For the latter, wealth managers will help clients get value—special discounts and deals—in exchange for providing information that the technology company can use. It will be similar to the way casinos currently comp high rollers with free rooms, meals, travel (as long as the gamblers let the casinos track their betting behaviors). But instead it will be for many different types of services and products that wealth management clients buy or use.
Granted, wealth managers will have to be much larger than they are today (with many thousands of clients and perhaps as much as $150 million to $200 million of annual revenues) to create this kind of buying power. However, we are less than a decade away from seeing firms of this size. Moreover, the aggregation of buying power is already something that wealth managers are very familiar with, having used it to first build their firms in the ’90s. Back then, offering access to institutional classes of shares (versus the client investing on its own) saved many clients what was almost the entire cost of their advisory fees.
Newly minted Nobel laureate and behavior economics guru Richard Thaler calls the process of individuals trading information about themselves for value as “smart disclosure.” He also recently opined that the use of personal data in this manner is an inevitable opportunity, as individuals and governments claim rights to online information from commerce providers.
So why are wealth managers going to be at the forefront of this tectonic shift in consumer behavior? Well, if not them, then who? Clients already share their most closely held secrets with advisors and rely on them to protect their assets and improve their lives. Taking on the responsibility for both guarding their privacy and capturing full and fair value for information will be just another step in the natural evolution of the wealth management industry.
Mark P. Hurley co-founded Fiduciary Network in 2006 and serves as its CEO.