By FINTECH Books Contributor, Alessandro Bologna
In January twenty years ago, when I was 15 years old, I was going to my travel agent to plan and book my first study holiday in England. I chose on a paper’s catalogue through a short description the destination, the school, the health insurance, the transfers and the accommodation. After that I went to my bank to exchange Liras for Sterling and to order traveller’s cheques. Finally, I bought a Kodak disposable camera to prove my investors (my parents) that I was really there.
If I were to do the same today I could swiftly arrange everything from my sofa. Some goods mentioned above don’t exist anymore and some technologies are now surpassed, while other services have completely changed the way to be served. Technology and innovation produced, in the last two decades, disintermediation and disruption in almost all sectors.
Disintermediation can be defined as the elimination of an unnecessary layer in a transaction, increasing efficiency (e.g. travel agent vs.Skyscanner.com add comparability, savings, proximity, etc), while disruption is an unexpected solution that satisfies a need in a completely new way (e.g. listening music with Spotify, traveling with Airbnb, learning with Coursera, etc).
The Financial Sector is not immune to these dynamics with a high commoditization for products and services. In wealth management in particular, disruption could come from new entrants who know very well all the preferences of the clients, their needs and habits of consumption.
If private banks wish not to become the new travel agency, they need to shift towards a goal-based asset and liability management, an holist approach encompassing asset allocation, debt and insurance optimization, tax and real estate planning, philanthropy and succession planning tying the single goals with appropriate timeline and the probability to achieve them. “Change is the law of life”: the only way to survive is to evolve.