EXCLUSIVE: Where Next For Wealth Management Software - WealthBriefing London Summit

Chris Hamblin and Tom Burroughes London 10 June 2015

EXCLUSIVE: Where Next For Wealth Management Software - WealthBriefing London Summit

Love it or not, you cannot get away from technology and that applies to wealth management. Senior industry figures recently debated trends at the WealthBriefing Summit in London.

At WealthBriefing's recent London summit, held in the Guildhall a stone's throw from the Bank of England, eminent panellists discussed the part that software was playing - and would play in future - in private banking and the wealth management sector in general.
On the panel with Stephen Harris, WealthBriefing's guiding mogul, were René Hürlimann, a Swiss software vendor at Appway, Peter Schramme, a Belgian software vendor at Objectway, Tim Tate of Citi Private Bank and Steve Dyson, an experienced wealth-manager-turned-consultant. Sponsors for the conference were Appway; Dubai International Financial Centre; Objectway; smartKYC; ProFundCom; Standard & Poor’s Money Market Directories and K2.

For a while now, financial firms have been introducing digital channels to interact with clients. When asked to enumerate the differences that this has made, Tate said: "There's a relationship angle and a reporting angle. Customer behaviour is changing all the time and will continue to do so. Digital technology is becoming more important in all our lives – more and more of us are using social media, online retailing or Facebook, for example. At Citi we see that the behaviour of UHNW clients are no different from the rest of us."
He said that digital channels had had a great effect on client reporting and onboarding, adding: "In February last year – after about one year of using it internally – we launched our client platform to our clients. Whatever the bank sees, the client sees. It changes the dynamic of the relationship. They [clients] now come to meetings with tricky questions ready for the relationship manager, which is interesting to see. About 60 per cent of our clients are signed up to the platform, although adoption and usage varies from region to region."
Towards a paperless environment
According to Tate, Citi did not see the platform as a move towards greater self-service and therefore less effort on its part to serve customers – instead, it is trying to make it a way of enhancing the relationship between the bank and the client.
Tate also thought that the days of paper were ending for another reason: "One of the biggest complaints we hear from customers is that they are receiving too much paper through the post. One of our clients saves up all the paper and takes it in to meetings with us every 3 months, questioning why we should be bothering him with it. Obviously some of it is a regulatory requirement. Through the introduction of our digital platform, we've seen a drop-off in the number of customised reports being sent to clients."
Interactions with clients
The panellists were asked how wealth managers use technology to improve and cement client relationships. Hürlimann noted that technology can improve the client experience by producing “event-triggered advice”. This includes indicating a change to a risk profile, or using the information to propose suitable products. Technology can also foster greater collaboration at the client’s convenience, such as working together via screen-sharing on any device, anywhere. In addition, such changes and communication will be recorded with the very same technology for auditing purposes.
“Automation and rules-based guidance also saves costs; it reduces complexity and enriches client satisfaction, he said. We believe it all plays together and without a flexible end-to-end software solution in place, the whole topic is far too complex to be managed efficiently,” he said.
Peter Schramme agreed: "It's right! I think digital technology is completely changing banks' interaction with their clients. The digital channels towards their client are not eliminating the face-to-face interactions. It is not an `either/or’ but an `and/and’, `omni-channel’ reality. Most financial institutions still have inconsistent data-sharing across their channels. As many clients start blending channels – real omni-chanels quickly become a real business issue. Moreover, digital enables you understand the behaviour of your client much better. As a simple example, the usage pattern of the channels a client uses can already tell a lot.”
What are clients asking for in terms of technology? What are the trends? "They're not asking for technology per se, but for the choice to interact. They're also asking for personalisation, consistency across all channels – everything they get in their digital life outside of banking,” Tate said.
The fintech revolution
The panel then came to the subject of fintech challenger companies. Tate said: "A lot are doing one or two customer journeys. How far these new entrants disrupt the industry [is to be seen]...among UHNWs the personal touch is still very important. Among the mass affluent, though, I think the fintech companies will gain some good share pretty quickly." The panel seemed to agree that these small businesses were good at design and this allowed them to score over the banks in that particular respect. Tate added: "Banks are not usually best at design."
There are a number of factors which make driving digital projects challenging for banks, some within their control, others which are dependent on external factors. In one encounter he implied that things had been held back by the non-availability of 3G or 4G infrastructure in some regions, adding that "3G/4G and WiFi availability have been held back the adoption of mobile digital. Also, many financial advisors are still sitting in their offices using desktop computers." He noted that the bank's original expectations had been confounded, perhaps quite pleasantly, in another way: IT-literate HNW people of all ages were embracing banking technology. "It's not just a next-generation play as we thought at the outset. Our oldest customer using our digital tools is 97," he said, adding: "In 2011, we were focused on iPad. But we've seen the importance of multi channels."
Tate had advice for the audience about allowing users breathing-room to talk to their financial institutions about new designs: "One of the best ways to get feedback – be nimble. Put out new functions and get people to react. Let them use it. Design is one of the big areas we're in. Some people thought our user interface, which was coloured black, looked contemporary and was very easy to use, however one referred to it as "the Black Hell" – it was a chalk and-cheese reaction. I was surprised by that because many people thought it was a good user interface, and most of our original testing supported that view.
"I think a lot of these small companies are using technology to try to disrupt the financial industry. They usually focus on some very specific task. They get it to appeal to a certain type of customer need," he added. 

