Wealth Managers Increase Focus and Spending on Technology to Improve Advisor Experience

Apr 15, 2013, 12:00 ET from Ernst & Young LLP

NEW YORK, April 15, 2013 /PRNewswire/ -- Leveraging technology to provide a better experience for clients and advisors will be the strategic focus among wealth managers over the next two to five years, according to Ernst & Young LLP's wealth management survey, Enhancing the advisor and customer experience through technology: 2012 Americas wealth management study, released today. Though wealth management firms already dedicate a significant portion of their budgets to client services, the survey finds that less than one-third of firms currently feel that their client-related technology is effective. Going forward, firms are focusing on designing segment-specific servicing models that provide different levels of high-quality service.

"The takeaway here is for wealth management firms to take a deeper dive into their current technology models and ascertain return on investment and evaluate total cost of ownership," says Marcelo Fava, principal at Ernst & Young LLP. "Wealth management firms should ask themselves: What's working? What isn't working? Is there opportunity here to have a more dedicated technology organization for our advisors? There is no silver bullet. Firms need to focus on balancing the benefits and limitations of each model when making sourcing decisions and then successfully roll out and integrate capabilities into their existing environment."

The 2012 Wealth Management Survey contains the views of 40 senior-level wealth management professionals across North America and Latin America. They hold titles such as chief operating officer, chief Information officer, chief Administrative officer and vice president of Strategic Planning. Each represents a wealth management firm with assets under management that vary from several billion US dollars to over US$500 billion.

Advisor effectiveness and mobile technology

Firms are prioritizing spend on advisors and improving their books of business. In particular, they are leveraging technology and automation to allow financial advisors to be more effective and spend more time with clients. Over 75% of wealth management firms surveyed said that they have initiatives in place focused on increasing face time with clients as it has become clear that the benefit of adding support resources quickly outweighs the cost.

What's more, this trend of enhancing technology, specifically mobile technology, to free up advisors' time is consistent across all firms, regardless of the number of clients and assets under management. In fact, approximately 75% of wealth management firms surveyed plan to invest in mobile tools to increase advisor collaboration and effectiveness. Larger firms generally plan to use mobile to deepen client relationships by providing greater access to information, while smaller firms plan to use mobile applications to introduce new products and services and increase sales.

Maximizing ROI

Proprietary tools are especially dominant in client-related functions. In fact, almost 80% of client and advisor-related technologies are proprietary. Yet 40% of survey respondents said their client technology is ineffective.

In terms of the overall technology organizational structure, the size of the wealth management firm is clearly correlated to its technology model. Larger firms are far more likely to have a dedicated technology organization, while smaller firms rely heavily on a shared service model. At the same time, more dedicated structures seem to rank higher in perceived effectiveness, while shared services models rank the lowest.

Compliance and regulatory requirements are here to stay

Though wealth management firms' strategic emphasis is clearly devoted to client and advisor experience through enhanced technology, an increased focus on regulation, compliance and risk management is also critical and one of the most important near-term challenges that wealth management firms face. Thirty-eight percent 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.

Latin America

In general, the Latin American wealth management market is at a different stage of evolution than the wealth management firms in North America. Though Latin American firms have been traditionally limited by the market's size, and are therefore smaller than their North American counterparts, the socioeconomic changes the region is experiencing will present a significant opportunity for wealth managers. The challenge will be to profitably capitalize on this opportunity, overcoming hurdles due to limited scale.

Latin American wealth managers spend a larger proportion of their operating budgets on trading support and trade order management than their North American counterparts. This can be attributed to their smaller size as these are categories where economies-of-scale benefits are significant, but this increased spend may come at the expense of client service support and investment management support categories. While North American firms are focused on improving the client and advisor experience, Latin American wealth managers are focusing more on new product and new market growth.

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Nearly 35,000 Ernst & Young financial services professionals around the world provide integrated assurance, tax, transaction and advisory services to our asset management, banking, capital markets and insurance clients. In the Americas, Ernst & Young is the only public accounting organization with a separate business unit dedicated to the financial services marketplace. Created in 2000, the Americas Financial Services Office practices today include more than 4,000 professionals at member firms in over 50 locations throughout the US, the Caribbean and Latin America.

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