers of disruption are technology, competition and regulatory scrutiny.

WealthTech/FinTech’s would soon be able to take over the full wealth management value chain.

When looking at FinTech entrants to the wealth management industry you could roughly say that most of them are focused on the investment side of the value chain (e.g. robo/automated advice solutions). While to do that FinTech’s have to provide onboarding/admin services and as such are full organizations, there is a significant FinTech opportunity ahead of us to specialize across other aspects of the value chain (e.g. onboarding, customer engagement or service delivery).

Wealth management needs to consider partnering with FinTech’s to keep up with the pace of innovation.

Solutions delivered by FinTech’s are efficient and offered at lower cost than   existing services delivered by traditional wealth managers. Traditional players could remain competitive in the market addressing the operational efficiency across their broader operations, improving experiences delivered to clients and focusing human efforts to the areas where they are most valued.