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The Next Wave of Disruptors

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Around this time, we begin to look forward to what the new year may bring and speculate from what quarter significant disruptions might arise in the wealth and asset management industries. One development that we believe may be increasingly likely is the entry of a non-financial, technology giant like Google or another similar derivative into the investment market.

Robo-advisors still account for just a few percent of the total AUM of retail investors in the US., but they have introduced and helped popularize the concept of technology-based investing, particularly among millennials. We believe that Google has the opportunity to build on this foundation to significantly leap frog these early market entrants in size and market penetration. This belief is based on the following:

1.Google’s resources to support an investment management initiative are unlimited across development, production, delivery and promotion

2.Google’s brand awareness is extremely high and its reputation for technological sophistication, process driven thinking and analytics, and constant innovation is widely shared in the marketplace

3.Perhaps, most importantly, Google may have the tools to develop a new investment paradigm that relies on big data access and cutting edge artificial intelligence to offer alpha and/or improved risk management. If so, the firm’s investment options could be a significant advance over the simple MPT driven index/ETF allocations of current robos and at scale may even be cost competitive. A truly better mousetrap based on the deft application of technology could put a Google offering in a class by itself, distinct from the robo’s as well as traditional providers like Fidelity, Schwab or Vanguard

Google’s purchase of AI firm DeepMind and its recently reported partnership with Blackrock provide some evidence of the direction the firm is taking. All else is speculation at the moment, but if Google, or some other respected tech leader gets in the investment game, the impact is likely to dwarf that of the current wave of robos.