Expert: John Chapman. Facilitator: Adam Jones, Redington
Headlines
- Wealth managers all shapes and size are looking for growth
- Acquisition can see quicker results. It allows rapid expansion into different geographies and sectors as well as the possibility of fresh talent from an acquired company
- Growth via efficiency and productivity gains is a very achievable model
- Technology to drive efficiency, productivity and growth is a key driver not just in the back office but at the front end too
- There is ample reason to change things. Understanding technological capabilities means the wealth manager can target areas for productivity and efficiency gains. This adds to the bottom line and drives growth
- Vendors need to meet the needs of wealth managers. Wealth managers meanwhile needs to understand their own needs and aims to find the best fit
- Growth via efficiency is a much harder sell at board level as it can be complex but it makes so much sense
Key Challenges, Conclusions and Solutions
1. Wealth managers all shapes and size are looking for growth.
Acquisition is one way to do this and investing in technology to build in operational efficiency and the ability to scale and grow organically is another. The two offer distinctly different experiences.
Acquisition can see quicker results. It allows rapid expansion into different geographies and sectors as well as the possibility of fresh talent from an acquired company.
But there can be drawback in terms of getting a good cultural fit and the risk of employee turnover and with that, client retention. The execution risk with acquisition is high and at all levels hard work is needed to make sure that the whole process, and the expectations surrounding it, are controlled and managed so as to promote ‘oneness’ going forward.
In particular wealth managers are looking to acquire firms that will add to the business by bringing it closer to the client and thus provide recurring revenue streams and thus, growth. That could be a tech offering that the client will value and use or it could be acquiring different types of assets or client base; a pension adviser would be focused on the decumulation phase and make sense for a wealth manager largely focused on the accumulation phase and looking to diversify revenue streams for better overall growth, for example,
Growth via efficiency and productivity gains is a very achievable model.
2. Technology to drive efficiency, productivity and growth is a key driver not just in the back office but at the front end too.
Client engagement is so important and technology can help with this in terms of making things easier to do, such as onboarding.
It also allows the adviser to be more efficient and thus adds value to the end client. Indeed, within wealth management clients really do need the coaching and the advice, they need things explaining to them face to face. If the advisers have more time to do that as a result of the tech being able to pick up and automate other processes that it’s a good thing. It’s giving the adviser the right back up to take away the manual work as well as the tools in terms of data and information provision to provide the very best service possible.
3. There is ample reason to change things. Understanding technological capabilities means the wealth manager can target areas for productivity and efficiency gains. This adds to the bottom line and drives growth.
Wealth managers can get systems tailored round to their exact standards and needs because newer back-office systems are open architecture as so a component approach can be taken. This means adding bits on to get the exact functions and capabilities that the adviser needs. Although setting this up takes a bit of time initially the help from the software vendors is there to make sure the process is smooth and can evolve with a firm.
Data and its management is the power of the business. Knowing what the data should do and where it needs to go and for what purpose is important. Knowing how technology can help with this gives advisers the ability to set things up to suit themselves.
APIs are a massive enabler when it comes to data flows between various components. They give the ability to exchange and aggregate data which gives a better overall picture to the adviser.
Adding different components in an agile and iterative way makes for a better end result as the wealth manager retains control and can also choose to tweak and add to system capabilities as time goes on. Having the right team in place to make sure they can identify and change processes and configure tools accordingly is key. The ability to make the technology work around the firm and not the other way round is the key concept here.
4. Vendors need to meet the needs of wealth managers. Wealth managers meanwhile needs to understand their own needs and aims to find the best fit.
This is easier said than done. Expertise within wealth managers is lacking. In addition, the tech industry is fragmented. It is often hard for firms to know what is out there and make a call fairly early on about what they actually want and need and why and therefore which vendor is the best fit for both today and the future.
The vendor obviously needs to understand the business model, be able to offer a good starting point and proactive in helping the wealth manager to grown its own expertise to self-service in future.
5. Growth via efficiency is a much harder sell at board level as it can be complex but it makes so much sense.
If a wealth manager can change to move to a business model that runs smoothly and efficiently and then it is thus easier to build upon and scale in the future because the metaphorical house has been built on rock, not sand.
