Advisers plan to use tech to kick client experiences up a notch

In the results of its 2012 Wealth Management Study, announced last week, Ernst & Young LLP reported findings that will come as little surprise to many regular readers of InvestmentNews. Primarily, the fact that leveraging technology to provide a better experience for clients — as well as advisers — will be a strategic focus among wealth managers over the next two to five years.
Entitled “Enhancing the advisor and customer experience through technology,” this second annual installment of the study focused on current and future industry trends related to how wealth management firms manage their technology and operating platforms.
Firms included in the survey varied greatly. Assets under management, for example, ranged from “several billion” dollars to more than $500 billion. Similarly, there was large variability in terms of number of clients; 18 of the firms had more than 100,000 clients while 16 had fewer than that.
The firms represented a wide mix of clients including a mean of 26% among the mass market (less than $250,000 in investable assets), 35% core affluent ($250,000 to $2 million), 27% high net worth ($2 million to $20 million) and 12% ultra-high net worth (greater than $20 million).
I interviewed Marcelo Fava, a wealth management performance improvement leader and principal with Ernst & Young LLP, who said that the variety of firms involved ranged from small independent broker-dealers at one end of the spectrum to more than one wirehouse at the other, though he could not disclose specific firms.
“A lot of big firms have been stuck with a lot of legacy technology,” Mr. Fava said. Because of this, they have to be selective about where they plan to invest, since it would be completely impractical to contemplate replacing everything.
“Client facing technology — that’s where they want to make most of their investment,” he said of those interviewed in the study.
Despite budgets with already considerable resources dedicated to client services, survey findings indicated that less than one-third of firms currently feel that their client-related technology is effective.
And more than 75% of respondents said they have initiatives in place that are focused on increasing face time with clients.
“I would say that with all the adviser- and client-facing technology, we are going to see a big push on the fee-based platforms and these will be provided with tax optimization and presentation features if they do not already have them,” he said.
Titles of those surveyed at the firms involved mainly C-suite officials or were senior managing directors in large firms.
Over 75% of those surveyed said their firms have initiatives underway specific to increasing face time with clients. And improving mobile technology is viewed as a priority too. The idea being that such a strategy will not only serve advisers’ needs better but help free up their time.
Improved collaboration tools are of interest also with 75% planning to invest in mobile tools to increase adviser “collaboration and effectiveness.”
Among other findings, 38% of firms still see regulatory compliance issues as their main operational challenges. As a result, spending related to compliance and risk management is strong, with firms currently allocating 22% of their overall operating budget to these areas.
There is also a section dedicated to the Latin American wealth management sector. Firms in this part of the world spend a larger proportion of their operating budgets on trading support and trade order management than North American counterparts. The report’s authors attribute this to these firms’ generally smaller size as these are categories where economies-of-scale benefits are significant. While North American firms are focused on improving the client and adviser experience, Latin American wealth managers are focusing more on new product and new market growth.
“Wealth management firms are going to need to ask what is and is not working over the next few years and really prioritize their technology investments for advisers,” Mr. Fava said, adding that firms know they cannot afford everything but must seek to take a balanced approach to meeting the needs of different segments of their businesses.
There is a great deal more detail than is feasible to share when it comes to breaking down particular business segments and types of tools, much of which does not apply to registered investment advisory firms (which were not among those surveyed).
The published report encapsulates the responses from a survey given during phone interviews with 40 senior-level wealth management professionals across North America (30) and Latin America (10). Surveys generally took 45 minutes to administer and record.
For more information on the survey and its results visit the relevant Ernst & Young pages online.

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