The Impact of the Rise of Robo Advisor on Wealth Management Industry in the U.S. and Taiwan
Date Issued
2016
Date
2016
Author(s)
Wang, Shao-Yu
Abstract
The reason why financial technology has drawn such a big attention recently is that it intentionally disintermediates traditional financial institutions from their profitable but inefficient business, and consequently jeopardizes their profit model. Examples of the disruptive innovation in retail banking sector, including 3rd party payment and peer to peer lending, have been successfully gained traction in multiple markets. It is widely expected that the next target for Fintech firms will be on investment/wealth management sector. Some of Fintech firms in the U.S., by combining data science and investment management knowledge, have rolled out “Robo Advisor”, which quickly penetrates into its target audience, the mid and lower band of the middle class. Traditional wealth managers run their business in an expensive manner and their clientele is relatively limited. Robo advisors, who mitigate unmet needs and a pain point among the long tail end of clientele, offers a service model which is able to be in touch with clients more broadly with a lower cost. Few reasons drove wealth managers in Taiwan from embracing innovation in the past. First, Taiwanese wealth managers were protected by complicated ordinances from new entrants. Second, the size of Taiwanese wealth management market is relative small. Besides, there is a misperception about innovation, which was solely focusing on product innovation, rather than the innovation of consumer segments and business model. However, Fintech now is pulling and tempting clients all over the world crossover the physical boundary, to lever its services and products. Wealth managers in Taiwan now are facing unprecedented competition, the new entrants could destruct current business model through internet eventually. The thesis is to compare the wealth management industry in the U.S. and Taiwan, differentiate the factors of their innovation drivers, identify the current phases of their innovation diffusion, and attempt to model the evolution of wealth management ecological system by performing Porter’s five-force analysis. At the end, the thesis concludes five findings and derives few implications to Taiwanese government and the players in the local wealth management industry when both of them face to the impact of the rise of robo advisor.
Subjects
Fintech
Robo advisor
Data science
Wealth management
Mutual fund
Disintermediation
Innovation diffusion
SDGs
Type
thesis
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