In the late 1990s, I used to work for an innovative company called ‘Open Market’ which pioneered both ideas and technologies about the commercial use of the Internet, much of which has evolved and become commonplace today.
One of the themes that the President Shikar Gosch introduced was the idea of ‘Digital Termites’ and ‘Termiting’ digital media. What he meant by this is that with broad access to information and data by anyone if a supply chain, there was the ability for industry participants to extract new data, re-purpose it, combine with other data and create new value propositions. He called this process ‘digital termiting’ and the organisations that did it ‘digital termites’.
What has this got to do with wealth management ? Quite a lot !
We are in an unprecedented period in the investments and wealth management industry of the grab for consumer relationships and margin compression, and with this it is largely recognized that there are ‘too many snouts in the trough’. There has been to date in many cases multiple ‘layers’ of value (bringing together someone’s opinion, market access and / or intellectual property) that over time have been synergistic, but the packaging of such has lead to an ‘supply chain’ that has become expensive and inefficient.
This is where the termites come in.
Organisations that may have relied on third parties to package up their value in some way, and combine their value on the top or bottom of such are now more able to considering ‘termiting’ the value propositions together in a more efficient manner and cutting layers of costs out. Examples may include
- where advisers are packaging up asset allocation information and investment model portfolios to replace investment product providers
- where investment platforms introduce model portfolios of investments to displace ‘fund of fund’ managers and / or investment products
- where asset managers seek to go directly to consumers and offer personalized investment portfolios with consumer data
- there are many more….
They key questions for wealth management industry participants are:
- what risks exist to your business of being digitally ‘termited’ by others
- what digital ‘termiting’ opportunities are there for your business to cut the snouts out of the trough and increase your business standing
- would you be disadvantaged if others could digitally ‘termite’ you proposition out from around you ?
- what data do you have that is important to your business to ensure that it is not ‘termited’ out ?
In an era where conflicted remuneration structures are being disbanded, and digital information is more readily accessible than ever before, I’d suggest that this trend is not going away…
If it means introducing an investment proposition into your business, we would love to help you understand how to achieve this and perhaps ‘termite’ some value elsewhere into your business.