Every startup (and banks, for that matter, but in a much less attractive fashion) are all after the Mass Affluents, meaning the large majority of potential investors and try to manage their money or at least to be the preferred infrastructure through which they can manage it themselves.
Personally, I had the worse experience ever with asset management, equity and financial products (funds, mainly blue chips) investments.
I can proudly claim I had no significant success in investing in financial products, whether I did it myself or I delegated it to someone else.
In Italy, we have this great category called “financial promoters”.
Thirty years ago, they started their career with a great deal of skepticism, fighting the perception that they were like stilling the money from the savers, that they pretended to be cheaper than banks but in reality was the opposite, and so forth.
Now, my home country maybe is not the brightest example of modernity or vision, for this and its insurance market (to name another financial service that badly need innovation as well) is not a good example either.
This being said, what I have learnt in my failed career of a private investor is the following :
– you have to follow your investment daily,
– there is never enough information that needs to be gathered in order to take mindful decisions,
– you (or whomever human) very hardly beat the market, unless your money is virtually unlimited,
– you have no idea what “risk profile” REALLY means nor if the portfolio you have been advised to set up is the best for you,
– luck is still a great components of a successful investment, sometimes in a higher proportion you would like to admit.
There are roughly twenty very good platform for asset management now in the market, without of course taking into the account the market feeds aggregators, the on the spot analytics platform, and the “behavioural” trading platform (where you do nothing else than betting on you copying someone else’s strategy, for example).
The reasons why this business is exploding have the same fundamentals than Alternative Lending.
It’s impossible for a bank (in this case for an asst manager) to perform in managing a portfolio of a few dozen of thousands dollars, as well as it’s impossible for a bank to give a 20000 USD loan and make money out of it.
Now : most of the value proposition of these new asset management startups today is based on ACCESS and PRICE. Access to a variety of financial products (and a comprehensive literature around it) in a much more unbiased, granular, global way than what a single bank can do, and price because the commission asset under management is much lower than the “traditional” way.
What very few people have managed to do is to go beyond asset management and give tailored STRUCTURE on the way people manage their money. Let me explain myself.
What the mythical Italian “financial promoters” were doing, back when they started, was very simple : they built such a deep knowledge about you, your family, your assets, your real estate appetite, your pension requirements, the need for your kids school and most importantly a feeling that they would have managed that money as if it was theirs.
Something that today is missing – again, for the mass affluent, meaning anybody fortunate enough to save some money at the end of the year – is being able to do Life Scenario Planning and get the necessary help to implement it when needed.
Since I left my dear, safe, structured, hierarchical, over cuddling previous company, I am facing this problem myself : I have a piece of that mythical retirement, no defined plan, some attempt of real estate. But who could I really trust to advise me on what the best future proof asset allocation would look like for me ?
When you can afford a private banker for yourself, admittedly you would be better helped off… But arguably that person would be partial and probably have dozen of clients like you.
What’s the point I am trying to make here ?
Unless you spent 30 years in the same company, bought a house and save enough for your kids to manage to grow up and reloaded their dreams (or at least help them to), it is likely you need mindful advice about :
– real estate management,
– life insurance,
– tax optimisation.
And no one will pay enough attention to you unless your money at the banks justifies that waste of (their) time.
Interesting enough, there are only so many billionaires (or close to that ) on the planet and the next market is clearly going to be the second layer of that fortune.
The new entrants combining a intelligent, top notch user experience in managing their assets, supported by a like-human advice big data driven and most importantly a comprehensive profiling and tailored proposal on the top of the pure investment side, will get the biggest part of the cake.