Software company, Advent, recently hosted the first in a series of webinars focused on how wealth managers are overhauling their systems to empower advisers.
Speakers
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Martin Engdal – Market strategist and director of Solution Marketing, Advent Software EMEA
Ian Woodhouse – Director within PwC’s EMEA private banking and wealth management practice
Daryl Roxburgh – Global head, BITA Risk
The onslaught of regulatory change continues, but there are still proactive moves wealth managers can make to empower their advisers and protect profitability, senior executives said at a recent Advent event.
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By GlobalDataIt’s no secret that increased regulation is hitting margins hard. What is more striking is the divergence in how well firms are coping with this. Ian Woodhouse, who leads PwC’s biennial private banking survey, revealed that while some European wealth managers report cost-income ratios in the 80-90% range others have achieved figures in the low 60s (the global average for 2013 was 65%). Additionally, European cost-income ratios are higher than the global average and revenue growth lower – although again with significant variation. "There are big differences between players," says Woodhouse. "Some are achieving very low revenue growth, some are reporting high single digit growth and others double digit growth. The pattern in Europe is uneven."
European participants – who are facing new local, regional and global rules – told PwC that they are at an inflection point. Regulatory change is top of the list of external factors reshaping the industry and its impact is rippling through firms while also interplaying with other disruptive trends. The result, according to Woodhouse, is "high and increasing" pressure on the front-office and advisers, most notably in the loss of client-facing time to regulatory tasks. Correspondingly, PwC found adviser productivity fell 15% between 2011 and 2013. "This lack of adviser productivity and client-facing time will be the battleground going forward," says Woodhouse.
Martin Engdal remarked that advisers’ time is expensive so must be deployed where it will deliver most value; yet many are being hampered by fragmented systems and processes. According to Daryl Roxburgh, the pace of regulatory change is to blame as it has forced stop gap measures which are now holding firms back. Working with wealth managers in the UK and internationally, Roxburgh has seen myriad common flaws. "We have found a lot of Excel, downloads, cutting and pasting, inconsistent data sources, re-keying of data and managers spending hours with PowerPoint slide packs taking data from different areas," he says. "Whilst these have plugged the gap of complying with the regulator they’ve actually started creating problems for these organisations. They realise that they’re inefficient, they’re inaccurate through re-keying and they’re disconnected. There’s no flow from one system to the next and therefore no audit trail."
Stripping out these inefficiencies is going to be paramount if advisers are to be facilitated in doing what they do best: providing high-touch service, building trust and deepening relationships. Engdal highlighted that advisers are "naturally entrepreneurial people, who are certainly asked to be so by employers and gather more assets and clients". However, he questioned whether they are empowered to do this. "Are they being provided with the tools they need to do more with less? I’d argue that in many cases they aren’t," he says.
Encouragingly, there is a growing focus on helping advisers more fully leverage their expertise, networks and time so they can win more business. Engdal told of how a client CEO recently said to him, "My number one concern is: how do I empower my advisers?" This executive was looking particularly at cutting the time advisers have to spend preparing for client meetings – on average two and a half hours at his firm – and this was in fact a recurring theme throughout the panel discussion. Roxburgh noted that some advisers are spending four hours preparing for meetings, while Engdal asked the attendees to imagine the impact on their firm’s profitability if they were able to cut preparation time by half.
Enhanced portfolio management, reporting and risk-profiling tools generate efficiency savings, but the panel were keen to emphasise broader benefits around providing a more professional service and fostering trust. Woodhouse noted that on average wealth managers believe they have achieved trusted adviser status with only 56% of their clients and that slicker servicing is key to upping this – particularly when 70% of clients have two or more relationships in place and comparisons are easy to make. Clients – as well as regulators – are asking much tougher questions about how portfolios are constructed and managed. Impeccable record-keeping, and the transparency afforded by real-time dynamic data are now what both sides demand.
For their part, wealth managers should also be on the same quest, the panel said. Demonstrating the value they offer over selfdirected or other low-cost models is crucial at a time when fee transparency is high on the agenda internationally. Furthermore, forward-thinking firms will be thinking about how they can actually turn the changes being forced on them to their competitive advantage. Eliminating the inefficiencies arising from siloed, endlessly re-keyed data, is just the start of the journey to efficiency, says Roxburgh. Rather, wealth managers should fully leverage dynamic data on clients’ risk profiles, portfolios and preferences to create rich management information which will in turn enhance the client experience and ultimately growth. Regulation might be forcing technology investment, but sustainable future growth depends on getting the most out of that spend, the panel concluded.
