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Credit crisis and global meltdown have leveraged high net worth individuals (HNWIs) to new levels of consciousness with focus on risk and returns. HNWIs have become increasingly sophisticated, globally aware, and proactive with their investments. Today, the majority of their assets come from business ownership and other proactive wealth generation activities. These individuals are as active in building their wealth as they are in investing it.

This new generation of HNWIs will require wealth management services to be more dynamic, sophisticated, and diverse. Firms will need to have IT architectures, governance structures, and service models that breakdown the traditional boundaries between asset classes. CIOs of tomorrow will have to take a leadership roles in becoming the facilitators for this change.

Gone are the days for standalone product centric strategies. Tomorrows need is Integrated financial solution supported with stable, easy- to-use technology. To effectively target the mass affluent segment, service offerings must incorporate numerous transactional and investment products and services with a strong advisory component. Effective use of technology is the differentiating factor for success in the future vs failed attempts in the past.

Serving Clients
Tomorrows mantra for most wealth management firms, or any firms that service the wealth management sector, is to get closer to their clients and knowing more about their clients. Today financial institutions are increasing their emphasis on maximizing existing client revenue. Vigilant CIOs can see revenue generation, client retention as business drivers for technological investment in new and existing distribution channels. Direct low cost channelsInternet, CRM systems, front office applications, specialized effective call centers/help desks are tools to improve productivity for years to come. Providing high quality self-service mechanisms is a prerequisite to efficiently serve this segment, which will be characterized by higher volumes and lower asset sizes compared to the traditional high net worth and ultra high net worth segments. Throughout this crisis, one of the differentiating factors among wealth management companies was those who reached out to clients. CRM platform and voice technology played a pivotal role. There are a lot of ways to reach out to clients. I have seen a very solid dichotomy between those firms that have reached out to clients and communicated with them regularly and those that havent. This has resulted in real outflow of assets from firms that have not communicated with clients. I see this as a necessity and realize that firms need to invest in technology to communicate with clients.

Investors Needs

The view that most investors have now is security and understanding what is out there, having to be more measured in the way they view the markets, and understanding the risks that are posed to them. Regulatory compliance is the top business priority along with business growth. I can predict that a large chunk of IT budgets are being sucked by regulatory compliance readiness requirements. As economic indicators strengthen further and strong market conditions becomes a reality, vast majority of firms will increase IT spend and usage of technology to increase their reach and access to right information at the right time.

Today, most wealth management firms follow a common process. How well firms implement this process from technology to personnel has significant impact on success in the increasingly competitive wealth management space. A well-implemented wealth management process can increase the differentiating factors of the firm to the market by:

• Improving client service, from reporting to call centers.
• Retaining and attracting top advisor and/or customer service talent.
• Reducing operational and administrative inefficiencies.

Technology in Use
Traditionally, different technologies have been used at each step in the wealth management process. For example, a firm might have a particular brokerage processing provider, but use a different application for performance reporting and yet another for proposal generation. Each of these applications, in turn, has its own data model and notion of the client, advisor and firm.

While the original intent of assembling best-of-breed functionality as point solutions seemed the right choice, the result of co-mingled technology generally disappoints all those it affects. The two biggest shortcomings of this approach are:

• Data Continuity: Disparate technology results in little or no data continuity across systems, perpetuating the swivel chair environment of reading data from one screen to key into another. Errors and inconsistencies take a significant toll on administrative efficiency and customer satisfaction. While some firms are still in pursuit of external aggregation, most cannot consolidate their own systems to a common household view.
• Workflow Continuity: An advisor often has seven or more applications to manage a client, rather than a single, cohesive desktop. Scalability is often limited to time, the advisor has to load information from multiple systems into Excel to answer the inevitable sonetimes the client often asks me that how am I doing?. Collaboration is limited, as most of these point solutions are desktop based and not readily distributed via Internet.

