In a research note, reported on by Bloomberg and Financial News, the investment manager said the Seattle-based company’s strong online presence and vast customer base, including 100 million-plus Amazon Prime subscribers, leaves it “well placed” to sell mutual funds to retail investors. Analysts added that Amazon may be tempted by the move, given the industry’s profitability, and claimed that the company would most likely become “an arms-length distributor of funds” rather than a “super-active manager.” (See also: Fidelity Labs Teams With Amazon on VR Financial Assistant)
In the speculative note, analysts argued that Amazon should avoid managing money itself as “the potential revenue would not outweigh the risks to reputation.” That, they said, leaves two options: set up an online fund supermarket, or begin offering robo-advisory services, similar to what Chinese e-commerce giant Alibaba (BABA) already provides through its Ant Financial arm.
Bernstein predicted that any move by Amazon to start selling funds would prove popular with its customers. The analysts noted that a large portion of the company’s Prime subscribers fit the same profile as mutual fund buyers and added that many of them have already thrown their support behind the idea, via a recent survey by online marketplace LendEDU.
According to that survey, 37% of Amazon Prime users would use an Amazon robo-adviser if one existed, while 41% said they would choose an Amazon retirement savings account.
The investment manager also claimed that the Seattle-based company should have little difficulty gaining regulatory clearance to sell funds, particularly as its entry into the market would likely drive asset management charges down. However, analysts did caution that Amazon’s potential foray into the industry could see its reputation take a hit if it was to lose money for investors.
Throughout the note, Bernstein reminded its clients that Amazon has yet to reveal any plans to branch out into asset management. The company did not reply to an emailed request for comment from Bloomberg.
Berstein’s speculative note on Amazon’s potential foray into asset management came several months after Jirisan Capital founder Gerald Hwang said he could see the online retailer taking the industry by storm. (See also: Amazon Is Now in Value Stock Territory: Bloomberg.)
“Asset management is the type of utility business that Amazon could easily disintermediate, for both its own benefit and the benefit of average investors worldwide,” Hwang said in March, according to MarketWatch. “If you thought the overbuilt status of bricks-and-mortar retailing provided the kindling to the Amazon explosion in retail, the abundance of asset managers (especially active asset managers) provides the uranium for an apocalypse that could be much worse.” (See also: Key Levels for Amazon Stock in Second Half of 2018.)