UK's Wealth Sector Must Get A Grip On Productivity – SEI Study

Tom Burroughes Group Editor London 7 June 2024

UK's Wealth Sector Must Get A Grip On Productivity – SEI Study

Weighed by continual compliance costs, demands from clients for new, faster offerings and the general forces of an uncertain economy, wealth managers must increase their productivity. A study suggests that too many businesses are failing to nail down problems and address them at boardroom level.

A survey of UK wealth managers shows that fewer than 10 per cent of them have specific measures in place to boost productivity or discuss them in the boardroom. This comes as the sector continues to be squeezed by red tape and rising client demand.

The study, carried out by US-headquartered SEI alongside FoxRed Insight and Solve Partners, casts an eye on wealth managers’ perceptions of productivity barriers across front, middle, and back offices. The research, conducted in late 2023, used findings from a survey of 65 wealth management firms and qualitative interviews with 25 C-suite individuals. 

Wealth managers self-scored their productivity on average as six out of 10. It turned out that relationship managers spend on average of just 43 per cent of their time on “golden time” – the crucial period of working with clients, investing, or business development.

Barriers to productivity gains include corporate culture, how firms are structured, lack of technology, spotty data and the burdens of complying with regulations. Last year, for example, the UK sector had to adapt to the Consumer Duty regime under the Financial Conduct Authority. Consequently, firms such as St James’s Place had to adjust fees.

The sector is littered with legacy issues (old technology and processes) that can hamper the ability to seek new clients as well as retain existing ones, SEI told WealthBriefing.

Difficulties can arise where a business has a book of clients and needs to align their proposition for new types of client, Jim London, CEO of SEI Investments Europe Ltd, told this news service in a call. 

"An issue for firms is staff retention and acquisition, and this can be a particular pain point with regard to skilled technical and operational staff," he said.

And, as London said in the text of the report, outsourcing – a business that Nasdaq-listed SEI provides – can be part of the solution to the productivity problem.

“Outsourcing can help reduce costs, manual process errors, complexities, and time spent recruiting and training. When done well, outsourcing can significantly impact productivity over time – creating room for growth. One firm in our research saw a 30 per cent to 40 per cent rise in operational productivity through reduced costs and increased scalability after outsourcing,” London said.

In other details, SEI found that 24 per cent of respondents said they had fully outsourced investment operations and were happier with work culture and productivity, as they were less likely to have problems with task hand-offs and inconsistent processes. Firms that had partially outsourced operations reported problems with inconsistent processes and data at twice the rate of other respondents, whilst firms with in-house operating models fell in the middle. 

There is also little consistency in the type of metrics in the industry for tracking productivity.

“When many business leaders think about productivity, they often focus on financial metrics or tech implementations and task automation to increase efficiency and drive revenue,” Donald Reid, founder and non-executive director of Solve Partners, said.

Reid said firms should spell out key performance indicators (KPIs). “Agreed-upon productivity KPIs should then be independently tracked and challenged by boards, and success should be linked to individual and team performance,” Reid said. 

SEI’s London told this news service that an example of the sort of work SEI does for client firms is when they have a “solid legacy business and want to re-shape their proposition.” “We like to target the operating model,” he said, such as asking what people in a firm should most focus their attention on.

“We try to take the frictions out of an operating model,” he said. One way that this can happen is via outsourced offerings, London said.

Asked about the Consumer Duty regime (which took force at the end of July 2023), London added that a lot of firms “have been looking at the value assessment and what sort of value they are bringing to the consumer.” There have been changes to procedures such as disclosures; models have had to be adapted, rather than completely upended.

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