overview: wealth management


Wealth


IBS Journal July – August 2015


Traditional depth and scope of wealth management Levels of products and services at various customer segments


Integrated wealth advisory Family office


Wealth advisory Private wealth management Lower HNWI


Financial planning Wealth management


Budget and cash balances Investment diversification Event-driven planning


Discretionary asset management Investment advisory


Mass Affluent Asset management Manager selection and oversight Performance measurement


Sophistication Source: Cedar research It might be that disappointing results


of previous back office projects is in part to blame for the shift. Patrick Engdal, director of product marketing for EMEA at Advent Software, says, ‘the focus has tra- ditionally been on the back office. This has been so for many years, however not with great success if measured on efficiencies gained and operational risk levels. In the last twelve to 18 months focus is shifting towards front office solutions as it becomes very apparent that without a proper solu- tion there is a high risk of falling behind and out of business.’ From a core operations point of view,


after falling out of favour for some time, Sage’s Freymond sees a resurgence in the need to automate the processing of deriv- atives and structured products. This trend is stronger among Sage’s clients in South- East Asia and, to a lesser extent, in the Mid- dle East, than in Europe. ‘Automation of the management of derivatives and structured products requires dedicated features at all steps of the workflow: order capture, exe- cution, processing and settlement, fees, accounting, corporate actions, reporting and risk management,’ he says. ‘The push towards derivatives and more complex instruments in general is a consequence of the generally high volatility and low yields that the markets have been facing for several years now. They appear to asset managers as a solution to respond to the client’s requirement to generate returns despite the current market conditions.’ Avaloq’s head of marketing, Thibaut


Jacquet-Lagrèze, also sees product innova- tion on the way. ‘In particular, we see inter- esting innovation in structured products to automate the processing of the full value chain from price discovery to creation and processing of events. This democratises and expands the offering of ad hoc struc-


24


tured products to a wider client segment at lower costs.’ Perhaps the focus is swinging back


somewhat to the back-end. Freymond says, ‘although there are more incentives to focus on front-end technologies as they are perceived to yield faster returns on investment, a lot of institutions still run back-end platforms that are expensive to maintain and don’t provide satisfactory levels of automation. A number of back- end systems were built as silos, focusing on certain types of financial instruments. This design is a legacy of a time when process- ing capacity was expensive and limited. Specialisation was perceived to be provid- ing the most efficient alternative then.’ This time around, ‘the newer systems integrate straight-through front-to-back operations for all instrument types. Such designs cut costs significantly by reducing the need for interfaces and reconciliation, they are eas- ier to use, require less training and require less hardware and a generally cheaper infrastructure.’ He concludes, ‘the long- term trend seems to be that back-ends are becoming a commodity as institutions can now get very high levels of automa- tion at affordable costs. As they progres- sively move to such modern technologies, they will be in a position to invest in the real differentiators. These are client facing technologies and the front technological innovations that allow them to extend the breadth of their services.’ ERI’s Hacking concurs. ‘Organisations


have, on the whole, been more focused on front-end technologies in the last few years, and this remains a focus for many as there is still a huge gap between the “top in class” and the rest of the industry. Nev- ertheless many are also realising that the systems behind the front-end are also criti- cal if they are to avoid image- critical issues


© IBS Intelligence 2015 www.ibsintelligence.com


and also have a cost- effective operating model. We are now, and would expect to see this continuing, with a shift from almost exclusively investing in front-end technologies to a re-balancing of invest- ments to try to ensure that the back-end matches the efficiencies and changes being introduced in the front.’ Hacking advises, ‘instead of splitting


back and front office systems and func- tions, COOs and CTOs should think more in terms of end-to-end processes, from the idea of a financial analyst to the sale of the positions, from a potential client identifica- tion to the closing of its account, and so on’. In the long-term, whatever the model,


Jacquet-Lagrèze believes that you cannot have true front-end digital innovation with- out overhauling the back office. He sees many private banks and wealth manag- ers changing their core banking systems to decrease costs and improve efficiency in the medium term. ‘However, while most of the banks see the benefit of such a pro- gramme to achieve a return on investment within two to three years, many are still postponing the investment to focus on the digital channel strategy in the very short term. We deeply believe that implement- ing client digital channels that are not well integrated to a real-time core processing engine will lead to poor results both in terms of client experience and in terms of the overall spending in the medium term (two to three years). Banks that choose not to postpone the investment in the core processing system and implement digital channel strategy on a strong modern foun- dation will benefit from lower total cost of ownership, higher efficiency and better cli- ent experience.’ Jacquet-Lagrèze feels that much of


the investment in front-end technologies is being driven by short-term strategies as


Upper HNWI Tax planning Estate planning Financial planning


Ultra HNWI Integrated Planning Investment planning Trusteeship


Risk management Lifestyle management Family continuity


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