White Papers

Report Warns Against Use Of Technology "Quick Fixes" Among Wealth Management Firms

Eliane Chavagnon Deputy Editor - Family Wealth Report 1 October 2013

Report Warns Against Use Of Technology

Wealth management firms should use a single platform for product distribution and client data management if they want to take advantage of increased demand among clients for their services, a new white paper argues.

Wealth management firms should use a single platform for product distribution and client data management if they want to take advantage of increased demand among clients for their services, according to a new SEI white paper.

Many industry players currently take an "on-the-go" approach by introducing quick fixes to solve immediate issues such as more stringent regulatory requirements - but this does not solve core problems, the firm says. 

The report will add to debate on what is the most efficient way for wealth management firms to handle issues such as upgrades and replacements for older technology, particular when sensitive client data is at stake - a key issue for compliance - not to mention the need to contain the costs of technology. (As well as providing investment services, SEI also provides technology solutions to the financial industry.) 

The paper, The Legacy of Legacy Systems, points to industry research which it says predicts that demand for wealth management services is set to rise 7 per cent a year. It also argues that this data-driven industry might be “misjudging the rising importance of clients’ desire to control their finances,” citing findings from The Futurewealth Report by Scorpio Partnership.

While the paper acknowledges that many advisors feel challenged by the idea of clients taking control of their finances, it notes that newer platforms are likely to offer scale and efficiencies - that older systems cannot achieve - and in turn generate more sales.

The findings resonate with those of a recent Celent study - Driving Efficiency Through Wealth Management Platforms - which said that firms are looking to gain efficiency by creating a “unified offering” with a just few key strategic partners. SEI’s latest paper also adds weight to the argument that wealth managers in the Americas are more tech-savvy and target a far leaner business model than is the case for their global peers (see this study here).

In another study earlier this year, SimCorp claimed that as client and market demands intensify, state-of-the-art investment management systems result in a lower cost of operations over time versus retaining a legacy system.


Alongside the idea that a growing number of wealth management clients would like to be in charge of their finances is the notion that they also want to interact with professionals to help them with their more complex financial requirements.

“This client co-pilot can range from a single person to a family and their appointed advisors. The wealth management co-pilot can be a single individual advisor or a team that includes a relationship manager, accountant, lawyer and so on,” SEI said.

And while this type of evolution is “noteworthy” at smaller wealth management firms, bigger players have more to gain, the firm added.

“Larger institutions are most aware of the obstacles to their growth, and they have the scale, the brand and the economic buying power to make it possible. The threat is that many hold to the belief that the best solutions are built internally. They could be, but not in a timely, affordable and scalable manner,” it says.

According to Al Chiaradonna, senior vice president, SEI Wealth Platform, the wealth management industry can learn from other industries when it comes to addressing legacy system constraints.

The aviation sector in particular is a good example of this, SEI said: “Following a surge in air travel, airlines increased efficiency and revenue by moving away from siloed systems to a unified platform concept. Similarly, the paper suggests that the wealth management industry transition to a single platform for product distribution and client data, allowing for the integration of disparate processes and redistribution of capital to focus on client needs.”

The white paper was published by SEI Executive Connections and is the first in a four-part series called SEI Insights: The Future of Wealth Management. The other three parts will examine changes to risk management, behavioral segmentation and advisor productivity.

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