Why the Spotify model works for wealth management
As wealth management firms move towards cutting out the middlemen, a trend already seen in the travel and music industries, dozens of companies in Stockholm are poised to break the mould.
Alongside firms like Tessin and Lysa is Kidbrooke, a company founded in London before moving the headquarters to the buzzing Stockholm FinTech scene.
And business is booming: in Summer 2020 the major Swedish financial services corporation Skandia released a new pension advisory tool running on Kidbrooke’s backend. The system crunches users’ numbers before providing near-instantaneous bespoke financial advice.
“We are applying the success of Spotify to the wealth management industry. We are shifting the paradigm from ownership to access by providing companies such as Skandia with a turn-key solution,” says Head of Business Development Zaliia Gindullina.
When working with Skandia, the expectations to provide excellent quality of services were high. Kidbrooke and Skandia spent about 4 months seamlessly integrating the APIs with incumbent infrastructure and front-end.
The challenges in this type of collaboration lie not only in the legacy IT systems of large financial providers, but also in the requirements of complex decision-making structures involving teams responsible for compliance, user experience, marketing, frontend and backend development. The success of a project depends on how well a company like Kidbrooke and the customer can manage these complex decision-making processes in close collaboration with the stakeholders.
She is convinced that Kidbrooke would have found it more difficult to establish their model outside of Sweden. However, as the firm now has proof of concept, it plans to re-enter the UK market while maintaining its Swedish headquarters.
The company’s strategy is supported by a wider move to digital services: 60% of wealth management clients already prefer digital channels for receiving advice, whereas only 34% of wealth managers favour giving advice digitally. And it’s a growing market, stretching far beyond the super-rich as more and more people worldwide seek savvy wealth management solutions.
“A large part of the industry has simply become complacent, spoiled by traditionally high margins and little outside competition. However, it is now clear that it is time to wake up for the traditional wealth managers if they hope to take advantage of the customer bases they have accumulated over the years. We think that collaboration with wealth managers is more likely to yield the most significant impact of technological innovation rather than going against them. The only thing that is needed is the willingness to adapt to new customer demands”, says Zaliia.
Early adopters like Skandia can gain a competitive advantage by adopting digital processes early on while other companies are still debating whether they should embrace digital transformation. Customer needs have already changed; the wealth management industry will follow.
This story is featured in the new Stockholm FinTech Guide, which you can download here (PDF).
For more information, please contact Jenny Berthling. Details below.