Despite growth, the global wealth management (WM) industry is gripped by numerous challenges.

1. View Point
Holistic Solutions for Key Challenges of the
Wealth Management Industry
- Anjani Kumar, Kamlesh Ghewarchand Oswal
In spite of its growth, the global wealth management (WM) industry is gripped with numerous challenges today. In order
to successfully overcome the challenges, capitalize on the opportunities and become successful, WM firms must make
large scale changes to many aspects of their business. This paper discusses the key challenges that WM firms face today
and provides solutions for overcoming the challenges.
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2. The global WM industry has grown significantly over the years and is poised for further growth in
the future. The growth is thanks to the continual increase in number of high-net-worth individuals
across the globe; and other enabling factors like changing demographics and increased retirees’
Overview needs. However, in spite of its growth, the WM industry has been facing myriad challenges. In
addition, the industry is witnessing disruptive changes like client technology transference and
evolving revenue streams. Following are the key challenges that WM firms face today and solutions
to overcome the challenges.
Challenging environment and sub-optimal strategy
Challenges Client and advisor dissatisfaction
and Solutions
Regulatory pressures
Sub-optimal operations, processes and tools
Challenging environment and sub-optimal strategy
While the economic environment is gradually improving in countries like the U.S. (e.g. the U.S. unemployment rate fell to 8.3 percent
in January’12, the lowest level in the last three years), the environment still remains challenging in many countries across the globe. For
example, there is a recurring threat of default by European countries like Portugal, Italy, Greece and Spain. Consequently, for many WM firms,
budgets remain tight. Firms’ spending on key technology improvements or on business enhancements is constrained. There is also enormous
competition amongst WM firms. Mergers and acquisitions and the foray of non-traditional players in WM business (e.g. brokerage, insurance
companies, independent consultants etc.) have all increased the competition. Today, firms of all types offer similar products and services to
similar client segments and there is limited differentiation amongst the offers provided by firms. The sub-optimal and siloed strategies that
firms have followed for years are also starting to haunt many firms. Although critical, not many firms have well laid out client segmentation
and valuation strategies. Many view client onboarding processes as back-office functions that needs to be cost-contained, rather than being a
competitive differentiator. A large number of financial organizations lack sound strategy to bring their entire gamut of services (investments,
brokerage, banking, retirement products etc.) to their clients in an integrated fashion. Firms have failed to change their business model with
the changing times.
WM firms must enhance their business model, revise their strategy and must work towards moving to a robust
business model. In such a model, a relationship manager would be the primary contact point for the client. The
relationship manager would be supported by various product specialists. Firms must also focus on integrating
their service models. For example, where it makes sense, large firms must look towards restructuring their
multidimensional enterprises offering lending, insurance, consumer banking and other products and services
Solution
around their WM groups. Banks providing WM services could work towards having closer links between small
business operations and mass affluent sections while strengthening links between private client services segment
and investment banks. Many clients (including baby boomers), will retire in the coming years and a large number
of these clients are ill prepared. They are looking for sound financial advice and robust retirement income solutions.
There is also a gradual, but definite change occurring in the makeup of the demographic culture in many countries.
For example, in countries like the U.S., the ethnic economic composition is changing and minority groups’ wealth is
increasing significantly. Firms must adjust their business model to meet the global investing needs of their clients
and capitalize on opportunities arising out increasing retirement needs and changing demographics. Exhibit 1
shows a recommended transition map for WM firms.
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3. Exhibit 1: WM industry transition map
• Trusted wealth advisor
• Product sales focus
• Value-added solutions
From • Secrecy and asset preservation focus
• Open architecture
• Proprietary products focused
To
• Provides wide range of alternative products
• Siloed service and products approach
• Integrated and holistic model
• Secrecy and asset preservation
• Customer centricity and advice led by in-depth research
• Limited say of client
• More decision making in the hands of client
Holistic WM Model
A one-stop-shop WM firm
Relationship Specialist meeting the clients’ needs
Client Manager Team from Insurance, Trust,
Brokerage, Private Bank
and more
• Financial Planning • Retirement Planning • Wealth Transfer
• Investment • Liability • Charity /
Management Management philanthropy
• Insurance • Trust & estates • Business Succession
• Cash Flow • Personal & business Planning
Optimization lending
Client and advisor dissatisfaction
In recent years, clients’ confidence in their WM advisors has been shaken badly. Many clients have started to closely scrutinize their advisors and
have raised expectations from their advisors. For example, many clients are asking for more control over their investment and WM decisions
while they expect ‘just in time’ (e.g. timely financial advice to invest windfall gains. They also expect ‘just for me’ (e.g. personalized and bespoke
retirement planning advice) solutions and services. Regaining clients’ trust and meeting their heightened expectations is a major challenge for
firms today. Firms are also grappling with dissatisfaction of many of their advisors. Having faced client ire, significant market losses, reduction
in compensation; and intense press and government scrutiny in the recent past, many advisors have been under tremendous pressure, and are
dissatisfied with their firm.
