According to this article, the wealth sector has an addiction to old-fashioned tools for amassing and handling data and, if it does not change, businesses could be in dire trouble.

The following article comes from Alvaro Morales, co-founder and chief strategy officer at Flanks, a Barcelona-based wealth management automation platform. Morales, a former global head of private banking at Santander, founded the business alongside Joaquim De La Cruz, a software engineer turned wealth management CEO. In early January, the firm announced a €14 million ($15.9 million) capital raise.

In this article, Morales discusses how the wealth management sector is being held back by its habitual use of old-style ways of logging and processing data. 

The editors of this news service are pleased to share these ideas; the usual editorial disclaimers apply. To comment, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing com   (There is more about the Flanks business below.)

The wealth management industry has an Excel problem. We’ve all been conditioned to do things the hard way. In my 35 years in wealth management, including my time as global head of private banking at Santander, I've seen how our industry remains stubbornly attached to old-fashioned tools. Even today, I estimate that 85 to 90 per cent of wealth management operations still rely on Excel spreadsheets and manual processes.

The problem is made particularly acute when it comes to portfolio aggregation which, given the globalised nature of wealth, is now more of a necessary offering than a “nice to have.” This is partly due to regulatory pressures – the European Commission's Retail Investment Strategy (RIS), being one. Set to take effect over the next few years, it will require enhanced aggregation tools to allow clients to consolidate and manage their investment portfolios more efficiently. While institutions are forward-thinking when designing systems for their own internal data, they face a real challenge when dealing with information from different sources. 

I saw this challenge become particularly pressing about 10 years ago, as family offices emerged as powerful players in our industry. These smaller, more agile firms began attracting clients by promising comprehensive portfolio management across all their investments – not just those held at a single institution. Traditional banks found themselves needing to compete, but their manual processes – and the inability to adapt quickly – made this practically impossible.

Let me show you how painful this is in practice. Picture an advisor at a major bank trying to give investment advice today. First, they must call their client asking for the statement from last month. Then they wait – that client won't receive that statement for another 10 days after month-end. Once he gets it, it then needs to be scanned and returned. By the time we have this information ready to analyse, it's 45 days old. That's a month and a half where the market has been moving, but we've been flying blind with outdated information. And remember – this isn't just one client.

We're doing this charade with dozens of families, all with investments spread across different institutions.

The hidden cost of manual processes
The cost in this instance isn't just about operational inefficiency – it's about the quality of advice we can provide. It's impossible to give the right advice if you have to wait 45 days because the market has probably changed completely by then. What does this mean in tangible terms? You lose clients. And it’s impossible to win new ones if your competitors can move faster.

Then there is the problem of scale. In my experience, a private banker managing about 30 to 50 families hits a ceiling that's practically impossible to break through using traditional processes. The financial impact can be huge – typically the answer is to hire an assistant to handle the manual data entry and reconciliation tasks. With these assistants often commanding significant salaries, having the right technology in place to automate some of these processes could result in significant cost savings.

With such a manual burden on the industry, I firmly believe technology in private banking is probably the best investment an entity can make because it's practically cost zero compared with the returns. When you increase the productivity and efficiency of your bankers, you're going to increase that bottom line dramatically.

How generational wealth transfer will reshape wealth management
These aren’t pressures we are just feeling from within. There are external pressures incoming too. Our industry is changing fundamentally. When I started 30 years ago in Swiss banking, it was an old-fashioned way of advising. The relationship between the client and advisor was sometimes more important than the real advice. But that dynamic is rapidly shifting.

The wealth management industry is facing what I call its very own “Kodak moment” – once the dominant photography company, they failed to embrace digital technology and lost their market position. In the next 15 to 20 years, we're going to see the largest wealth transfer in human history – around $85 trillion moving from the Baby Boomers to the next generation. And this isn't just about money changing hands. With increased regulation providing a safety net of trust, this new generation wants more than just relationships – they want good advice, good knowledge, and good technology. They're better educated, and technology driven. What they want is a good professional with good technology who can help them increase their wealth.

As a side note, I don't believe technology will completely replace the human element in wealth management. Yes, the new generation wants technology-driven tools, but they will still want to see a face, a human face. AI can reason and not just automate tasks, supporting advisors in improving their client relationships – but it won't replace them.  In the same way that you want to see a doctor, you want a human to manage your money. Money is like health – and that dynamic is very, very important for any person.

Our reliance on Excel isn't just costing us €20 million ($22.8 million) – it's threatening our very existence. Too many companies have become extinct because they didn’t look at what their client base really demanded. Just look at the likes of Kodak and Sears, industry leaders who couldn't break free from old ways of working. With the largest wealth transfer in human history approaching, we can either evolve or expire. By clinging to manual processes, we're not just failing to serve the next generation – we're actively preventing the democratisation of wealth management. I believe that no name is too big to fail. Change must happen now.

About Flanks
The business operates across the pillars of technology, industry expertise, and regulation. Services include a multi-custodian portfolio view, enhancement of data, and documentation processing. Clients can choose from which services they want, in a “modular” fashion. The Flanks LUME ecosystem includes partners such as Temenos, Wealth Dynamix, Njorda, PetakSys, Coinscrap Finance, and Pivolt. These complement Flanks' capabilities. The firm has a B2B SaaS model, and targets banks, family offices, and other technology solutions such as portfolio trackers.