As rapidly evolving technology, profitability pressure and customer driven experiences continue to shape the wealth management landscape, traditional financial services firms face an array of risks that are growing more prominent. If you don’t take measures to safeguard against these risks, the potential impact could put your firm at a competitive disadvantage. But viewing these increasing risks as an opportunity to drive change throughout your business offers much to gain in tomorrow’s wealth management world.
Risk #1: The rise of disruptive technologies
While disruptive technologies have recently garnered significant attention in the financial services industry, thanks to the rapid proliferation of fintech startups, disruption isn’t new. Motorways threatened the train lines, and on-demand TV content providers upset traditional television. Innovation is around every corner. A single microbrewery could probably never take down a national beer distributor, but a lot of those small breweries together can affect that major player’s distribution lines. The biggest threat from the recent growth of fintechs is their cultural ability to fail quickly and use that failure to adapt and move on. They embrace a culture of learning through failure without fear. The ability to pivot and persevere takes them to a potentially successful idea they never considered in the first place. Every successful firm experiences failure. Traditional financial services firms need to determine how to adopt this “no fear” approach to change and embrace new technology, while operating inside a heavily regulated environment.
Risk #2: The assumption of information security
Data security has evolved, and it’s not all about hackers and the threats they pose. You’re handling vast amounts of confidential data every day, and technology is rapidly accelerating the movement of this data. Data leaks are just as damaging as data breaches. That’s why you should treat information security as a continuous process—not just a onetime event. Taking a systemic approach and addressing risks in a prioritised order will benefit you and your customers. Controlling implementation within all areas of your organisation—from HR security to communications to software development—gets everyone on the same page. The business and technology sectors will begin speaking the same language, supporting the core that ensures security. When you implement a systemic strategy for information security, client confidence increases. This function cannot be undervalued or under-prioritised in today’s world.
Risk #3: The reality behind disparate systems
It can be all too easy to respond to the challenge of constantly evolving technology by continually adding new, best-of-breed applications to an existing infrastructure. As a result, you may find your firm managing a large number of disparate systems. The benefit of best-of-breed function points quickly becomes outweighed by disjointed data, manual workarounds and swivel chair processes that proliferate when connecting these disparate systems.
Further, the need for constant upgrades to systems in this type of environment can be daunting and expensive, as it costs more to support the structure and connectivity. You might feel as if you’re on a technology treadmill, struggling to keep pace with the non-stop process of managing so many applications and vendor relationships. Depending on the size of your business, you could be maintaining 30 to 50 (or more) separate systems, with each system requiring vendor management oversight and separate upgrades. The cost and maintenance cycle are complex and never-ending.
The decision to modernise a platform and consolidate disparate systems is significant. Be thoughtful and stay focused on the value of integration and improvement of your employees’ and customers’ holistic experience. If you’re replacing core mainframe legacy platforms, you’ve already succeeded by taking that “no fear” approach to adopting new technology. It’s also important to spend time identifying your unique value proposition within the markets you serve. What is it that your firm does better than anyone else? More important, do all of your disparate technologies enable your value? If not, why pay to maintain them? Focus on creating substantial differentiation for your customers, and consolidate systems that don’t support that value, and you can gain a better technological cost structure and seamless end-to-end experiences for your advisers and clients.
Risk #4: The (un) sustainable investment
Keeping pace with the technology treadmill requires a lot of money and management focus. Often overlooked, these costs can build up over sometimes not easily visible, and may not be aggregated in a single report. Once your firm stops to perform the analysis, you should be able to identify inefficiencies. Technology’s price tag can overwhelm the largest of organisations, and paying disparate systems a la carte can quickly run up the tech bill. Consolidating onto a unified platform creates a cohesive environment that brings cost benefits, and it creates transparency and simplicity in understanding cost drivers.
Risk #5: The challenge with adviser/client alignment
The adviser is the face of a wealth management company. It is often the trust an adviser builds with the client that promotes and differentiates a firm’s brand. When an adviser and the client each use different systems to view and manage customer wealth, the experience suffers. The adviser’s focus and productivity diminish when spending more time with daily administrative tasks in multiple systems. The effect here is a double-whammy—when both adviser and client are frustrated, your firm is liable to lose both. A fully integrated, modern platform provides a unified experience that takes customers from “prospect” all the way through the client lifecycle. When information is shared seamlessly across an organisation, from executive management to an adviser or portfolio manager to the end-customer, all stakeholders remain on the same page. It is imperative that you build your firm’s own unique strategies to safeguard against these risks, and it must start at the top. Prioritise at the highest organisational level and develop a systemic, holistic approach. These risks are here to stay, and they trigger a great opportunity for those willing to take a risk and get started on the future.
About the SEI Wealth PlatformSM
The SEI Wealth Platform (the Platform) is an outsourcing solution for wealth managers encompassing wealth processing services and wealth management programs, combined with business process expertise. With the Platform, SEI provides wealth management organisations with the infrastructure, operations, and administrative support necessary to capitalise on their strategic objectives in a constantly shifting market. The SEI Wealth Platform supports trading and transactions on 157 stock exchanges in 56 countries and 43 currencies, through the use of straight through processing and a single operating infrastructure environment. For more information, visit seic.com/ wealth platform. For professional investors only. The opinions in this document are from SEI only and should not be constituted as investment advice.