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Wealth Managers Outsource Tech As Compliance Costs Bite

Robbie Lawther

19 April 2018

Wealth managers with in-house technology services aren't so common as regulatory costs force them to consider hiring outside help, the proposition director at  was the inter-generational transfer. It is a key challenge for wealth management firms. I think some have been more proactive than others about addressing that challenge. The primary thing that firms are starting to do more is think about how do families and the next generation want to contact with them. The next-gen transfer will demand more for digital, more demand for mobile, and clearer and transparent services.

"The next-generation are taking more of an interest in their financial situation, and are therefore more informed. The shape of services that are offered either through advice or to the customer need to change. I think some firms have got that and know they need to change, and we have supported the development of a new customer portal for its clients and mobile apps. We are seeing clients think digital with the change from face-to-face to webchat. There is more of a demand for us to extend our services to new communication channels. Research has shown that Millennials want richer client reporting, on a portal, pdf or print out – and we are seeing demand for increased flexibility on that so access to more data, charts and decision information.”

In recent years, there has been a trend of merger and acquisition deals in wealth management, with firms seeking scale to preserve an edge at a time of rising regulatory costs, while others are spinning off operations seen as non-core to concentrate on areas in which they can achieve profitable growth.

A Pricewaterhouse Coopers (PwC) report last year on asset and wealth management deals found that disclosed deal values hit record levels in 2017, totalling £11.4 billion ($16.03 billion) in the year to September.

When firms come together, different operating systems can make corporate marriages unhappy. Russell said that SEI can play a role in helping firms solve amalgamation issues.

“Firms have different systems, and when one firm acquires another or there is a merger, there is a need for a review of that firm in the context of amalgamating the systems together," Russell said. "You can’t just place firm A activities into firm B’s operating model. If you do that it won’t work. What you do have to do is go into a considered change programme, which looks at which firm has the more efficient model to use. And if the firm is not ready for this then they need to get the right infrastructure in place with right people and structure. And then you can transition the business into a new structure.

"There is an order with these things. Before you migrate processes from firm A to B and you deliver a new product, get the building blocks right. Firms will typically have an idea of how they want to run it, but it’s part of that acquisition process, it’s never a complete thing until the organisation comes together. The role we play in those situations is a supportive one to help the firms join together, and we have a team here that supports organisations going through an M&A deal."

This publication recently reported on the the challenge of removing tech wrinkles in wealth management M&A, following an intrerview with Ben Revill, business manager at Xpedition, formerly known as Touchstone CRM.