Luminaries from the wealth management sector recently gathered, at the invitatioin of the publisher of this website, to explore the intersection of wealth management and technology.

(Editor's note: FWR is a sister news service to WealthBriefingAsia; while the event reported below was held in New York, many of the points made in it have global significance, hence its appearance here.)

Questions surrounding the role of technology in wealth management have attracted a lot of attention in recent time, as the industry’s roster of products and “solutions” continues to grow.

During session two of the Family Wealth Report Summit last month, a panel of distinguished speakers from around the world discussed the challenges and opportunities that technology is bringing to the wealth management sector.

Sponsors of the event, which took place at New York’s Metropolitan Club, were: RBC Wealth Management; Capgemini; Appway; Equipos; Portcullis Group; Columbia Management; and SmartKYC.

Jon Carroll, president and chief executive at Family Office Metrics, chaired the second panel, which featured: Andrew Sutcliffe, chief executive at SmartKYC; Robin Williams, chief product officer at Private Client Resources; Glenn Bolstad, vice president of sales, North America, at Appway; Simon Turner, chief technical officer, Equipos; and Dan Watt, head of program and project management at RBC Wealth Management.

As wealth management firms strive to meet evolving client expectations and “stay current,” many are re-examining their business models and looking to technology in doing so. According to data compiled by Ovum, the US high net worth banking and financial planning sector spent $3.3 billion on technology in 2013 - a figure that the research firm anticipates will rise to $3.4 billion this year, $3.6 billion in 2015 and $4.2 billion through 2018.

But implementing new products and systems can – if not properly thought out - be a big drain on resources, and, as one member of the audience pointed out, “can take twice as long and cost twice as much.”

“Another challenge is that, by the time you’ve finished implementing that first wave of change, your client will be asking for something different, or technology will have moved,” said Turner of Equipos.

He added that it’s “very dangerous to put your stead in one particular way of implementing something,” highlighting that one of the things his firm has changed over the last 12 to 18 months is the way they develop.

“We now go through the process of planning, developing and evaluating the results on a much shorter time scale - normally around four weeks - so we can continually adjust and evaluate where we are and change the direction in which we’re moving. Change is the only thing that is constant in technology,” he said.

Bolstad agreed that development cycles need to become shorter, highlighting how – despite the dominance of Microsoft Office - Google rolled out “Docs” directly to consumers for rapid feedback.

“Even though it wasn’t as good as a Microsoft Office product, the consumers felt they were being heard and that there was constant deployment and betterment of the product. It’s that marriage with business, IT and a vendor - from the beginning - that greatly increases the chances of success,” he said.

That, according to one member of the audience, is paramount; at her former firm, one of the biggest complaints with new technology was that the end-user was never asked for their input, she said.

One size does not fit all
Someone from the audience asked why the industry hasn’t developed “narrower” solutions instead of “this-can-solve-all-your-problems” types of packages.

In the industry’s defense, Carroll said that all of the firm’s represented by the speakers do indeed provide “targeted solutions,” as opposed to trying to be “one-size-fits-all.”

“It’s important to recognize that the client has a need, which may not fit precisely with what you sell. Those firms that take a consultative approach will, I think, win more business than those that are tied to a particular product offering,” he said.

Bolstad said he doesn’t like the word “solution,” as, in his view, a technology problem can never truly be “solved.”

“I like the word journey…let’s constantly develop. The days where technology providers come to you and say ‘we can solve your problem’ – I hope those days are mostly behind us.”

Outsourcing and “the cloud”
Williams, whose firm Private Client Resources provides data aggregation services to ultra high net worth clients, thought it appropriate to define the concept of outsourcing and “the cloud.” He highlighted that most business solutions today – unless it is purely systems-based - have three components: human, process and systems.

“Outsourcing is no different - there is a human, systems and process part. A key litmus test to think about…is where is the work being done? The cloud does not equal outsourcing, if you apply those three components. You have to ask, who is doing the work? Who is managing it? Where is the real effort and labor taking place? Purchasing software online is not outsourcing, it doesn’t necessarily improve your processes or make you execute faster – it is a tool.”

He said he hears the terms “outsourcing” and “the cloud” often tied together. But “I will probably speak for most here in saying that we consider the cloud more of a marketing term than anything else,” he said. “The concept of central management or resource off-site has been around for a while.”

Fragmented systems
Rising regulatory requirements and associated costs, among other developments, have of course made wealth managers more aware of how technology can help boost efficiencies. Firms are increasly under pressure to review their infrastructure and look closely at how they manage various systems, as well as how they aggregate data.

But many players are still relying on various systems for individual processes, as highlighted in SEI’s Legacy of Legacy Systems report, for example, which warned against the use of technology “quick fixes.”

Similarly, Watt argued that “when you try to assemble these pieces they don’t glue together very well,” adding that “you can see this challenge to an extreme” with consolidated reporting.

“Everyone is producing the data in a different format and it’s not easy to consume - that’s where I think the industry has a long way to go,” he said.

Moving on to the topic of data management, Turner said his firm finds that clients have “very little control or understanding” as to how clean their data is. He believes that “the software industry as a whole is very immature with respect to componentisation,” although data as a service is “starting to evolve as the more standardized way of doing things.”  

“I think it depends very much which area of the technology stack you look at, but we need to drive better accessibility and better standards at all levels,” he said.

For example, Bolstad mentioned that, without a “consistent process or flow,” efficiency cannot be measured.

Indeed, earlier this month, SEI said that systematic workflows “create the culture that ensures integration works” and are critical to boosting a wealth management firm’s value and client service experience.

Finances
Besides regulatory and technology-client pressures, there is, increasingly, a third pressure on the chief financial officer to say “we’ve got to do all of this - and cheaper,” Sutcliffe noted.

Watt said RBC breaks technology projects down into four components, using the analogy of project management spend as a “portfolio of funds that has to have a return as a balance.”

The first – risk – considers compliance, regulatory and safety factors and “doesn’t return a lot” but “keeps you in business,” he said. The second relates to efficiency, or operations, which “focuses on reducing the cost of current operations.”

Then there is the growth aspect, he continued, “which looks at how to develop existing products and services, and potentially push them into different markets.” Lastly, the innovation component “takes into account what isn’t being done today but should be a focus in the future, as well as how that aligns to the overall strategy.”

But how do, say, family offices make big buy decisions responsibly?

“For family offices, the decision is huge and can take a couple of years from start to finish,” Carroll said. He added that it is usually justified by three perspectives: quality, security and the level of control the firm needs.

Constant change
Sutcliffe emphasised that it’s “important not to get trapped in technology for technology’s sake.”

“The industry is full of examples of technology-led projects where you lose sight of the real business case and the value - in the banking industry as much as any other. You’ve got to constantly ask yourself what it’s going to do for the firm and the client, and not get stuck in the ‘whiz-bang’ technology,” he said.

It is also worth mentioning that firms in the wealth management space are increasingly placing a bigger emphasis on enterprise culture and ensuring the “right fit” – certainly when it comes to technology but also in areas like recruitment.

Watt highlighted that a key aspect to keep in mind is the cultural change that big technology projects generate. “Change management becomes as important, if not more important, in our projects than the technology itself,” he said.