Wealth Management Technology & Operations Trends 2018: Insights from the Latest Report

What is in store for the wealth management industry as we head through 2018?

In the latest annual WealthBriefing and SS&C Advent Technology and Operations Trends in Wealth Management Report, we reveal the critical challenges troubling wealth managers. We also explore the opportunities available for forward-thinking firms to hone their competitive edge.

 

Regulation remains a top wealth management burden

Once again, the ever-expanding global regulatory agenda is a major focus among industry participants. For globally-active financial institutions, the number of regulations they must track has tripled since 2011. And more than half of wealth managers believe regulatory change will speed up even further over the next three years.

Compliance has become such a resource drain that it is soon expected to eat up 10% of some firms’ revenues. Investment in technology-driven automation and enhanced data management, to improve efficiencies and ease the cost burden, is therefore an ever more important priority.

Another issue absorbing wealth managers’ attention is cybersecurity. Here the level of preparedness is worryingly low, with over a fifth of firms not confident in their capacity to tackle cyber-threats. Only 15% say they are highly confident in their security capabilities.

 

Cloud-based technology supports efficiency and service gains

The opportunities that an efficient technology infrastructure offer also emerged as a major theme in this year’s survey. Whereas the industry was once relatively tech-shy, wealth managers are increasingly looking to cutting-edge capabilities to help improve both their behind-the-scenes operations and the client experience.

One notable trend is the growing robustness and acceptance of cloud capabilities. This continues to fuel enthusiasm for outsourced or hosted technology solutions, with half of firms now willing to go down this path.

Outsourced and hosted technology are seen as an effective route towards greater efficiencies and streamlined costs, a problem the industry has been wrestling with for years. Other major benefits include improved service quality and reduced operational risk.

 

Portfolio management in desperate need of streamlining

As for specific technology focal points, streamlining portfolio management has become a key priority.

Just 6% of respondents use a single system to construct, manage, monitor and report on their portfolios. Almost half use four or more solutions. The resulting inefficiencies are particularly felt when compiling investment performance reports, rebalancing and during initial portfolio construction.

For the many surveyed firms keen to offer clients a wider selection of asset classes and investment instruments, such technology shortcomings need addressing urgently.

 

Positive prospects … but constraints as well

Overall, the vast majority of survey respondents are upbeat about the wealth management sector’s growth prospects. And this is across the globe, with high optimism seen in almost equal measure in North America, Europe, Switzerland, the UK and Asia.

However, the report sounds a cautionary note. Maximising the benefits of the latest technology trends demands forward-thinking attitudes and, inevitably, significant strategic investment. Yet firms’ compliance burdens—and the energy, attention and budgetary resources they eat up—are increasingly stymieing innovation in other areas of their businesses.

Those wealth managers that can devote resources though to improving the client experience and optimising their internal performance will be well-placed to profit from the industry’s continued growth, and the massive inter-generational wealth transfer that will take place over the coming years.

What is in store for the wealth management industry as we head through 2018?

In the latest annual WealthBriefing and SS&C Advent Technology and Operations Trends in Wealth Management Report, we reveal the critical challenges troubling wealth managers. We also explore the opportunities available for forward-thinking firms to hone their competitive edge.

 

Regulation remains a top wealth management burden

Once again, the ever-expanding global regulatory agenda is a major focus among industry participants. For globally-active financial institutions, the number of regulations they must track has tripled since 2011. And more than half of wealth managers believe regulatory change will speed up even further over the next three years.

Compliance has become such a resource drain that it is soon expected to eat up 10% of some firms’ revenues. Investment in technology-driven automation and enhanced data management, to improve efficiencies and ease the cost burden, is therefore an ever more important priority.

Another issue absorbing wealth managers’ attention is cybersecurity. Here the level of preparedness is worryingly low, with over a fifth of firms not confident in their capacity to tackle cyber-threats. Only 15% say they are highly confident in their security capabilities.

 

Cloud-based technology supports efficiency and service gains

The opportunities that an efficient technology infrastructure offer also emerged as a major theme in this year’s survey. Whereas the industry was once relatively tech-shy, wealth managers are increasingly looking to cutting-edge capabilities to help improve both their behind-the-scenes operations and the client experience.

One notable trend is the growing robustness and acceptance of cloud capabilities. This continues to fuel enthusiasm for outsourced or hosted technology solutions, with half of firms now willing to go down this path.

Outsourced and hosted technology are seen as an effective route towards greater efficiencies and streamlined costs, a problem the industry has been wrestling with for years. Other major benefits include improved service quality and reduced operational risk.

 

Portfolio management in desperate need of streamlining

As for specific technology focal points, streamlining portfolio management has become a key priority.

Just 6% of respondents use a single system to construct, manage, monitor and report on their portfolios. Almost half use four or more solutions. The resulting inefficiencies are particularly felt when compiling investment performance reports, rebalancing and during initial portfolio construction.

For the many surveyed firms keen to offer clients a wider selection of asset classes and investment instruments, such technology shortcomings need addressing urgently.

 

Positive prospects … but constraints as well

Overall, the vast majority of survey respondents are upbeat about the wealth management sector’s growth prospects. And this is across the globe, with high optimism seen in almost equal measure in North America, Europe, Switzerland, the UK and Asia.

However, the report sounds a cautionary note. Maximising the benefits of the latest technology trends demands forward-thinking attitudes and, inevitably, significant strategic investment. Yet firms’ compliance burdens—and the energy, attention and budgetary resources they eat up—are increasingly stymieing innovation in other areas of their businesses.

Those wealth managers that can devote resources though to improving the client experience and optimising their internal performance will be well-placed to profit from the industry’s continued growth, and the massive inter-generational wealth transfer that will take place over the coming years.

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