How Amazon Will Dominate Wealth Management

They make it really hard to mess up

Here’s the simple reason why affluent people (of all ages) will love receiving financial advice from Amazon: you’d have to try pretty hard to mess up the process.

As much as every advisor will self-righteously proclaim he or she is committed, passionate, altruistic, and would do anything for their clients, at the end of the day how uncomplicated is the process you put your clients through?

One of the reasons advisor businesses have such poor operating margins is that they (intentionally) are designed to encourage the client to be dependent upon the advisor.

Here’s how I would describe most advisor firm operations:

• Manual (assumes everyone loves photocopying and faxing things to them)
• Requires face-to-face meetings and hand holding (takes valuable time)
• Paper-driven (you love brandishing those brochures and welcome packets that wind up in the trash bin)
• Involves lengthy reports (that nobody can decipher)
• Disjointed with multiple technology sign-ons (so you have to remember five passwords)

This is easy?

Half the advisors I work with are either unwilling or unable to use Microsoft Word track changes! I get website revisions written out by hand, scanned, and emailed to me! This is time efficient?

It’s painful.

You don’t think this frustrates people? Do you really think people like operating this way?

I don’t believe these myths about the poor technology skills of the more senior generations. Have you ever thought that maybe if your technology were as easy to use as Amazon then more of the people you claim to be “tech incompetent” would use it?

Clients somehow find a way to order carpet cleaner from Amazon, don’t they? I know people who can barely turn on a cell phone and they’re telling me about the porcelain pig set they just bought in a bidding war on eBay.

Examples of how Amazon makes it hard to mess up:

• No matter where I go, I always see one page instead of having to click away and leave a million screens open, which is totally confusing.
• At every point, I see “Hi Sara.” Personalized touch. I want to say hello back! It also makes me feel centered, as if I haven’t wandered too far from the mother ship.
• Amazon truly offers a single sign on. I only have to re-enter my password if I’m altering my confidential info.
• It makes it hard to get lost. Everywhere you go, the Account & Lists, Order pages, etc., are still visible.
• The subconscious loyalty play “Customer since 2003” appears right under my name. What advisor technology software does that?
• They know I’m a female business owner, so they print “Shop women-run businesses” at the top of the page, creating an emotional connection.
• They have all the information about the product on one page instead of making me click around for it.
• Presentation is more visual than words-based, which creates more trust.
• They have all the information about the seller on one page. No rambling about their 20 years in the business as a fiduciary with five drop-down menus – you can see the social credibility right away by viewing the reviews and ratings that other buyers have given this seller.

People trust Amazon more than the U.S. government

If you have any doubts about people trusting big tech, did you know that, according to Digitaloft, over ninety thousand people ask Google this question every month:

“Am I pregnant?”

For those of you skeptical that people would be willing to trust big tech with their personal information, let me ask you: What information could be more intimate than this?

Admit it, you’ve consulted Dr. Google on an embarrassing or disgusting question that you didn’t want anyone else to know.

According to a study by NYU and Georgetown University, Amazon ranks second only to the U.S. military as the institution that Americans trust most. Oh, you advisors say, “but people won’t trust Amazon with their hard-earned money! That’s going too far!”

Au contraire, mon frere.

According to a study by Bain, nearly two thirds of Amazon Prime customers said they would be willing to try a free bank account offered by the company. All because they sent you those bottles of dish detergent on time.

They bypass the first (painstaking) step of the sales process

Buyers of wealth management services, and especially online buyers, have their guards up when they meet a new advisor. But as stated above, people already trust Amazon.

Let’s say Amazon plays its cards right and uses highly personalized messaging to move trusting buyers right along into the sales funnel for wealth management services.

Here are a few scenarios where this could play out brilliantly:

• What if, after I bought a box of size 1 pampers, Amazon flashed me a message that said, “Have you checked out the New York 529 plan? Click here for a free consultation.”

• You’ve got people on Amazon FBA (fulfillment services) sell half a million dollars of inventory a month. This would crush any advisor competing for the high net worth business owner. Check out this move: At the end of the first month in which the seller produces $100,000 of revenue or more, Amazon sends them an offer to meet with an Amazon financial planner.

• You’re selling a book on Kindle and when you go to input your tax information about tax treatment of the royalty payments, you aren’t sure about a particular term so you click on the help menu for that term. Now Amazon knows you need some tax advice and a chat box pops up with a CPA/CFP ready to explain.

Do you doubt they can do this? You are talking about the most personalized technology experience available that exists on the planet. Of course they can.

They understand human psychology

They wouldn’t have gotten this far if they didn’t weren’t masters of human psychology.

But Sara, you say, “If I buy a piece of patio furniture on Amazon and it doesn’t look like the picture I saw on the screen, I can send it back. If I tell Amazon to invest my retirement savings and they mess it up, it’s gone forever.”

That’s true. But you’re assuming that Amazon would make suggestions about how to invest your IRA like they prompted you to reorder your favorite waxed mint dental floss.

Yes, Amazon will have to come up with a foolproof method for assessing people’s risk without meeting them face-to-face. But this change is in order anyways. Most advisors, with all their face-to-face meetings and risk tolerance questionnaires, wind up putting clients in the wrong risk bucket? Almost every advisor I know has messed this up at least once.

I’ve seen this across the board: new advisors, advisors with 30 years of experience, fee only advisors, commission based advisors. I don’t know a single advisor who doesn’t struggle with this.

So, what does that say about the current understanding how people really think about they want their money invested? As I discuss on this podcast with Aaron Klein of Riskalyze, the traditional way of assessing risk is broken.

Yes, I agree that this will not work unless Amazon masters a way to assign risk ratings to clients. If there is anyone out there who can, I’d put my money on them.

Sara’s upshot

This idea of Amazon making a killing in the wealth management business came about as a result of a podcast I recently did with Ron Carson that you should check out if you agree with my theory.

And if you do, the next question is: What service model would allow them to pull this off? I’ll cover that in my next article in this series. In the meantime, I’d really love to know what all of you think so please post a comment to APViewpoint and let me know.

Sara Grillo, CFA, is a top financial writer with a focus on marketing and branding for investment management, financial planning, and RIA firms. Prior to launching her own firm, she was a financial advisor and worked at Lehman Brothers. Sara graduated from Harvard with a degree in English literature and has an MBA from NYU Stern in quantitative finance.

Read more articles by Sara Grillo