A Business Model Map in the Wealth Management Industry

Abstract

This paper proposes a theoretical framework which sets alternative business models (BMs) in the wealth management industry, testing them with experimental data. Our “map” of business models arises when wealth managers (WMs) potentially make a mix of business process standardization/customization, together with ‘make or buy choices’, after an external and internal strategic analysis has been carried out. As far as the demand-side is concerned, the size of wealth under management is integrated with a new criterion to cluster customers, which also considers the client’s risk propensity and his/her willingness to diversify investments. In addition, internal conditions in the WM organization are adequately considered. Demand and supply operational information, referring to a unique dataset of Italian WMs covering more than the 88% of the national industry, allows us to test the reliability of the theoretical layout and to show the positioning of a relevant sample of Italian WMs. Operational data support that our business models map can be a reliable instrument both to describe and to guide the strategic position of WMs. The three theoretical BMs corresponding to “direct” customization may unambiguously be undertaken by three different clusters of Italian WMs. Figures of the residual two WMs’ clusters reveal their potential positioning which could be developed towards both direct customization and modularization.

Keywords: business model, wealth management, value-chain, High Net Worth Individuals

JEL Classification: D46, G21, G23