The wisdom of the crowd is a popular trend and many start-ups leveraging crowd-sourcing have scored exceptionally well during their seed financing. So how and when can we apply crowd concepts to Private Banking and Wealth Management? I say the time is now and people are waiting for the appropriate services.
Would you agree to the following statements?
– Ebay has made prices more transparent
– Book and Hotel consumer reviews are gaining traction in consumer purchasing decisions
– I trust my personal network when researching personal finance options
There’s two parallel trends at work when combining Wealth Management and crowd concepts. The social net transformation going on is creating, for the first time ever, a close equivalent to the traditional advisor – client relationship on a virtual platform. All Facebook savvy clients would start to trust their direct network more that their quarterly changing, process and product optimized advisor. The second tend is relying of the truth in large numbers. Many investment decisions are only occurring a few times for the individual client but in large numbers across a specific community. And the public exchange about pro’s & con’s of certain products, or the service quality of certain banks or advisors can leverage that fact. While a few banks and investor communities have started to build such an exchange, a true crowd-sourced private bank is yet to be founded.
Some possible constructs might include:
– timesharing of multiple portfolio managers running a joint, crowd-funded investment fund
– risk & reward sharing by syndication expertise and capital between multiple asset managers
– independent financial advisor can offer expertise for specific client requests out of the crowd
What would be your expectations as a client or as an employee of such a crowd powered wealth manager…
That study involved about 1000 people. That may be all they could find!
My point is that the actual available market is smaller today than it was a decade ago.
I agree that few people will trust traditional bankers (and probably not the brokers that they have acquired like the BofA Merrill Lynch deal). I personally would never trust a Wall Street firm again. They have ripped the public twice in a 10 year period.
You may have to change the words “banking concepts” to “personal financial management concepts” etc. in order to get traction. I feel sorry for the Private Banking employees – it used to be an honorable profession.
For example, when a prospective client asks about a mortgage loan, the Private Banker will say – I will introduce you to our mortgage officer. The prospect says “Have they taken their state licencing?” to which the Private Banker will state “No – all the banks lobbied to keep us from having to train them to a minimum national standard – but trust me – that the person is OK”
Do you think that any banks can overcome that as they try to create an exchange to leverage the opportunity?
Dave Ramsey is on the radio mon-Fri in about 500 markets for 3 hours every day. He is a financial adviser. He spits on the banks every day with valid objective comments and not once has a bank challenged him. they do not because he is right. Social software will not offset the constant barrage of bad PR that the banking industry incurs – until they change their evil ways (and I say that with sadness).
Want another example – in order to give investment advice other than for bank deposits, the “banker-advisor” must include “suitability” in their recommendation. But that is only “suitability” for the asset side of the client’s balance sheet. The banks do not want to provide “suitability” to the liability side! At least that was the ABA official position last year. They do not know how to do it! I can give you many other obstacles.
Non-banks are going to be where the intelligent part of this tier of upwardly mobile will seek advise.
Perhaps in a few major metropolitan areas, there may be opportunity with small groups that have affinity relationships; but, at some point, advise seekers like to “press the flesh” of the person they are doing business with.