Current US trends indicate – Fintechs are part of the future model. After market oriented models we face the emergence of a new area of risk- and infrastructure oriented approaches. Taking these and investing selectively along the bank`s strategy are part of the solution. In the end the incumbents are likely to be challenged by a purely digital infrastructure. Join us in looking into “the new digital wealth management play”.

1. Underlying trends

We see the following underlying marketoriented trends:

  • Demography: Baby Boomers enter Wealth Management age with expected doubling of coverage ratio of clients covered per relationship manager
  • Robo-Technology: After the US, Germany is the market with the highest robo-penetration. Although shift of client volumes has been limited so far, two major impacts already take place – transparent, lower cost structures make costs a relevant factor and revenues are getting under pressure (> 30 bp instead of 75 bp)
  • Expected down-turn in stockmarkets will reduce the AuM volume reducing income even further. This will particularly hurt the independent robo advisor models. Some of them might disappear, others can become a cheap bargain for incumbents.
  • Retirement assets gain substantial importance in the wealth management arena with new Fintechs entering the market.
  • Millenialls like assets with focus on sustainability, fair labor as well as good corporate behavior.
  • Finally, micro-investments have become a new category to address. Global players go for youngsters as well as emerging markets to capture a large number of smallest investments. Again Fintechs, often in combination with mobile payment solutions capture the market.


1.1 Fintech contribution

Looking at the US we have seen the emergence of a large number of Fintechs addressing the wealth management market.

Consumer oriented models

Taking the latest news from the US, superior consumer experience is targeted by addressing a very different set of strategies:

  • Wealthfront, Andy Rachleff: with US$ 11 bn AuM it’s the biggest independent digital wealth management platform. With 85% of the clients being younger than 45 years, they target a growth group with a tax product, financial planning as well as the ability to borrow against the portfolio. They have almost no marketing expenses while 60% of their employees are technicians. Pricing is at 25 bp flat, which does not allow for breakeven so far. Their performance measure is the rate of technical change with no intention to combine the model with physical distribution.
  • Fidelity, Ram Subbramaniam describes Fidelity`s innovation strategy. With 12.000 people in physical distribution all over the US, they offer clients the choice between self direction, robo-advice and personal relationship management. Their digital offering is based on three pillars, namely (1) API, (2) Cloud and (3) Data and AI. Among the latest results from Fidelity Labs are a voice identification system to identify people, Fidelity Go again for miliennials as well as a personalized App for customers. Fidelity also cooperates with ATM network Coinbase to deposit and retrieve cash.
  • Tala is a financial inclusion platform. It is a digital only approach that starts with credit, 99% repayment and not collections. They follow a three step approach (1) Identification, (2) Segmentation and pricing (e.g. the speed of filling is a good indication for credit quality respectively fraud) and (3) improving scores form loan to loan. In the end that means a dynamic pricing scheme. They hold their own balance sheet as a foundation of the relationship, focus on SMEs and provide one credit at a time. Tala has started operations in five countries so far with the Philippines being their strongest market.

Risk analytics and wealth management infrastructure

Risk management and wealth management infrastructure have become the dominant factors in 2018. (see figure 2):

The following examples exemplify the approaches in more detail:

  • Riskalyze: it is a core quantitative risk assessment software which assigns a proprietary “risk number” to objectively pinpointed advisor`s risk appetite. In 2018, Riskalyze is partnering with Vestwell to provide retirement investors with tools to monitor allocations and record investments. Riskalyze has US$ 23,5 m disclosed funding with anker investors such as FTV Capital.
  • Quovo is a data platform that leverages a robust suite of API`S & modular applications to aggregate financial data across more than ten thousand financial institutions. Core customers are Bank of America, Chase, Citibank as well as Riskalyze. They have raised US$ 10 m in Series B funding.
  • Plaid develops technical tools used by other fintech firms to better connect consumers, traditional financial institutions and developers. These tools can further provide key insights to customer data e.g. enable the transfer of funds, track spending behavior or detect fraud. Plaid is backed by Goldman Sachs, Citi Group, Google Ventures and several more.


1.2 Transition path

We don't see clear patterns of the future digital model yet but rather a selection of single explorational directions. From this we expect the following three directions:

  • Incumbents investing or even buying into some of the Fintechs to improve their underlying infrastructure gradually. Its either huge players who can go for larger bets or the acquisition of smaller Fintechs such as purely German players. To date, effects on the process model are less transparent, which will require further investigation.
  • Incumbents intensifying their own development projects to improve operations. The negative AuM trend might cause limits to that.
  • Emerging of a purely digital infrastructure which serves clients as well as relationship managers at the same time. Wealth management has the beauty, to be small enough to do so with modest/manageable investments on the other hand with relationship managers moving around and bringing clients and assets with them. Based on a digital proposition acquisition costs might be underproportional.

2. Investments and transition as part of the transformation

Investments and / or cooperation

There has been a decent history of investing into wealth management start-ups. The most remarkable start-ups are listed below:

  • SIGFIG: UBS and Santander invested into SIGFIG to foster their wealth management business.
  • Scalable: Blackrock is among the core investors. With its cooperation with ING in Germany, they have raised more than € 500 m AuM in the past twelve months alone.
  • Motif: Goldman and JP Morgan are part of the core investors.
  • Bloom: Backed by Allianz Ventures as well as Nationwide.


From a US perspective, Fintechs in robo-retirement, impact investment as well as in micro investing are among the next M&A targets (see figure 3). Again, it's less the pure size of the business but rather access to a new consumer group as well as fostering one`s own image.

3. A purely digital wealth manager – a potential build model with reduced entrance barriers

What would a purely digital wealth manager be like? Apart from building it on its own, cloud-based core banking software provider such as Ophen could provide out-of-the-box solutions to facilitate the set-up as well as lower running costs (see figure 4).

Customization must adjust for the following aspects:

  • Superior customer experience in terms of onboarding, mobile usage, ordering as well as reporting and analysing
  • Straight through processing for each transaction without any crucial interfaces
  • Open API model to be able to exchange data as well as to add superior functionality from other providers such as Riskalyze or similar
  • Cloud based solution guarantees for low running costs
  • Superior tool set on reporting and analytics

Security has been a neglected component to the discussion so far. We are convinced that in particular an advanced solution on identity and access management will provide a superior setting as well. Fintech or cyber innovation has been limited along these lines while at the same time urgent need is frequently quoted by our consulting customers.

4. How to start

How to start? Is always the key question. With a core product, a superior digital solution as well as the ability to keep a high rate of change are key elements to success. The latter is driven by the teams’ or founders’ customer proximity, strong technical capabilities as well as sufficient financial resources. Crypto has proven to attract a high number of customers in a small period of time. Another leverage is to use customer streams in upmarket product models such as luxury, cars or holidays.

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