Page 15 - Investment Advisor March 2021

knowledge of technology-driven million investors across its many busi- less of distribution reach. Experience
financial businesses and our ability ness lines. has shown over the last robo-decade
to move with speed with Walmart’s To sum up, Walmart is roughly 25 that advisors have successfully har-
mission and reach, we can create and times larger in revenues, 30 times larger nessed new technological innovation
deliver financial offerings that are in terms of the number of physical loca- for their own businesses, and when it
second to none,” added Meyer Malka, tions and nearly 10 times bigger when matters most, people will pay a pre-
managing partner of Ribbit Capital, in it comes to the size of its customer base mium price for professional help in
the announcement. than one of the largest financial services managing their money. They simply
companies in the world. That should want to talk to a human when it comes
THE FALLOUT keep all of us awake at night. to the very personal issues involved
What will this mean to us in the cushy in meeting their goals and making the
world of wealth management? What WHO WIN? WHO LOSES? most of their financial resources.
happens if Walmart does launch a robo Of course, there is some history that In fact, as Walmart builds out a mas-
advisor or a robo insurance platform? shows what happens when a physi- sive investor base, these types of advi-
Should we be worried? After sors may very well partner
all, financial advisors — for the Potential losers … likely will with the Walmart venture to
most part — have been immune garner referrals for Walmart
to the technology changes be any firm in the financial clients who have more com-
driven by the entrance of digi- plex needs as their wealth
tal players over the last decade. services distribution grows. However, those advi-
In fact, many of the innova- game, including broker- sors who only sell products
tions developed by these early and are transaction-based may
VC-backed entrants largely dealers, asset managers very well be pushed out of the
have been embraced, extended mass affluent marketplace, as
and commoditized by the big and life insurance product technology and distribution
financial services brands, such reach replaces this transaction
as Vanguard, Schwab, Fidelity, manufacturers. business with a much lower
and Merrill Lynch. So what’s cost-structure and devastating
the big deal? cal retail operation wades into finan- operational efficiencies.
Before we answer that question, cial services. The answer: not good. Other potential losers square in the
let’s review the data that highlights Remember the “socks and stocks” sites of this Walmart-fintech juggernaut
Walmart’s massive reach. In terms of debacle that retailer Sears attempted likely will be any firm in the finan-
revenues, Walmart generated $524 bil- in the 1980s by placing stock brokers cial services distribution game, includ-
lion in its 2020 fiscal year. That’s a stag- in its stores after its failed attempt to ing broker-dealers, asset managers and
gering number compared with revenues diversify into financial services with its life insurance product manufacturers.
one of the financial industry’s largest acquisition of Dean Witter? Overstock. As Ribbit Capital’s Malka says above,
players, Fidelity, which had a touch com launched a robo advisor two years knowledge + speed + reach = victory.
under $21 billion in that same time peri- ago to much fanfare, yet it yielded zero Regardless of what happens, this
od. And in terms of yearly e-commerce assets. development confirms one thing: We
sales, Walmart had nearly $40 billion, so Is this time different? Probably, given are still in the early stages of our
it’s no slouch in the digital arena. the track record, reach and potential of industry’s evolution as technology
Also, Walmart employs 1.5 million the new Walmart fintech venture. Who continues its digital transformation
people and has nearly 5,000 physical
will be the winners and losers at this
of everything and economies of scale
BigTunaOnline/Shutterstock alone. In comparison, Schwab-TD focused on financial planning, rela- Timothy D. Welsh, CFP, is president, CEO and
store locations in the United States
become more powerful.
inflection point?
Winners are professional advisors
Ameritrade has 400 offices, and Fidelity
tionships and a behavioral finance
has 180 locations. When it comes to
founder of Nexus Strategy, LLC, a consulting
clients, Walmart is truly an outlier, serv-
approach, who once again should rise
firm to the wealth management industry and
above and continue to separate them-
ing more than 265 million people each
can be reached at [email protected] or
selves from any techn offering, regard-
week, while Fidelity serves just over 30
on Twitter @NexusStrategy.
MARCH 2021 INVESTMENT ADVISOR 13