What You Need to Know
- Here's why these blue-chip banks — which for generations have fixated on the 1% — are stooping to conquer clients with just 0.01% of this wealth.
Three of the grandest names in white-shoe wealth have recently opened their digital doors to the averagely affluent:
In February 2021, Goldman Sachs Group Inc. expanded its personal loan platform Marcus by launching Marcus Invest, “an automated investing platform with managed portfolios of affiliated and unaffiliated ETFs.”
In June 2021, JPMorgan Chase & Co. spent a rumored 700 million pounds ($899 million) to buy Nutmeg, “one of the most successful digital challengers in the British wealth management market.”
In January 2022, UBS Group AG found $1.4 billion in cash to acquire Wealthfront, “an industry-leading, automated wealth management provider serving the next generation of investors.”
Although each of these brands has its own wealth-management pitch, all are essentially retail “robo-advisors” — digital platforms providing automated investments, premised upon semi-bespoke onboarding (risk profile, personal goals, time horizons), offering fees that reflect that absence of human interaction and requiring low opening balances.
(Similarly, if less storied: Lloyds Banking Group acquired the investment platform Embark; Abrdn bought the AI-driven Exo Investing; Royal Bank of Canada proposed the acquisition of Brewin Dolphin wealth management; and Barclays partnered with Scalable Capital to develop the discretionary portfolio manager, Plan & Invest.)
To open an account with Goldman Sachs Private Wealth Management you need at least $10 million in investable assets; Marcus Invest requires $1,000.
So why are these blue-chip bankers — who for generations have fixated on the 1% — stooping to conquer customers with just 0.01% of this wealth?
Various interlocking forces are at work:
TAM of AUM
According to Backend Benchmarking, assets under management (AUM) in the robo-advice market rose from $631 billion in 2019, to $785 billion in 2020.
And so, as the total addressable market (TAM) expands, traditional wealth managers are looking enviously at the AUMs of robo-pioneers and FinTech disruptors like Betterment, Fidelity, Schwab, SigFig and Vanguard — to say nothing of blockbuster gambling/trading apps like Robinhood, whose 17.3 million monthly active users, as of December 2021, had an AUM of $98 billion.
Whereas high-net-worth clients tend to employ elaborate financial structures across multiple jurisdictions, and rich retirees must juggle pensions, annuities, dividends and estate planning, the above-average working Joe/Joanna simply wants to get in on the market without getting burned.
For such modest aspirations, “robo-advice” is not merely better suited to the task but, given its fees, preferable to the client.
Once mainstream consumers have signed up to wealth management, how much easier is it to sell them retail banking, loans, mortgages, insurance, e-trading and, who knows, crypto?
Capability · By investing in the high-tech and human capital required for robo-advice, traditional banks simultaneously become better equipped to serve modern billionaires who also prefer digital dashboards and cellphone apps to stuffy, oak-paneled offices.
Anyone who still thinks Gen Z, Millennials and Generation X have nothing to offer but personal debt and avocado toast should remember the actuarial gravity of an ageing population.
As each day passes, more members of Gens X–Z are reaping the fiscal harvest sowed by the richest-ever generation who, born between 1946 and 1964, are now 58 to 76 years old.
According to Morgan Stanley, this represents “the largest intergenerational wealth transfer in history, with $30 trillion set to change hands over the next few decades.” As the diner sign used to say: “A milkshake customer today is a steak customer tomorrow.”
All of which poses a puzzle: If wealth management is not just for the wealthy, how best to brand the product?
What Is Wealthtech?
For many steeped in the traditions of wealth management, wealthtech is an oxymoron: One can either have “high touch” or the common touch.
Yet such hidebound thinking increasingly jars with our disrupted, democratic and direct-to-consumer present, where digital natives have neither the time nor the personality to schmooze with pinstriped advisors inherited from their (grand)parents, or tipped by a friend.
In this new informality, where word of mouth competes with click of mouse, brands as grand as Goldman Sachs are a double-edged sword: On the one hand, they confer history, stability and deep wells of experience; on the other, they connote expense, exclusivity and consumer intimidation.
Inevitably, the Germans have a word for this: schwellenangst, which translates literally as “threshold anxiety” and is used metaphorically in the arts sector to describe the apprehension that discourages neophytes from even trying “highbrow” culture like classical music, opera and ballet.
Such schwellenangst places brass-plaqued bankers in a bind: Do they stick with their legacy branding? Do they create their own indie FinTech knock-off brand? Or do they attempt some form of hybrid diffusion?
Hybridity is the approach taken by JPMorgan and Goldman Sachs, whose offspring cling closely to their parents. (Marcus was named after its bank’s founder, Marcus Goldman, 1821–1904.)
It’s notable that the logos for Nutmeg and Marcus don’t just reflect the established typography, they include tethering taglines — though there is an interesting difference in tone between the corporate “a JPMorgan company” and the collaborative “by Goldman Sachs.”
Similarly, their websites reflect only a cautious departure from formality … especially when compared to Nutmeg’s pre-acquisition look and feel.
By contrast, Wealthfront (currently) makes little play of its pending UBS ownership, showcasing instead the echt-bland meet-cute origin story of “when Andy called Dan” and “realized they not only shared a mission — to help democratize access to sophisticated financial advice — they agreed that software could unlock great investing for everyone.”
When it comes to tone of voice, however, all three brands exercise a little more freedom: Looking related is one thing, sounding the same is another. Compare the (boldfaced) pitch of Goldman’s Private Wealth Management …
“It is a privilege to advise the world’s most influential people and institutions. Goldman Sachs’ deeply personal approach goes beyond wealth and investment management — it is a lifelong partnership for growth. Join us for access to expertise, opportunity and each other.” … to the cakeist approach of Wealthfront:
“If you try to do things yourself, you’re never sure if you’re making the right decisions. If you use advisors, you’re never sure whether they’re making the best decisions for you … or for themselves. Wealthfront levels the playing field. Because everyone deserves an equal chance to succeed.”
That said, the disarming frankness of Nutmeg …
“Investing can be difficult. Just ask all those who have tried and failed to beat the market. Fortunately, we have the people, the technology and the portfolios to help.”