Change ManagementIT StrategyUncategorized

‘Wealth Management as a Platform’ could be coming soon

Ever since I read the HBR article on platform strategy and Pascal Bouvier + David Brear’s posts on Bank as a Platform (here and here), I’d been thinking about Wealth Management as a Platform (WMaaP), given my association with this sector. This post explores that concept further and sheds light on ecosystems fueling FinTech startups to turn this concept into reality.

Oh no, not another ‘aaP’ acronym!

I know that feeling. I am not a huge fan of yet another “aaP” or “aaS” acronym. Makes my head spin every time I try to imagine how a financial function/ institution could operate “as a Platform (aaP)” or “as a Service(aaS)”. So, why consider ‘Wealth Management as a Platform (WMaaP)’ – stand alone – and not as a subset of ‘Bank as a Platform (BaaP)’? In my mind, while banks provide wealth management and personal finance management services, there is a fundamental disconnect.

Banking as a function is more concerned with getting optimal returns for funds/ capital and making a profit in that process. In contrast, the function of wealth management/ personal finance management is – or should be – to align funds/ wealth/ assets against financial goals of the individual and household.

The focus of banks is funds/ capital and the focus of wealth management is the individual/ household.

And this is well evident in the way most retail banks are set up – as product-specific business units versus being centered around customer segments. So, while BaaPs may get more customer-centric, and neobanks are trying to be customer-centric, it may take some time. So, for now WMaaP as a stand-alone warrants a closer look.

Independent Broker Dealers (IBDs) and RIA Custodians don’t offer WMaaP

As I thought of a potential WMaaP, I contemplated if IBDs or Custodians for RIAs in US were essentially acting like Wealth Management Platforms. After all, they allow access to several investment products, not just their own. Further, Custodians for RIAs don’t restrict vendors RIAs use for tools and technology.  But on closer look, IBDs and Custodians are not platforms for several reasons (even if we consider them as a B2B platform).

Rephrasing Pascal and David’s words, ‘the Wealth Management as a Platform structure does not just create investment products. The WMaaP structure is more focused on enabling users of the platform (producers and consumers) create and consume value.’

That is quite a shift for custodians who are still associated with product manufacturing or IBDs who do not offer open technology.

Here is how Asheesh Chanda, the founder of a FinTech startup (O2O Technologies) which is creating one such WM platform explained the concept.


WMaaP:Asia :: Mobile Banking: Africa?

As you may know, Africa – not North America or Europe – leads the way in mobile banking, especially mobile payments. Mobile payments took off in Africa not because of high bank saturation, but because of the exact opposite reason. This was one of the instances where technology innovation allowed banking consumers to skip several steps of  “banking evolution” and move even ahead of some developed economies in mobile banking/ payments.

Wealth Management as a Platform may be able to do the same, i.e. skip a step and move investors in countries like Singapore or India where the personal wealth management sector is less mature than the US or European market.

Asheesh Chanda explains the value proposition of O2O Technologies’ Wealth Management Platform below. O2O Technologies and their affiliates are operating/ applying to operate in Singapore, Hong Kong and India.

In Singapore and India, where the Mutual Fund market is not as mature as the US market, there is a huge gap between the demand and supply of money management and investment strategies for  middle class investors. Since household savings rates in these Asian countries are two to four times that of US household savings rate, this is a sizeable market. WMaaP will find its audience, if it can overcome its initial hurdles.

An initial version – not a perfect version – of WMaaP

Deciding on an investment strategy is not like buying consumer goods or clothes, how will the investor be educated?’ [O2O Technologies is trying a “recommendation” solution to address this initially.]

“Platform succeeds only with a critical mass representation from both consumers and producers. Can such a WMaaP attract and retain that critical mass?”

“When the world is moving towards passive investing, will such a platform of active money managers as producers hold water?”

“What about compliance for such a Platform?”

I realize that O2O Technologies’ current Platform contradicts my initial premise that “wealth management” should be much more than investing funds for higher returns. I realize that several questions remain. I am sure the O2O Technologies team is solving for these and other business needs – and/or will pivot to make it work.

As of now, I see this as a very promising development. Because such platforms have the power to put the consumer (investor) on a equal footing with the producer (financial service providers) and create much needed transparency for the investor.

What are your thoughts of such a Platform taking shape in more mature financial markets like the US and the EU?

PS: Segments of the interview where Asheesh answered questions about their business model (incentives), Compliance, Technologies being used for the Platform, (Active) Asset Managers staying competitive can be found in this playlist:

(Author is the Founder of S2E Consulting)