What’s Behind the ‘Great Unbundling’ of Wealth Management?
July 1, 2019 by Timothy Welsh
In the world of wealth management, revenue opportunities derive from typical activities. These include advisory fees, mutual fund investments, managed account enrollments, security transactions, platform fees, and other products and services that are neatly bundled in the delivery of financial advice via a human advisor in some form of the financial planning process.
Now more than ever, these traditional activities and revenue sources are being disaggregated into their component parts based on new technologies and emerging regulatory requirements — so much so that a “great unbundling” is now changing the economics of manufacturing, packaging and distribution across the industry.
According to the experts at Deloitte Insights, to offset the costs of infrastructure-heavy distribution networks (e.g. human advisors), products have needed to be sufficiently broad to appeal to, and drive purchases from, a large reachable customer base. The resulting standardized products and distribution were bundled to gain supply efficiencies.
As a result, each bundled product was usually adequate enough to meet a mass market client’s need. In aggregate, the converged product offered value for the customer at an acceptable price point even if the investor did not want or use some of the product’s capabilities. Investors who wanted depth rather than breadth had to trade affordability, frequency or quality to obtain it, according to Deloitte’s analysis.
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