When Harris pressed him about whether this was a good or bad thing, he said: "I think it's an interesting thing!" He said he thought that the chance of such companies eroding Citi's share of the "ultra-high space" was "relatively small."
Dyson said: "We've been working with a number of fintech start-up firms and see them as potential disruptors in the wealth management sector. The fintech market is growing, with advice market entry. Some firms are introducing hybrid models and customers start off with digital tools then go to an advisor."



The hybrid model
Harris asked whether hybrids represented "the winning model." Schramme said: "There is not a binary reality: it is not about 100 per cent digital or 100 per cent face-to-face. In reality there is a blend of contacts, sometimes digital, sometimes virtual, sometimes personal. In two years, video will probably be one of the cornerstones of the digital interaction. When you book online and mistakenly enter something twice (I'm doing that myself, because I'm getting older) a message pops up saying 'do you need help?' Similar patterns will appear in the investment market. Some don't want to touch the digital journey, some love it, and in between there are 50 shades of grey. The future will be when you can start with one way and can end up changing to the complete opposite. Everyone wants a different interaction model, so there's the fully face-to-face journey, the fully digital journey, and 50 shades of grey. Your future infrastructure must be able to cater for that in a seamless fashion.”

Panellists were asked whether, as wealth management firms mature, it will be difficult to replace legacy systems to accommodate the rise of new business requirements, such as e-channels?
Hürlimann said that innovation is hindered if one does not decouple data from process applications. Without such a step, speed of change will lag behind the need for businesses to handle complex issues. “For this, ideally, an ESB or integration layer is in place, which enables the use of new technology and innovation, without interrupting the `stable’ back end. Smart companies have this in place or are building it. The data lies underneath on a global (or group) scale, but there’s flexibility on top. So the different divisions of a company can profit and scale successful solutions and process efficiency,” he said.
The three stages
Dyson observed: "It tends to be a cyclical approach. Many years ago it was a build approach. Then it went to a single vendor, then to a 'best of breed' strategy. You have to focus on client engagement. It's great if the front looks nice and pretty but it is critical to have a strong data management strategy to ensure that both advisors and clients see the same data which has to be consistent and accurate. Smaller players tend to go for one IT solution, giving them front, middle and back office capabilities. Bigger players go for 'best of breed.'
“There have been a number of high-profile system implementation failures, Brewin Dolphin being one of the most public, so it is important to understand what the required target operating model is for the firm,” Dyson added.
Schramme said: "The question of 'best of breed' vs `single vendor’ solutions is, to me, not the right question. Look at the dynamics of your operations. You need operationally excellent systems in the back but also systems that are able to respond to disparate demands, i.e. changing customer demands. How do you blend them? That's the important question. You should not create silos where the back ends are exposed to the investors, you should create a horizontal collaboration and interaction layer that provides the differentiated user experience and is loosely coupled with the back ends.”
Tate said: "I think the approach we've taken is 'this is not optional'. We've got to do this and that is going to cost, and trying to measure it in 20/24 months is not the right approach. The way you cost and fund this project is vital. You have to be able to remove the short-term hurdles and cost challenges and bite the bullet and focus on the long term."

Tate's parting shot was an interesting one. On the subject of how it is necessary to invest heavily to ensure that data appears electronically in front of a prospective customer as quickly as possible, he said: "If you're on a tablet you only get one shot with a client to make a first impression and the data must be there in 1 or 2 seconds. You could lie, stall and say the network's slow, but really you need robust data that you can upload instantly. That's expensive to provide. You have to take the cost and amortise it over the years."
Schramme went along the 'big data' analytics route, saying: "Your organisation has a lot of information on your client that is undiscovered and unused. There is a lot of public information on your client that's undiscovered and unused. Analytics is what it's all about."
Ian Woodhouse of PricewaterhouseCoopers observed that all these technological changes would have a discernible effect on relationship managers and advisors, adding: "They are used to having leeway, but this will affect that. It's not just the RMs; HNWs will invariably want to contact people in the back office." He asked the panel what they thought about this. Harris called the question "the elephant in the room."

Schramme said the proliferation of information was bound to have a big impact on what the RM has to do. He thought that the advancement of IT was going to turn the RM relationship into "an engagement-based one (such as a trusted guide more in the life-important aspects) vs the current more transactional-orientated relatiohnship.”
Talk drifted inevitably onto the subject of luddite RMs, with most panellists saying that they were no longer noticing the existence of too many old-school-tech-illiterate bankers and observing that the solution to this waning problem was largely a case of training. There also seemed to be agreement that, although most banks still do not let the back office talk to the customer, leaving the job to the RMs, this was going to have to change.

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