Page 14 - Investment Advisor March 2021

INDUSTRY INSIGHTS

By Tim Welsh

What if Walmart Had a Robo Advisor?

Being a highly regulated industry may protect wealth management from
this new threat … or maybe not.

W hen wealth management

are
executives
asked,
“what keeps you up at
night?” or “what are you most worried
about?” their usual responses haven’t
been about their fears of losing market
share to current rivals or any of the
annoying startups backed by venture
capital. Rather, their real anxieties are
laser-focused on what could happen if
the big tech titans like Amazon, Google
or Apple finally turn their disruptive
appetites on the business of financial
services.
After all, these goliaths have had
a devastating history of wiping tra-
ditional industries off the face of
the planet and replacing them with
their brutal efficiencies, cost savings, middle-man distribution inefficiencies Thus, when news broke in January
elegant interfaces and middle-man have been commoditized, dramatically that Walmart had created a new fintech
crushing technologies to provide a reducing competition. start up with venture capital firm Ribbit
better customer experience. In fact, In many areas of financial services, Capital to develop and offer “modern,
if they even start sniffing around thought, there are expensive, clunky and innovative and affordable solutions,”
a particular industry, stock prices manual processes that remain part of the REM sleep cycles of asset manager,
get hammered. Case in point: When product manufacturing and distribution broker-dealer and insurance company
Amazon acquired Whole Foods, all in the legacy businesses of mutual funds, executives probably were cut in half.
bets were off in the traditional indus- insurance products and the like — and “For years, millions of customers have
try of food distribution. this does open the door for a non-tradi- put their trust in Walmart to not only
To date, wealth management has tional goliath to exploit. save them money when they shop with
been insulated from the reach of the us but help them manage their finan-
tech titans by, of all things, regulation. 800-POUND GORILLA? cial needs,” said John Furner, president
These titans have said many times Let’s consider the one 800-pound and CEO of Walmart, in a statement
that they don’t like highly regulated Gorilla that hasn’t made the list of announcing the new strategic partner-
industries and there are so many more what keeps wealth management lead- ship with Ribbit Capital.
fruitful markets still waiting for them ers up at night: Walmart. The world’s Of particular worry to the wealth
to dominate. largest retailer typically isn’t thought management industry is that Ribbit
Also — and probably the biggest of in the same disruptive categories Capital has real experience in this area,
barrier to entry — is that the current as the tech titans, yet the potential is having been behind fintech startup suc-
wealth space already is an oligopoly of there for it to completely re-write the cesses such as Robinhood, Credit Karma
trillion-dollar companies. These firms distribution and delivery of financial and Affirm. This means the combina- BigTunaOnline/Shutterstock
are highly entrenched brands that have services, forever altering the comfort- tion of Walmart and Ribbit could be the
invested massively in technology, driv- able, highly profitable world in which beginning of something truly disruptive.
ing many costs to zero; much of the many of the industry still lives. “When we combine our deep

12 INVESTMENT ADVISOR MARCH 2021 | ThinkAdvisor.com