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There is also a customer and organisational
need for more digital offerings and channels. This
scenario describes an industry well into the first
stage of disruption.
Innovation guru, Clay Christensen (author
of The Innovator’s Solution), talks about the
“cliff of disruption” and the fact that disruption
happens slowly until it happens fast. Four years
ago, Deloitte predicted in its Short Fuse Big Bang
research that financial services would be one
of Australia’s first industries to be significantly
disrupted by digital technology.
This was an early sounding of the bell about a
phase that is now much more transparent, where
it is easy to see what is going on. This is the most
interesting phase of all. It is where incumbents get
to make choices. Those that do not make choices
and stick to ‘business as usual’ or make the wrong
choices will be likely to feel it within a few short
years. So what is happening in terms of disruption
in the wealth industry?
A 2014 Deloitte study, titled Digital Disruption in
Wealth Management, identified numerous start-
up firms with digital business models that have
emerged within the wealth management industry
over the past ten years.
According to this analysis of more than 50 of
these start-ups, they are business-to-consumer
focused, and primarily serve retail investors in
• connect: helping investors connect to their
peers with multiple accounts and multiple
sources of advice
• advise: providing investors with advice
tailored to their unique situations and
delivered through a rich, digital experience
• invest: providing access to esoteric
investment opportunities and investment
strategies similar to those used by
professional investors and institutions.
In 2015, there are more wealth managers
providing scaled advice, with equity and donation
crowdfunding, and access to peer advice through
Some companies that started out just four years
ago, supported by venture capital, are now billion-
dollar wealth managers. Two of the most notable
are Wealthfront and Betterment. Within three
years, Wealthfront has grown to now manage $2
billion in funds and Betterment went from zero to
$1.4 billion in a similar timeframe.
Wealthfront uses a robo-advice platform
that automatically selects a portfolio based on
information the consumer provides about their
The products are targeted at millennials
and the ‘high earners, not rich yet’ (HENRYs).
‘Attract them now and retain them though their
accumulation and retirement years’ is the model.
Charles Schwab has successfully leveraged this
approach with its online trading platform more
than a decade ago.
Betterment has just started to move up
the value chain by extending its automated
investment program to registered investment
advisors with Fidelity, referring these advisers
to test digital investing. Betterment and Fidelity
are popular because they are filling a gap in
the market, they are much less expensive than
traditional wealth options, and have award-
winning user interfaces.
Global financial technology (FinTech) financing
has more than tripled in the past three years, to an
estimated $3 billion annually. This has triggered
an unprecedented level of innovation in the
financial services sector over the past 12 months. In
Australia, new start-ups include Movo, Stockspot,
BrightDay, Selfwealth, Big Future, Pocketbook,
crowd funding platform Equitise and peer-to-peer
lender SocietyOne, an online nimble fintech.
However, it will not necessarily be the new start-
ups that win the lion’s share FinTech company
business, though they may be bought out and
make a handsome gain. The real opportunity is for
incumbents to adopt disruptive techniques.
Charles Schwab has recently launched a zero-cost
portfolio management service. It is disrupting
itself, looking to win share in the millennial
market and learn how to bring the core of its
organisation to the edge. As Schwab continues to
develop its offering, it also has developed a more
traditional, face-to-face service for clients as they
are getting ready to make a play for retirement.
Vanguard has also piloted Vanguard Personal
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