3 Ways Banks and Wealth Managers Are Adopting Embedded Wealth Today (and Why Only One is Up To It)

Such has been the stratospheric growth of embedded finance over the past 10 years, it was perhaps always inevitable that it would push new members and seep into other areas of money management, lending to insurance.

Among these new ends is one that promises to forever transform the way people use their wealth: integrated wealth management.

As the tectonic plates of consumer expectations continue to shift and demographic flux sees wealth transferred to younger, more tech-savvy generations, traditional, face-to-face relationships between wealth managers and investors are threatened.

However, this is not the doomsday scenario as it first appears. Indeed, thanks to the early and intelligent integration of embedded wealth management functionalities, it represents a phenomenal opportunity. An opportunity to open the doors of investing to the affluent masses and dig deep new revenue streams for banks and wealth managers.

With such promise looming, many banks and wealth managers have already begun the process of adopting integrated wealth management technology. In most cases, they do this in one of three ways.

In this article, we seek to explore this trinity of methodologies and why one in particular is gaining traction.

The purchase of B2C on-board heritage proposals

When a business wants to quickly diversify its service portfolio, acquiring an existing business that already provides those services is a preferred option. At least among those with fairly deep pockets.

Once completed, acquisitions provide out-of-the-box internal experience, brand reputation, and market share. However, acquisitions are expensive, complex and risk-laden processes. In few industries is this truer than in finance.

With large volumes of capital owned by multiple parties involved, complexity and risk are compounded when the acquired company offers a niche service. With built-in wealth falling into this category, not only are existing vendors hard to acquire, they are also hard to find.

We could take JP Morgan Chase as an example with their recent acquisition of Nutmeg. JP Morgan Chase holds a status few financial institutions can match and by bringing Nutmeg into the fold, one of the few digital retail wealth managers with brand reputation and market share, is no longer for sale. .

The self-construction of embedded legacy technology

In the absence of a suitable integrated wealth provider to acquire, banks and wealth managers may instead choose to develop the technology themselves. It’s a huge gamble and an area where neither has an impressive track record.

Developing brand new technology from scratch is a notoriously long process, requiring multi-million dollar commitments to complete and requiring constant maintenance and upgrades throughout its life cycle.

As the digitization of banking and money management continues to accelerate at high speed, this may be the
a length of time necessary to self-build the integrated wealth technology that is most problematic.

Not only does time inflate costs, but once the technology is ready to go live, competitors who have adopted faster, more modern approaches to enabling digital wealth are already consuming market share.

Partner with an existing platform provider

For banks and wealth managers who want to become early adopters of embedded wealth and radically improve their chances of becoming market leaders, the opportunity to do so seems infinitesimal when none of the above options are available. feasible. Until they discovered the third partner option with an existing platform provider.

By integrating an API-native wealth management platform that simply plugs into existing ecosystems, banks and wealth managers can significantly enrich their existing datasets with data from both internal systems and external sources, becoming them ourselves an integrated wealth provider in an agile and profitable way.

Thanks to this data connectivity with third parties, it is possible to perform several tasks quickly and at scale. These can range from onboarding clients and performing KYC processes to providing bespoke proposals that match clients’ capital and risk appetite for maximum return potential.

In addition to being significantly more cost effective compared to acquisitions or self-build, API-powered platforms enable the creation and implementation of highly automated integrated wealth propositions in as little as six months.

A unique opportunity

Banks and wealth managers often adopt new high-potential propositions once they have proven themselves in the field, in which case they need to catch up with those who have recognized the opportunity before them.

One need only look at the runaway success of more established integrated finance proposals to see that integrated wealth management is likely to follow a similar trajectory. Moreover, those who will be market leaders tomorrow are those who plan to become integrated wealth management providers today.

Dolores W. Simon