There was one headline in my news feed that really stood out yesterday and it was this: ‘Vanguard’s digital advice platform crosses $100bn’. This was the news, reported in On Wall Street*, that the U.S. firm’s digital Personal Advisor Services business unit, only launched to the public in mid-2015, has surpassed the seven-figure assets under management (AUM) line. Simply wow.
Now. That. Is. Growth! From a global wealth management perspective, according to the latest Scorpio Partnership Global Private Banking Benchmark 2017**, the 25th largest private bank in the world, CIC, managed $133.61 billion at year-end 2016. Vanguard, in less than 3 years, is not far off that sum.
Whether the comparison is fair or not, I do not care. Vanguard is rocking the party with these numbers, and its growth is blazing a positive trail for the future of the industry in my humble opinion. The oldies might be in the corner moaning that a new kid is stealing their thunder but, unless thy get on the dance floor and start to dance to, they will gradually see their lovely sugary cake disappearing before their eyes.
I don’t know about anyone reading this blog but, if you hadn’t guessed it already, to me this is big news. Here are a few reasons why:
- Vanguard reached this AUM in less than 3 years (big, big growth!)
- This is all about technology, with a firm business rationale hand behind it (a clear opportunity to pursue)
- This is an established firm going against the traditional grain and shaking things up
- Depending on your viewpoint, Vanguard is not a ‘leading wealth manager’. It’s an imposter!
- This says everything about the need and the demand for digitally delivered wealth management
- This is ripping up the rule book of what wealth is, who it is for, how it is accessed and delivered, how much it costs, and who delivers it
I could go on, but I think you get the point. Ultimately, gathering such a large AUM in such a short space of time demonstrates not the only potential for a digital wealth management proposition but also, more importantly, the CLEAR market need. Is anyone still out there saying no to a technology-enabled and delivered wealth management proposition that also has meat on the bone behind it (i.e. a credible brand, existing infrastructure, people, etc.)?
Honestly, I have never understood or accepted any view, whoever it came from, that said ‘our clients don’t want it’; ‘this is just for the mass market; HNW/UHNW clients aren’t interested’; ‘older clients want a relationship; this is just for the next generation’, etc. We have some very telling terms in the English language that would tell you very clearly what I think of that, but I will leave those to your imagination.
Vanguard is rocking this party and is miles ahead of any competitor, established brand or one of the many new kids on the block. But its dominance does not actually matter. The flow of other entrants, big and small, is such that the course is set. Merrill Lynch, UBS, Morgan Stanley, Wells Fargo, HSBC, the list goes on and on.
Plus, as they all know, the relevance of digital is not just about the front-end, brand, asset gathering and client acquisition. Digitalisation goes right to the beating heart of these businesses, front-to-back, top-to-bottom. They cannot ignore it and, as time passes, firms with an eye toi their future will all engage..
The fact that Vanguard has leapt to the front in such a dominant manner is only going to make those behind it more eager to engage and chase it down (or at least follow in its slipstream). Indeed, this growth is going to make it certain, if it weren’t already, that a digital wealth play is now a must for any firm that wants to operate efficiently, at scale and on the major future battlefields of wealth management.
So, there you go. And this is just the start of a long journey to the future. The wealth management sector is being reshaped. Of note, though, before I get labeled as blinkered or something worse, while I might fully support this aspect of the future, and see it further developing, at no point am I dismissing what has gone before it. You don’t knock your old house down before you’ve built your new one, do you. No, you combine the best of both. But if the structure of your old house is not suitable for the challenges and opportunitiy of the new, you find something better.
Well done Vanguard, and all others that follow suit. I look forward to seeing more milestones being reached.
References
*Original On Wall Street article: https://onwallstreet.financial-planning.com/news/vanguard-digital-advice-platform-hits-100-billion
**Scorpio Partnership Global Private Banking Benchmark 2017: http://www.scorpiopartnership.com/benchmark-2017/
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