There has been a general intrigue about when Amazon.com will bring its patented disruptive powers to the financial services industry.
That day seems to have arrived.
A recent Wall Street Journal story claims that Amazon is considering creating a checking-account-like product with big banks.
According to the story, “Offering a product that is similar to an own-branded bank account could help reduce fees Amazon pays to financial firms and provide it with valuable data on customers’ income and spending habits.”
If Amazon does move into consumer banking–the company already offers business credit products–it stands to reason that wealth management will follow. Here’s how I see this playing out.
How Would Amazon Enter Wealth Management?
We wrote two weeks ago that Overstock might be a precursor to Amazon's entrance into financial services. While I have no insight into Amazon’s corporate development strategies, its operating cash flow of over $18 billion in 2017 means that the company likely has enough resources to buy an existing robo-advisor. But it won’t be cheap. Industry leader Betterment, which American Banker has speculated could itself become the “Amazon of financial services,” raised $70 million last July at an $800 million valuation.
If Amazon were to build out its own wealth management business, it would immediately have several advantages over its upstart competitors. As one of the more trusted brands in the world, it would pay practically nothing for customer acquisition. It could leverage its AWS infrastructure for its back-end, and before you know it, retail investors could be asking, “Alexa, Could You Transfer my 401k to an IRA?”
For underlying fund products, expect Amazon to partner with established players like Fidelity and Vanguard, unless Amazon is willing to create a mutual fund or ETF with a negative expense ratio.
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What Would Amazon Call It?
Searching the web for this topic leads one down a rabbit hole.
Not surprisingly, someone else has already come up with the name “Amazon Wealth Management.” According to public business records in Florida, a company of that name was formed in May 2008 but voluntarily dissolved in January 2013. Its SEC registration lapsed in 2012.
The domain www.amazonwealthmanagement.com is “under construction” and leads to another domain www.fvisions.com, which leads to a site called Advisor Launchpad, a DIY webpage designer for financial advisors. Alternatively, www.amazonwealth.com leads to a company called East Carolina Computers. It is available for sale on GoDaddy for $49,999.
For a plucky domain-name entrepreneur, this could be a tremendous opportunity.
Amazon’s Current Impact
Just because Amazon hasn’t officially entered financial services yet doesn’t mean that it has yet to influence the industry. If anything, financial firms are continually pushing to "be like Amazon."
At Harvest, for example, we incorporate AI and machine learning into our platform to enhance reader experience just as Amazon and many of its peers do. Last year I outlined how hedge funds should start thinking like Amazon regarding how they run their business, not just profiting from its meteoric stock price appreciation.
Amazon founder Jeff Bezos once famously said to competitors, "Your margin is my opportunity." For asset and wealth managers who have enjoyed fat profits for decades, that day is here.