Consistent growth is difficult while profit margins are being squeezed and traditional revenue models are being challenged. Brett Williams, MD, SEI Wealth Platform, UK Private Banking, outlines the key considerations for wealth management firms to successfully navigate a complex and demanding ecosystem

With a raft of changes impacting investors and savers in recent years, the need – and consequently the opportunity – for wealth management firms to provide advice has never been greater.

However, given the complexity of delivering a quality service, a number of factors will determine success for organisations. What then are the most important things for wealth management firms to consider?

Costs

Increasing compliance and operational costs are forcing some wealth management firms to replatform, or at least make significant investments in new technology across front, middle and back-office processes.

As a consequence of this disruption, there is growing recognition among wealth managers and financial advisers that by engaging with technology providers with institutional capabilities, they can de-risk and downsize their business, and still deliver quality service and growth with the benefits that straight-through processing and outsourcing bring.

Others sitting on expensive, unprofitable platforms have yet to see the light, and face the risk that these solutions do not pass the due diligence suitability test! The Financial Conduct Authority (FCA) is looking on with interest, and this alone is reason enough for platforms to re-evaluate their commitments to due diligence. The regulator’s thematic review on this subject underlines how it is no longer possible for wealth managers to trust existing processes, and by ignoring this fact some firms will run the risk of exposing themselves to possible enforcement action.

Value

Given the intensive consolidation that has occurred across the value chain of late, firms that have pursued vertical integration are facing challenges in streamlining the component parts.

Many are reliant on overengineered software applications and processes that, when combined with ageing and expensive systems, restrict innovation and progress.

There is a need for new models that are simpler and more efficient. Some financial advisers who are served by the retail platforms are now of a size where they recognise the opportunity to take a greater share of the margin on offer across the value chain, and are promoting their own brand on services and products rather than that of others.

Service

Consumer expectations are growing, and clients are demanding more for less. Without continuous enrichment of the range and quality of services offered, advisers face strong downward pressure on margins.

Making the time to focus on what offers real value in true financial planning – i.e. establishing a clear understanding of life goals, cash flow needs and other objectives – is now more than ever dependent on the use of the better planning tools available in the market. These investments in tools which allow consistent and controlled delivery of strong service propositions will be key to the future success of many wealth management firms.

The chance of success will be further enhanced if these tools are embedded in a good practice management system, and integrated with platform services to deliver a seamless solution. Few can deliver an end-to-end solution that offers this potential without the need to continuously rekey client data. Advisers should make it a key part of their next due diligence exercise.

Innovation

The push or pull towards D2C, mobile, internet and social media, and the increasing demands from users for simpler, more appealing, more efficient tools and applications are changing the future landscape for advisers.

Technology is now available which allows firms to engage with and educate customers digitally, improving access to information and services and reducing costs. Clients who have historically seen the adviser as their finance teacher can now rely on technology; importantly, research shows they prefer this approach.

Integrating digital solutions effectively with the personal touch where this is needed will be an important factor in the future success of wealth managers and financial advisers; it is not just the millennials who expect to be serviced digitally.

Regulation overload

With RDR, pension freedoms, CASS, FATCA, GATCA and Mifid II and other directives, many firms are facing regulation overload. The financial commitment required to continuously improve systems, processes and controls is significant. Consequently, regulation is constraining proposition development, innovation and, some would argue, the quality of client service.

A more proactive approach to regulation is needed across the market, with some technology partners configuring their solutions to comply, thereby reducing the ongoing burden on the adviser.

The annual process of platform and technology due diligence should be used by wealth managers and financial advisers to test their suppliers to ensure they remain suitable and fit for purpose.


The SEI Wealth Platform is an outsourcing solution for wealth managers, encompassing wealth processing services and wealth management programs, combined with business process expertise. SEI provides wealth management organisations with the infrastructure, operations, and administrative support necessary to capitalize on their strategic objectives in a constantly shifting market. The Platform supports trading and transactions on 131 stock exchanges in 50 countries and 35 currencies, through the use of straight-through processing and a single operating infrastructure environment. For more information, visit: http://www.seic.com/enUK/banks/288.htm?cmpid=pb-gpa-813 or contact Andrew Booker on 0203 8107718 or abooker@seic.com.