Firms must shift to a client centric view and must deliver a differentiated and unique client experience. They must
provide a unified view to the client and enable them to see all of their assets held outside the firm through a web
front end. Firms must improve their delivery channels and provide personalized services to clients. Firms must
leverage their entire suite of product offerings and pursue sound client acquisition strategies. These institutions
Solution
must also work towards improving product functionality (e.g. retirement products), performance and its returns.
Aligning their marketing campaigns towards targeted clients is a priority that requires monitoring for campaign
effectiveness. Firms must also understand the enterprise value of their client and proactively improve the quality
of service – especially to the “mass affluent” who have generally not been served well. Building a strong advisory
component is crucial for firms. Firms must enhance advisors’ capabilities through advanced training and product
knowledge. Hiring the right talent in the local markets is a priority. Investment in an advisor desktop and client
portal that is accessible to both clients and advisors is crucial. Advisors should have access to a unified view of
the client, CRM tools, financial planning and advice tools, tools for collaboration with the back office, and access
to market information and data. Firms could look at providing a single workbench to advisors that can cover
all aspects like portfolio management functionality, order management, data warehousing, due diligence and
more. Exhibit 2 illustrates features of best-in-class advisor desktops while exhibit 3 shows features of a best-in-
class CRM solution.
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4. Exhibit 2: Features of best-in-class advisor desktop
e.g. client profiling, portfolio analysis,
portfolio rebalancing
Desktop integration (risk,
e.g. dashboard, alerts,
compliance, trading,
CRM
services and operations)
Servicing & Asset allocation Book management
execution
e.g. sales tools, e.g. investment proposals,
collaboration tools, Financial advice tool Financial planning Client presentation profiles, reports
aggregation tools
Research & content Portfolio Market data
management
e.g. analyst research, e.g. news, quotes, indices
product screening
e.g. account management,
performance management
Regulatory pressures
The WM industry had already been struggling over the years to ensure effective compliance with many regulatory requirements (e.g. AML,
KYC regulations, pre-and-post trade compliance, SoX etc.) Recently, firms across the globe have been subjected to intense governmental
scrutiny and are facing many new regulatory changes. Many of the regulations are still evolving. At both the global and country level, there is
lack of consensus amongst legislators and administrators on the evolving regulatory requirements. The plethora of new regulations and the
uncertainty around many of these regulations have increased the challenges of firms face manifold. Enhanced MIFID, U.S. Dodd-Frank Act,
UCITS IV, Basel III, RDR and FATCA are only few of the regulations that WM firms are grappling with today.
Firms must focus on meeting compliance needs and on improving the efficiencies of their existing compliance
programs. They must leverage compliance solutions for their competitive advantage. Towards this end, firms
must invest capital on new compliance technologies, consolidate older compliance systems where appropriate,
and centralize their data management operations. They must leverage robust data aggregation, reporting and
management tools. For effective data management, it is important that firms establish a robust governance
Solution
framework. They must create a unified framework for effective management of system enhancements and upgrades
arising out of current and future regulatory changes. Focus on leveraging good information risk management
programs that will help them assess their readiness for a regulatory compliance audit and in aligning with global
information security standards (e.g. ISO17799, COBIT etc.) is critical Exhibit 3 shows a recommended client data
aggregation & reporting platform solution.
Exhibit 3: Client data aggregation and reporting platform solution
Portfolio Performance Measurement
Client Website
CRM
Internal Website
Operational Data Store
Loans Relationship
Reports
KY C / Risk Profiling
I nve st m e nt Suit abilit y
ETL layer
Investment
Data Loading Performance
Investments Visibilit y
Acco Reports
unt Financials & Pe rform ance
Client Account L inkage s
Legal
Clie nt Re port ing Role s Statements
Deposits Clie nt De mographics
Business
Intelligence
Trust Financial
Accounts Reporting /
Data Quality Downstream
Compensation
Solution systems
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5. Sub-optimal operations, processes and tools
A large number of firms are saddled with sub-optimal operations and processes and lack process management discipline. For example, many
firms lack the means to effectively gauge their immediate exposure. Many don’t track important metrics that could help them improve their
processes. It seems many firms are not in control of their client onboarding process. This results in missed asset growth opportunities. Exhibit
4 highlights issues in many firms’ client onboarding processes.
