Google or Amazon wealth management? How the threat is evolving

The tech giants are gradually capturing financial services.

Their reputation really does precede them, as numerous studies show consumers are keener to trust Google or Amazon than UBS or Merrill Lynch. Taking into account the consumer data aggregation powers and innovation prowess these big tech companies possess, what would prevent them from invading the wealth management industry in 2019?

It's quite possible that one day Alexa or Google Assistant will wake you up in the morning and say, "Yesterday you made this much money in interest. You have this much in bills to pay. Also, you’ve got a social engagement tonight, would you like to donate something to that event?" You might reply, “Yes, make it for me,” and the system would run all the operations automatically.

Recent research shows that both millennials and HNWIs want control over their investments. They would expect Google to give them that control if it were to launch a digital wealth manager.

Capco's Phillip Klein, who heads its North American digital wealth and wealth management strategy, says, “If you have an Amazon or an Apple offering wealth management, able to target you with artificial intelligence and better data, better algorithms and better digital propositions, and a brand that is better trusted by millennials and Generation Z, they’re going to be very fierce competitors.”

Nevertheless, is the threat real? Or are they even already there?

Michael Short/Bloomberg

Among all the giants, Google is the closest to customers. Every wealthtech mobile app is run on an operating system owned by Google. The success of such mobile solutions as Robinhood or Acorns has meant that the younger generation is ready to enter the wealth management market, says Lex Sokolin, director of fintech strategy at Autonomous Research. Also, Google’s Deep Mind offers great prospects for behavioral economics.

At present time, Google Assistant skills can help you check financial markets, manage investments and payments, donate to charity, file taxes, and find financial services. There are about 300 apps in the business and finance section, including those of Apex and Coinbase.

Amazon’s forté is integration. They’re all connected to the end investor, advisory firms, and platforms. Most of the wealthtech companies store their data in AWS Cloud, as it’s more secure than doing it in-house. Recently, Amazon collaborated with Fidelity Labs to create a virtual reality financial advisor, Cora. Earlier, a partnership with UBS Wealth Management allowed Alexa to answer various economic questions.

Alexa’s skills in the business and finance section total over 1,600, and include cryptocurrency apps, eWallets, tools for managing mortgages and invoices, financial calendars, and analytics assistants. Among the app providers are Schwab, Fidelity, Orion, PayPal, JPMorgan Chase, and Capital One.

Apple and Facebook may also increase client stickiness by implementing wealth management offerings. Some wealthtech tools are already using Facebook profile analysis to empower financial decisions. However, in Facebook’s case, it has lost a great deal of customer trust and probably dropped out of the race.

Are these companies really able to disrupt the current market? Obviously, they can potentially do so. But let me explain why I think it won’t happen in 2019.

There are many industries that Amazon and Google have failed to disrupt. Despite these companies’ distribution advantage, markets for smartphones and payments (PayPal and Square are still safe) survived the battle.

Finance is a highly regulated market, and this eventually slows down its adoption for Google and Amazon. Also, investment is a money-sensitive area that carries reputational risk for both companies.

The giants have two aces up their sleeves — intuitive user experience and daily-life integration. Almost all the experts I’ve spoken with have claimed that these are the most wanted aspects by both advisors and investors.

Amazon’s role would be much more than just disrupting existing solutions. It has revolutionized e-commerce, but not because it sells things. It’s likely that Amazon will be able to integrate all the existing solutions under one roof. Google is known to be an information gatekeeper; it’s likely that its fintech entry will follow the model.

It’s not a question of “if,” but “when.” Some of the platforms have already taken the best of the trend and partnered with giants. One company, Bridge FT, is already bringing Alexa into the fintech space. It combines powerful voice recognition, different types of integration, and parsing tools. Alexa has given customers an incredibly easy plug-and-play experience, which would have been torturous to implement in the past.

Amazon is great at disrupting industries suffering from inefficiency — empty inventories, unused shelves, etcetera. In turn, platforms aim to take inefficiency out of the fintech world. Hence, they’re fighting the same battle. It’s worth collaborating with giants to make better products for customers.

In 2019, more companies will follow suit and join innovation harvesting. It’s very likely that tech giants will encourage partnerships with wealthtech platforms. They’ll lure enterprises in by using virtual reality and augmented reality tools to develop company-specific apps, thereby widening their offerings. However, it’s unlikely that any of them will launch their own product that is able to disrupt existing players. Industry changes happen slowly, and it will take some time to figure out how to make new solutions inclusive.