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Amazon in wealth management? What about Costco or Target?

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Costco. Walmart. Target. Even the local grocery store chain.

The list of retailers that could potentially launch a wealth management offering is surprisingly long, as financial advice is commoditized and scaled even further to reach the smallest investor.

With Amazon inching closer to financial services, industry observers say its a worthy exercise to think about other potential retail competitors. The leveling powers of today’s digital technology can help them avoid the past failures of attempting to bring wealth management to the masses, such as Sears’ infamous 1980s attempt with Dean Witter.

“People may roll their eyes in the land of wealth management and financial services, but it’s no longer a place for just banks. They don't own it anymore,” said Doug Fritz, CEO and founder of F2 Strategy, a technology and marketing consulting firm to the wealth management industry based in the San Francisco Bay area.

“When you take that veneer away, what really exists there is trust and presence and the ability to get in the middle of a transaction, and then it can be anybody else's game.”

With the exception of Overstock, no mass retailer has announced a wealth management offering online. But the seeds are there. Any retailer with a robust e-commerce digital platform, physical ubiquity, brand awareness and trust built over many years of effective marketing could find an opening, industry observers suggest.

Costco seems like the most obvious candidate to get into the wealth management space, said Fritz.

The discount warehouse retailer already has a wealth of services that go beyond selling 30-ounce jars of organic blueberry jam from Maine. Costco provides home mortgages; auto, home, health and life insurance; auto buying; payment processing; and discount personal and business checks. Previously, Costco offered its members discounted trades through the online brokerage ShareBuilder (now known as CapitalOne Investing).

Walmart too offers check cashing services, tax prep, money transfers and bill pay and money orders.

“Competition will come from unexpected places,” says April Rudin, founder and president of The Rudin Group, a marketing strategist for the financial services industry. There would be little barrier for Costco or Walmart to offer a white-label robo adviasor from a tech firm to their customers, she says.

“When I think about Walmart, I think about it as a Main Street brand, not a Wall Street brand. There are plenty of people on Main Street who need financial literacy and would like to go to Walmart as a trusted brand,” Rudin says.

Fritz says this concept can be translated further down to regional grocery chains, such as West Coast-based Seafood City, offering wealth management services to its mostly Filipino customers, who already take advantage of the store’s partnership with Philippine National Bank to send money abroad to relatives.

The long-term play is what happens when non-traditional entities such as these retail stores and tech companies like Amazon realize that they can duplicate the same financial services via cloud-based platforms, he adds.

"Being a partner is not your salvation. Asking someone to partner with you — this is a future competitor,” Fritz says.

Some experts don't expect retail stores to jump into the wealth management business, largely due to regulatory hurdles. The biggest tech companies are more likely to jump into the fray first, suggests Timothy Welsh, president of Nexus Strategy in Larkspur, California.

“It’s difficult for anybody to be a disruptor to come into this space,” Welsh says, who cites regulations, compliance and infrastructure as key barriers to entry.

Incumbents such as Charles Schwab have already boxed in robos with products and are not being shy about advertising them, he adds.

“I’d be most concerned about Amazon, Google and Facebook,” says Charles “Chip” Roame, managing partner at Tiburon Strategic Advisors in Tiburon, California.
“Amazon’s natural play may be as a giveaway within its Prime service; what if it acquired one of the robo advisors and made it free to Prime members?”

The prospect of a mass retail giant entering wealth management shouldn't scare advisors, says Billy Lanter, a fiduciary investment advisor at Unified Trust Company in Lexington, Kentucky, because they would face the same issues that many robo advisors have come up against.

“What is your experience as an advisor?" he asks. "Do you know what it is like to ride a bear market and transition people into retirement?”

Planners need to focus on helping their clients reach financial goals, Lanter adds. "If you are adding good value, you shouldn't be worried. If you are just managing money, then the threat is real."

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