Wealth management firms are forced to reinvent the way they approach the relationship between customer value, growth and profitability due to changing regulations, globalization and evolving customer demands, according to a report by SEI Private Banks and research provider WISE Gateway.
The report revealed that advisors are being paralysed by various inefficiencies that include team organisation, disconnected technologies among others, with nearly 40% of an advisor’s day spent on low-value administrative work.
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Outdated and disconnected technology is a key impediment to profitability, and over 65% of firms operate on a system older than five years.
According to estimates by the report, these firms spend 5% more of their technology budget on maintenance compared to firms operating on a newer system.
Moreover, over one-fourth of all firms have between 10 and 25 surround systems, while about one-fifth of platforms older than five years have more than 25 surround systems.
The report says that firms have to bear expenses related to additional surround systems that support their legacy infrastructure.
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By GlobalDataAround 40% of managers at small firms said that their client data was very accessible, with 60% citing the client data as very consistent. However, larger firms cited figures less than 30% for accessibility and consistency.
Notably, not a single process was given a top-three score by managers while rating their firms’ sales and service processes, on average, with very few managers citing their manual processes as very automated.
The report further unveiled that the increase in size of a firm increases its efficiency challenges, and the likelihood that it will outsource operations.
In case of firms managing under $1bn in assets, 36% opted to outsource, while 71% of firms managing assets above $10bn are outsourcing.
Also, 48% managing $1bn to $4bn in assets chose to outsource, similar to 58% of firms managing $4bn to $10bn in assets.
SEI Wealth Platform, North America Private Banking senior vice president Al Chiaradonna said: "Wealth management is in the midst of unprecedented change. Regulation, globalization and evolving customer demands are impacting firm growth and forcing the industry to reinvent itself.
"While this can feel overwhelming, it actually creates tremendous opportunity for pioneering firms with visionary leaders who are willing to re-examine their business model’s profitability structure. Wealth management executives will play a key role in this reinvention and must commit to identifying their firms’ inefficiencies and addressing them by re-examining and re-thinking the entire value chain."
