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2020: The year of further technological transformation in wealth management industry

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This is a sponsored article from SS&C Advent.

Technology is fast becoming the key focus of wealth management. Technology, across the value chain – from client onboarding, through client engagement to operations, is becoming the primary focus of wealth management. Instead of asking how effective or responsive a wealth manager is, how long will it be before most clients will ask ‘how good is the firm’s technology?’

In 2020 and beyond, wealth management clients will gravitate to the firms with the most responsive technology. As the profile of wealth owner’s changes, younger clients will view good technology as an integral part of good customer service. Brand loyalty will also start to diminish, to be replaced by a user experience preference. Firms will also need to accept that clients will want to be able to move their accounts quickly and seamlessly. Putting up barriers to clients leaving will be seen in a poor light and uncompetitive.

Wealth Managers that cannot grasp this reality will lose clients. Wealth managers who understand the power and impact of technology will attract clients and their money. Therefore, 2020 could be the year in which technology will start to dominate wealth management. Understanding that technology, and its implications, will help wealth managers attract and retain clients in 2020.

The impact for this is far more advanced in the Asian Pacific markets. Here digitalization is far more established and client demands are ahead of other regions of the world. As an example, mobile payment volumes in China are more than 50 times that of those in the US. In most areas of financial services, Asia is leading the world, and wealth management will be no different.

As a result, Wealth Management is a sector undergoing real change. We are now seeing an interesting split in market opportunity between established operators and agile new providers. Here the advantages for existing players are based around an established presence, proven capability and an ever-demanding client base that is driving them to change. For new players, this lack of presence and market share is the biggest challenge, but their ability to launch agile businesses with modern and largely digital operating models could become a significant advantage.

Finance and technology is converging to deliver services in a more timely, engaging and efficient manner. This presents an opportunity to redesign the business and operating models, with technology at the core. The human role in this model is still important, but critically very different to the existing models. Technology can undertake the routine tasks, bring scalability and efficiency, and impact on operations. Perhaps the key human skills will be in design, user experience and differentiation. Domain skills will still be critical but increasingly focused on strategy, focus and exceptions.

As increased market competition, regulators and customer demand increases pressure on fees, firms will be faced with some stark choices. In order to protect existing fee levels the service model will need to be of the highest caliber. In established firms, this often means a significant human touch and a fear of degredation through change. The challenge here is that this often leads to a conservative and risk adverse culture and creates an inflexible, and increasingly uncompetitive, cost base.

One area where existing providers need to be more open-minded is in the front office. Tools exist today, and more are emerging, that allow optimized processing in the front office. These tools complement human skills and knowledge but create an operating model where scalability can be added at a fraction of the cost to more traditional approaches. An example of this is portfolio construction and modelling. Here SS&C Advent has created a cloud-based tool – Genesis – to optimize and automate portfolio construction and modelling processes. We can already observe organsiations providing superior portfolio management to clients, with very significantly lower staff numbers.

Embracing technology and moving to workflow and exception managed operations can be used to transform many areas of the front office and client engagement. As the client user experience continues to evolve to becoming more digital, these tools and processes must interoperate seamlessly with the internal front office tools to create a simple, transparent and timely process. The digital client experience is only as strong as its weakest point, and establish firms who bolt on new and powerful client engagement functions need to be more aware of the impacts these have downstream if they are not part of a more holistic review.

Wealth Managers have two choices in how they select and implement technology. To date, many have looked to use technology to supplement and improve their current processes and make their existing staff more effective. This is still a significant proportion of IT spend today. This has advantages, mainly in the areas of time to market and operational risk. It could be said to be the “safe option” which in an understandably risk adverse industry retains popularity.

Perhaps it is unrealistic to expect well established firms to simply rip up their operations and start over with a totally new approach. There are areas though where impactful change can be implemented to bring the optimum technology benefits. The front office has some of the most important and advanced human expertise. It is here where the utilization of smart technology can liberate this capability to ensure firms can optimize both their existing human assets and the growing capabilities of technology.

This is a sponsored article from SS&C Advent.

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