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Embedded Wealth Demystified

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4 March 2022
Jean Sullivan

What Wealth Managers Need to Know

Abstract

Embedded finance is reshaping the way customers engage with financial products and expanding the distribution of tools and services that banks, insurance companies, and wealth managers offer. It is an important emerging trend that will have significant influence on the delivery of financial services over the next few years, potentially disrupting existing distribution models. However, the term embedded finance is not well understood, especially within wealth management circles, and its inconsistent use creates confusion, making it difficult to advance the conversation.

The focus of this report is embedded wealth. Embedded wealth platforms provide a launchpad to integrate wealth management products and services seamlessly into other vertical offerings. They enable users to trade, invest, or even access services such as financial planning or behavioral assessments within their digital consumer journey.

Embedded wealth leverages the trend toward unbundling the wealth management stack—Wealth-as-a-Service—also referred to as modularization. The modularization of wealth offerings represents a breakdown of the existing financial services infrastructure and is an essential first step in enabling embedded wealth. It signals the dawn of a new era— more companies providing more wealth management products to a broader range of consumers.

Unbundling the Wealth Management Stack

It remains to be seen how big the embedded wealth and broader embedded finance opportunities will turn out to be—and how much they will alter the wealth management landscape. As with many advances in technology, we believe the sector will see both partnerships and incumbent versus challenger battles. Whichever direction the sector takes, there is no doubt that the wealth management sector in particular and the broader financial services ecosystem in general are becoming increasingly open. Each organization needs to articulate its strategy and determine the role it wants to play within that ecosystem—and develop a plan for embedded finance to take advantage of opportunities and respond to threats.

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