HSBC’s tie-up with BlackRock Aladdin shows competition is heating up in the wealth management tech space, says GlobalData.
Private wealth managers are increasingly in an arms race to adopt the latest technology, as demonstrated by HSBC’s move to offer BlackRock’s Aladdin software to its affluent client base. They continue to compete not just on the past returns of client portfolios but on the sophistication of the software they use to manage those portfolios as well.
HSBC became the latest bank to partner with BlackRock in March 2019, announcing a deal to use its Aladdin Platform for all clients with portfolios greater than $1m in both its private banks and the upper bands of its retail wealth management service.
The Aladdin software helps analyse portfolios, searching for hidden risk and correlations across asset classes, which appears to have been a key feature for HSBC.
According to BlackRock, the Aladdin platform combines risk analytics with portfolio management, trading, and operations tools on a single platform to enable informed decision-making, risk management, trading, and operational scale.
HSBC has already started rolling out Aladdin to its clients in the US and Hong Kong, with a full rollout across the world scheduled over the next two to three years.
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While it’s a significant deal and investment, the bank is not alone in tech-ing up its wealth offering. GlobalData’s 2017 survey of private wealth managers found that 56% were already investing in digital tools for financial planning and portfolio management. A further 18% planned to commence new projects in 2018, the second ‘hottest’ area for investment, after IT solutions which helped with adviser admin.
Much of the core elements of financial planning and investment management are well established, making it difficult for private wealth managers to differentiate themselves in that regards. Increasingly, it is the execution and monitoring of the investment process by sophisticated software that allows for in-depth risk management, where wealth managers can stand out and deliver value to their clients.
Automatic tax-loss harvesting, portfolio rebalancing, compliance checks, risk analysis, and more all need to be provided in real time by wealth managers to their increasingly demanding clients. Those that fail to invest will lose out.