In order to implement a more dynamic client servicing model, financial service providers will have to significantly improve and update their IT Through sophisticated and agile IT architecture, armed with data gathering and data analysis capabilities, firms will have a better understanding of clients changing needs.

For success in future one needs to have solution that embodies portfolio management, relationship management and customer administration, delivering on a unique value proposition of integrated applications leveraging a common, holistic data set. Solution in my mind is a composition of four distinct, yet highly synergetic, application tiers: the Boundary Layer, the Data Model, the Application Layer and the Interface Layer.

Wheres the Gold?
I am seeing the future trend. In terms of predictive marketing, real time, centralization, web services, outsourcing, global portfolio management and hedge fund administration.

• Predictive Marketing: To grow the wealth management business profitably, wealth managers must have CRM capabilities that are highly analytical in using customer data to draw sophisticated insight and predictions around profiling and targeting profitable customer propositions. Wealth managers need to customize offerings and deliver value within efficient service models that balance costly resources against a high quality customer experience. Feedback on marketing campaigns, customer interactions, and customer transaction insights is crucial to the continual improvement of the success of the CRM analytics and predictive trending forecast.
• Real-Time: As wealthy customers demand more frequent and a higher quality of guidance from their financial advisors, and become more active in the investment processes and performance measurement of their portfolios, the need for real-time access to information becomes critical. Strong data management with highly integrated feeds from internal and external data sources will be essential for real-time wealth management platform. Real-time security pricing information greatly enhances the effectiveness and value of risk metrics and supports more informed, and better timed investment decisions.
• Centralization: Going forward, wealth managers will need to institutionalize their knowledge about customers and their needs to allow for more timely advice, more consistency of client servicing across advisors, and a better customer experience in each of the access channels. More institutionalized customer information will also support the replacement of existing high-cost, decentralized delivery models with lower-cost centralized virtual models, thereby making more personal service available to more customers at a lower cost.
• Web Services: Wealth managers and wealth management servicing providers are making their platforms available to the wealthy end users and Independent Financial Advisors (IFAs) through private-labeled-hosted web services applications that allow an investor to directly collaborate with an advisor. For example, advisors can use a third party secure publishing platform which handles a variety of document formats such as HTML, Word, Excel and PDF, and is integrated with the wealth management processing platform.
• Outsourcing: The cost of developing and maintaining wealth management platforms and operations is a significant component of the overall cost base of the wealth manager. In addition, there are many wealth managers who are looking to develop integrated platforms with the characteristics described above. Integrated platforms with sophisticated wealth management functionality would take many years to set up, and require an enormous investment, along with the cost of maintaining them. Therefore, many wealth managers are more aggressively outsourcing large portions of their middle and back office technology and processes such as security processing, settlement, trust accounting, reconciliation, and performance reporting.
• Global Portfolio Management: Some of the wealth management service providers to HNW individuals need platforms that support capabilities relating to cross-boarder diversification of portfolios, multi-language/currency/accounting/and cross-boarder regulatory concerns, and can monitor and compare the portfolios against relevant regional benchmarks. Portfolios must be able to reflect these global differences when managing positions and reporting holdings, tax liability, and performance.
• Hedge Fund Administration: With the growing use of hedge funds and structured products in the portfolios of HNW individuals, wealth management platforms are adding the capability to process and report on these assets. More complex hedging strategies and derivative products are often processed using different applications that must be integrated into the overall wealth management platform.

To summarize the winning formula the right service model, based on well-toned business services for a distinct wealth management segment, must be enabled with a low-cost technology platform which provides both a natural user interface for self-directing wealth management activities and high-touch talented advisor support when needed. It is with this new generation of smart wealth management platform that wealth managers will be able to realize their share of the huge growth opportunities and achieve profitability at the desired levels.

Yateen Chodnekar
The author is head of technology, real estate and corporate services, Mangal Keshav Group, Bank of Muscat
maildqindia@cybermedia.co.in

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