Exhibit 4: Issues in client on-boarding process
High
Client off-
Disparate boarding due
Changing
data needs to data
data
related errors
requirements
Changing
regulatory Long lead
Impact on WM firm
requirements time for KYC
and data
verification
Inadequacy
of gathered
data Multiple
personnel
gathering
Paper Repetitive data
based gathering of
data same data
collection
Disparate
& review
channels for
gathering
Low
data
Low Impact on client High
A large number of firms lack robust advisor productivity improvement tools, tools for providing unified views of the client, robust CRM tools,
financial planning and advice tools and tools for collaboration with the back office. Their advisors use overlapping technology tools to conduct
their business. It means that they are unable to integrate internal data from the myriad of siloed and redundant systems as well as from external
data sources. Many firm’s websites lack important features like single sign-on access, portfolio performance tracking capabilities, and real-time
access to market information. As of today, most firms are unable to effectively meet their clients’ demands of instant access to their accounts
information on mobile devices. Exhibit 5 shows key technology challenges that WM firms face today.
Exhibit 5: Technology challenges of WM firm
Redundancy of tools
and applications Lack of Integration
Sub-optimal tools
Sub-optimal onlines Sub-optimal
Lack of good document
channel reporting solutions
managment system
Inability to provide Data security
Lack of real time access
robust mobile solutions challenges
to market information
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6. Firms must leverage Business Process Management (BPM) solution. BPM’s workflow automation and rules engine
will help firms to manage risks, lower cost, better understand and control their client relationship and also manage
regulatory burdens. Firms should deploy BPM without disturbing their legacy applications. They need to pay close
attention to all of their internal processes. Ensuring that their processes meet the firm’s control requirements and
that these processes are effective, efficient and dynamic to account for rapid changes is critical. Firms must also
Solution
leverage business intelligence (BI) solution and the required information must be integrated with and available
to the BI applications. Can the firm look at BI initiatives holistically and implement these at the enterprise level?
Creating an agile technology environment and having a flexible architecture is a crucial imperative. Firms must
review their entire technology solution landscape and carefully evaluate and deploy in earnest the right solutions.
They must work towards integrating their WM tools and front, middle and back office components. Exhibit 6 shows
features of a best-in-class WM platform.
Exhibit 6: Features of best-in-class WM platform
Holistic and real-time investment view
Efficient on-boarding
Decision making tools
Web 2.0 technologies
User centric approach
Customer
Experience
Integrated work-station
Best-in-class Holistic view of products and services
Multi-skin single platform approach Wealth Advisor
Customer segment based Infrastructure Integrated lead and contact
differentiated services
Management Productivity management
Data quality management, dashboard Platform Advance portfolio management
One-stop-shop; leverages white labeling capabilities
Transaction
Processing
STP, cost effective and modular
processing
Multi channel integration
Dashboards and workflow enablers
Intelligent exception management
For technology investments, firms must think strategically and make prudent investments. Exhibit 7 identifies key areas where WM firms could
focus their technology investments. Firms must look towards outsourcing their non-core functions and also consider hosted (SaaS or managed)
technology solutions. While choosing a vendor for providing technology solutions, firms would be prudent in considering the vendor’s past
record, managerial and technical capabilities, fitment with firm’s needs; solution’s flexibility, scalability and its ability to service multiple groups
within the same organization. For global operations, firms should select a service provider that understands the local market and has a proven
capability of investing in the solution integration.
Exhibit 7: Technology improvement areas for WM firms
Data Website CRM & Business
Aggregation, Front-office Improvement, Collaborative Analytics Mobility Process Compliance
Reporting & and Back-office Web 2.0 & RIA Network Management needs &
Management Improvements capabilities and Service Information Risk
Orientation Management
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7. Conclusion
Today, it is crucial for WM firms across the globe to follow robust strategies to be on firm
footing and regain clients’ trust. Towards this end, firms must holistically view their key
challenges, the disruptive forces that are shaping the industry, and the opportunities.
Firms should further consider the solutions provided in this paper and tailor these per
their needs, to come up with tailored strategies for overcoming their specific challenges.
Importantly, firms must focus on flawless execution of their defined strategies. If a firm
can implement recommended solutions flawlessly, it will transform its business and
prosper tremendously. Those firms that don’t take heed of the recommendations run
the risk of being left far behind by competition.
About the Authors
Anjani Kumar
Principal Consultant in the Consumer Banking practice of Infosys Limited
Anjani has ~15 years of IT, domain and process consulting experience. He has
deep knowledge and expertise on the Consumer Banking techno-function
aspects; with special interests in the Banking Channels and Analytics space.
Kamlesh Oswal
Associate Consultant in Capital Markets Practice of Infosys Limited
Kamlesh has 3.5+ years of experience in area of Wealth Management and Process
and Domain Consulting. As a part of professional responsibilities Kamlesh has
acquired exposure in Broker /Dealer function along with Wealth Management
and Credit Analysis. He has had extensive exposure to Equity Trading and has
keen interest in Derivative products.
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