Like many industries that underwent an era of productisation to mass manufacture items at scale and low cost, the wealth management industry is also moving on to the next chapter: ‘de-productisation’, or perhaps more aptly, the era of ‘mass customisation’.
The implications of this are deep and broad, especially where so much of the industry infrastructure, cultures, systems, and commercial foundations have been based on products and related disciplines (ratings, platforms, profiles, etc). The shift from a closed product structure to a transparent, client-customized portfolio approach changes many aspects, including the basis of industry power.
In this transition, unlike many of the past, we see nearly all players across the supply chain starting to adopt similar strategies, or at least positioning themselves similarly. The commonality is that there appears to be a race as to who is the organisation that can have a relationship with an investor and manages portfolios for them, ideally customised to the investors specific rules, preferences, or constraints. We are seeing asset managers providing model portfolios, we are seeing investment platforms operating discretionary services or products, and we are seeing investment advisers adopting being portfolio managers.
This overlap of supply chain participants outside their traditional ‘swim lanes’ is leading to changing industry dynamics, evolving relationships, and the emergence of ‘coopetition’.
Smart money then asks ‘so where does this end up and who wins ?’ – which is far from clear and may differ in different markets with different regulations and incumbent positions. One thing though is for sure – there is a race for relationships with consumer investors as if you don’t have that then your strength in the supply chain is reduced.
So in this era of ‘deproductisation’ some things to consider:
- do you have access to consumers directly ? and if not how are you going to attract them ?
- how can you mass customise if you don’t have the relationships with consumer investors ?
- if you do have consumer relationships, how can you optimise your position ? do you insource with a new era of technologies (like Financial Simplicity’s digital platform) or outsource, and to who, and are they trying to establish relationships with your customers ?
- what mass customisation infrastructure do you need to have ? is this in place ? insource or outsource ?
One thing is for sure, every organisation is going to need to consider their position in offering mass customised investments. What’s yours ?