Should Amazon move into asset management industry?

Amazon is well placed to disrupt the industry and, given the industry’s profitability, may well be minded to do so. Some tech giants already are managing money internally. Amazon, for example, has the Alexa Fund, a venture capital fund that provides funding to companies whose products use voice-enabled technology. Meanwhile, Google has its own VC fund, CapitalG, which provides growth capital to growing technology companies.

Pros

• Amazon already has millions of customers. Getting users onto a platform is one of the hardest tasks, and Amazon already has vast reach. Amazon Prime has over 100 million subscribers, which compares with 47 million active digital customers at JPMorgan Chase.
• Amazon has a brand that is very valuable. Recent surveys suggest that US consumers trust Amazon more than fund managers, and that 37% of Amazon Prime customers would use the company’s robo-investment advisory if it offered it.
• Robo-advisors, which use algorithms to help people make financial decisions, could be the sweet spot for Amazon. These companies have access to a broad set of data and expertise in artificial intelligence that could lead to superior investment decisions.

Cons

• There’s also the heavy wall of regulation surrounding the financial sector.
• Sometimes, investors will inevitably lose money. While this is a problem that all money managers face, it’s a reputation risk that may not be worth the hassle for a company like Amazon.
• Amazon would be marching into a brutal price war. Management fees have been steadily eroding, meaning regular people can invest and trade for peanuts.