Fintech and Data Rules Could Fuel Client Competition 

Right now, there is a lot of interest and investment in financial technology, with over $31 billion in global investment last year alone, Steve Lockshin writes on Barron’s. These technological leaps and shifts in data regulation mean advisors could soon see fierce competition for their clients, he writes. 

How Technological Advances Could Shift Advisor Clients Into the Hands of Banks

As robos, artificial intelligence, aggregation tools and other financial technology develops, banks will start poaching advisors’ clients, according to Lockshin, founder of AdvicePeriod. Early adopters will evolve quickly, and advisors without the means to invest in new technology will be left behind, he writes. The firms that will succeed are those that already have both banking and wealth advisory products, robo-advisors — and recognizable brands, according to Lockshin. 

Some wealth management firms are moving into traditional banking, such as Goldman Sachs, which folded its online banking under its wealth management division, he writes. On the other hand, commercial banks are likely to start targeting brokerage clients as their cash can be used for cheap loan funding, according to Lockshin. Charles Schwab, for example, moves advisors’ clients’ cash into their banking operations for a spread of about 2%, with 59% of their total net revenue coming from net interest revenue, as of the third quarter, he writes.

Fintechs will help banks take wealth management assets, and open banking will speed this along, according to Lockshin. New data-sharing rules will force financial institutions to share customer information with their competitors if the customer asks, according to Lockshin. A closed data system has benefited financial firms, and with companies such as Deposit Solutions allowing banks to offer their rivals’ products, there will be great disruption within the industry, he writes. 


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