Senior executives reveal the mistakes many firms make during a technology upgrade.

Clients - as well as regulators - are driving a technology revolution within wealth management, but many firms are making critical errors, technology experts told delegates at the latest WealthMatters event in London.

Many firms are currently undertaking an overhaul of their technology systems, amid regulatory upheaval and client demand for enhanced capabilities. But the current wave of technology implementations is also cyclical in nature and therein lies many of the problems facing firms, attendees were told. 

Wealth managers tend to significantly reinvent their IT systems only every ten years or so, said Ian Woodhouse, director within the EMEA private banking and wealth management practice at PwC. This, he explained, means that top management have usually only implemented one major technology overhaul in their career – leading to many common errors.

According to Woodhouse, one of the main ways in which firms go wrong is that they underestimate the scope of the project as “just an IT issue” and forget that the whole business needs to be involved and trained to use any new systems. Michael Bakouris, chief operating officer at PROFILE Software, agreed, summing up the issue neatly by saying, “it’s always mainly a business project, with IT as a critical participant”.

The panellists all agreed that another big stumbling block is that many wealth managers “bite off more than they can chew” and attempt to do too much at once. “Never go for a ‘big bang’ with IT implementation,” advised Woodhouse, “break it down into chunks and phase it.” Similarly, Bakouris advises breaking implementations into chunks “so the organisation doesn’t get tired.. You can go for quick wins”, in his view.

That said, Damian Bryan, chief technology officer at Equipos, believes that the piecemeal approach can go too far and that firms must perform a careful balancing act. “Don’t do a big bang, but don’t make it so small a chunk that there is no perceptible change.” This, too, can be damaging to internal support of an initiative, if for example, cost or time savings don’t manifest quite quickly enough.

Another common error highlighted by Pete Caddick, founding director of Third Financial, was that not enough of key executives’ time is allocated to projects – something which can be really frustrating for the providers of new systems. “Firms tend to underestimate the amount of time their senior management will need to spend on implementation. They need to be more accessible,” he said.

Is proprietary the best route?

Looking at whether proprietary systems are a good option, the panellists agreed that they have a place, but are something to be viewed realistically. “There’s a tendency to try to go too much down the proprietary route,” said Woodhouse, “Too much proprietary isn’t a good thing as it’s too expensive to evolve over the long term.” His advice for those firms in favour of proprietary systems is to mix “off the shelf” solutions with proprietary systems. “This way, at least you will be part of their development  and upgrade cycle,” he said.

The subject of regulatory change was high on the agenda as a key driver of the technological changes being implemented by the industry. Here, the overwhelming message is that compliance can never be a “bolt-on”. Simply adding on patches isn’t enough, said Caddick, explaining that firms doing this will end up with systems which are “bigger, uglier and more unwieldy.” “You won’t be able to work efficiently and effectively unless compliance is fully ‘baked-in’,” agreed Woodhouse. He went on to explain that what firms need is a “clear line of sight from the front through to the back office. “Traditionally, this hasn’t always been the case, giving rise to compliance breaches,” he said.

Here, however, the experts cautioned against over-reliance on automation, as, in the words of Bryan, “you will never implement a system that runs your entire business - unless you don’t want any ‘best of breed’ products”. They also pointed out that technology systems are only ever as good as the data fed into them; “if you automate chaos you just have automated chaos,” said Bakouris.

Advisors’ needs

Looking at other reasons behind the frenzied technology upgrade activity happening now, the panel singled out not only clients themselves as key drivers – but also advisors themselves. What we are facing is a radically altered landscape in which mobile channels and real-time data are key for clients and advisors, they said. “Business is everywhere now… business is done at any time. You need to be able to work lean, you need to be mobile and you need to follow the client,” explained Bakouris. It is not only the broad “mobile revolution” which is fuelling this, said Woodhouse, but also market volatility which means that  active investors appreciate real-time data and alerts more than ever. Speaking about mobile capabilities in particular, Woodhouse believes “the genie is well and truly out of the bottle…more people really want to communicate with their advisors through mobile devices and tablets”. Caddick agreed, saying that he “doesn’t see anything other than this voracious appetite for mobile increasing”.

The panel debate also addressed demand from advisors themselves for enhanced technological capabilities, with the ability to use tablets as an aid to client meetings emerging as top of bankers’ wish lists. Here, the experts advocate almost “reverse engineering” technology systems around advisors. Woodhouse used the analogy of Airbus’ automation technology, the success of which comes from the fact that it is built around the way that pilots work. Furthermore, because the system has been designed like this, users can take back manual control seamlessly at any time.

Transposed to the wealth management sphere, he believes that this is what firms should be aiming for – systems which are flexible and automate as much as the advisor needs or wants, with them still in ultimate control. “IT needs to replicate the way an advisor wants to work…the golden message is that it all starts from the user,” he said. It should also be said that it is always good policy for firms to accommodate their advisors' way of working as much as possible to ensure their “buy-in” for technology implementations. Dissatisfaction with IT systems may well prompt advisors to jump ship, but equally sweeping changes without adequate consultation might cause equal discontent.

One of the main takeaway messages from the panel debate is that firms need to be flexible in their approach to IT – both with regard to advisors’ working practices and when it comes to choosing systems themselves. This is particularly pertinent at a time when regulators keep “moving the goalposts” and business models are still evolving as a result of the financial crisis. Another important consideration is that many firms are using modules from several providers for various elements of their platforms, such as risk-profiling or reporting. “Be careful with workflow – most of all, firms need to ensure that their systems are flexible, can expand and can ‘talk’ to each other,” Bryan concluded.