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Asset managers need to develop their use of technology to continue attracting and retaining clients

Delphix, the market leader in data virtualisation, today released new research signalling that wealth managers need to digitise their operations to continue gaining and retaining clients.

The survey of the UK’s biggest wealth management firms, carried out by ComPeer, highlighted that 60 per cent of wealth managers admitted there is a threat from superior technology in appealing to generation Y, with all respondents either planning or implementing modernisation programmes. In particular, the front office and web portals were cited as a priority, with 80 per cent responding that digital is becoming an important hygiene factor as the technology involved in points of contact becomes a differentiator in attracting and retaining clients.

Parallel to these findings, 56 per cent of respondents are planning to increase their digital footprint to attract next-generation investors that have grown up with an inherent understanding of technology.

“Sophisticated investors are still willing to pay for expert knowledge and advice, so the human adviser will never be completely replaced. However, the rise of new distribution models and players – for example, robo-advisors such as Nutmeg – means the wealth management industry is on the cusp of change,” said Iain Chidgey, vice president, international sales, Delphix.  “In the near future, we are likely to witness a new generation of customers that want the flexibility of accessing and managing their portfolios online, in addition to the option of meeting advisers face-to-face.”

Driven by a desire to increase business efficiency (60 per cent), improve the customer experience (50 per cent) and increase client acquisition (20 per cent), all wealth management firms surveyed are prioritising modernisation programmes. Yet only half believe they have sufficient in-house skills to deliver planned transformations, with all respondents admitting that the sector is lagging behind in terms of the IT and systems driving innovation.

Currently, only one in five wealth management firms are using cloud technology while 80 per cent of respondents claim to be researching, implementing or using the cloud. When questioned about constraints to cloud migration, 60 per cent of firms cited cloud security and data protection fears and believe hosted or cloud services increase business risk.

Firms feel that improving data quality could speed up modernisation programmes with 60 per cent citing it as a hindrance to growth. A reliance on old technology (56 per cent) and internal culture (33 per cent) were also seen as factors slowing down automation projects, as the challenge of legacy systems and resource impacts the ability of wealth managers to support development.

“Typically, modernisation projects are data intensive in nature. For each application to be modernised, development, integration, QA and training all need access to data in their own environment. Yet, moving large datasets across application landscapes can take days or even weeks of coordinated effort,” added Chidgey. “To support modernisation initiatives, wealth managers need to rethink existing architectures and insert a new layer that can deliver secure data on demand to increase the pace of transformation while reducing risk.”

Increasingly, the survey indicates wealth managers need to find efficiencies by using automation to make changes more quickly and drive agility. The front office is the area where 67 per cent of firms are planning to increase automation, in addition to areas including capital gains tax, broker confirmation and reporting.

“By moving admin tasks to the middle or back office where they can be automated, investors can increase efficiency by spending their time managing money and gathering assets,” concluded Chidgey. “With upcoming regulatory changes, like MiFID II, automation also has the potential to provide greater transparency for clients. For example, enabling them to access costs and charges online, view valuations or portfolios in a dedicated portal and gain better access to research. Alternatively, automation can be used to integrate legacy systems, extract clean and accurate data or link with CRM systems to make the reporting process more efficient.”

Delphix commissioned ComPeer to investigate how UK wealth management firms are using innovation and transformation to attract and retain clients. ComPeer conducted interviews with C-level executives in firms offering wealth management services to private clients. In total, these firms represent approximately 24 per cent of the total wealth management industry assets under management in the UK.