New Products
Hunt For Mass-Affluent, HNW Clients Prompts New Models
The arrival of such an entity plays to the growth of the world’s mass-affluent sector, expected to reach more than 90 million people in 2023.
The launch late last year of a wealth management service that has
described itself as “Netflix for wealth management” is testimony
to how parts of the sector are automating as margin pressures
bite.
Back in December, London-based Vestrata, a fintech company
providing investment solutions, with C-suite figures from
bulge-bracket banks such as JP Morgan and HSBC, was launched. It completed
a $4 million funding round. Asked by WealthBriefing how
it works, the group said its platform is “modular.” Advisors may
choose to subscribe for one, some, or all of the Vestrata
investment solutions. “From a revenue model perspective and with
the ‘modular’ construct in mind, advisors ‘take what they need,
and only pay for what they take’”, the firm said.
Tej Dosanjh, managing partner (UK) at Evolution
Partners, told this publication that the arrival of such an
entity plays to growth of the world’s mass-affluent sector,
expected to reach more than 90 million people in 2023 from
about 75 million now (defined as people with net worth of up to
$1 million). This is a segment that has tested bankers for a
while. Such clients are wealthy enough to attract business, but
not so rich as to get too “bespoke”. This opens a big gap.
“In the traditional private bank model, this [mass-affluent] is
an unprofitable sector with an approximate cost of around $50,000
to onboard and maintain but only generating $10,000 of income.
They don’t need advice, are probably happy with a model portfolio
and standard client reporting. The banks are of course aware of
this,” Tej Dosanjh, who is managing partner (UK) at Evolution
Partners
“Many see the solution as adopting platforms that automate much
of the manual process, with a lower operational cost and greater
use of digital and AI that support onboarding, KYC, portfolio
construction and client reporting,” he continued.
Vestrata said it will “deliver a suite of discretionary,
advisory, alternatives and ESG investment solutions”. It is led
by Mark Le Lievre, co-founder and CEO, who was previously global
head of products and platforms at JP Morgan private bank and head
of investment content at UBS Wealth Management. Other figures
involved include Doug Wurth, chairman, who formerly led the
international private bank and alternatives businesses at JP
Morgan; Kim Lennen, chief technology officer, co-founder, and
former CTO of JP Morgan Private Bank (Europe); Lea Blinoff, head
of solutions, former MD at JP Morgan; Arun
Sinha, chief marketing officer, former CMO of JP Morgan Wealth
Management; Eric Laget, chief legal officer, former in-house
counsel at JP Morgan Asset Management; Tim Riseborough, chief
financial officer, chief operating officer, former COO at HSBC
Commercial Bank, and Sarah Newman, chief commercial officer,
former head of investment products at Barclays Wealth
Management.
“The easiest analogy to Vestrata’s business model is a B2B
version of `Netflix for Wealth Management’,” the firm said,
arguing that the streaming service has a deep and diverse content
library; a platform driven by algorithms to set which content
fits a client, and a distributed network of clients who access
their content globally.
WealthBriefing asked Vestrata about its revenue model.
The firm said there is a standard fee schedule that includes a
platform maintenance fee and platform modules fees
(discretionary, advisory, alternatives, data lake and business
intelligence). These are set at an annual fee depending on the
platform module(s) subscribed to, it said. There are also
“Solutions Module Fees” (discretionary, advisory and
alternatives), which are also set at an annual fee for the
investment solutions module(s) to which the advisor subscribes.
Depending on the service, an additional fee is required based on
assets serviced via the platform.
“Our expectation is that advisors should fully recoup the costs
in Year 1 from incremental revenues as a result of improved
client engagement and retention, doing more business with
existing clients, and acquisition of new clients and assets,” it
said.
Evolution Partners’ Dosanjh said such platforms have spotted an
underserved space in the market.
“There are innovators out there who have spotted this, built
modular platforms to address specific process automation needs
and happy to take on the mass affluent sector. The key challenge
for incumbents include reputational risk off ‘off-boarding’
certain customers or sell to platform operators, not deemed
profitable. That’s not a good look. Or they can deploy the
automated technology under perhaps a separate brand and migrate
them across from the core banking facility. This is still messy,”
he said.