Private banks have traditionally been reluctant to embrace new technology, but in today’s digital era they no longer have any choice. Modern integrated systems are increasingly a key differentiating factor, as they enhance customer service, boost advisers’ productivity and enable them to generate higher revenue streams. Moreover, regulation demands much higher transparency from wealth managers when they liase with private investors, which obsolete technology or Excel spreadsheets certainly cannot provide.
“Private banks increasingly spend on integrated advisory workstations, where in a single space advisers have customer relationship management and trade order management capabilities, client on-boarding technology and social media,” says Brendan Clarke, head of the wealth management practice at consultancy CapGemini in the US.
New technology also frees up advisers’ time from repetitive, administrative tasks so they can focus on advising clients. Within bigger organisations, technology is vital to boost cross-selling. “One of the big challenges for the wealth management industry is that institutions are very siloed, there is not visibility or sharing of information across different business units,” says Mr Clarke. Wealth managers must capitalise on their ability to cross-sell from equities to fixed income to commodities to multi-currencies.
“Modern systems ensure a single version of the truth, as all data is stored in one place and every user will address the same data,” explains Peter Dingomal, head of UK business development at Swiss banking software company Avaloq. “Moreover, they provide full system auditability, reinforcing compliance capabilities of banks, who can monitor who did what and when. Workflow processes are benchmarked and performance statistics allow banks to optimise internal processes.”
Increased regulatory pressure is a big driver to investments in technology, in particular in the front office space, notes Gary Linieres, founding director at Third Financial Software in the UK. Private banks are asked to show transparency in how they manage client assets, they must know their customers and treat them fairly. Some institutions unable to comply are getting fined a significant amount of money from regulators, he states.
Operational efficiency and cost reduction is clearly an important driver, as new systems enable private banks to rebalance portfolios across a large number of clients, while maintaining compliance and without taking on additional staff. Cost savings should then be passed down to customers.
Customer relationship management (CRM) systems also enable private banks to properly segment clients. Although every private bank is looking to move further up the wealth pyramid, the pool of ultra rich people is fairly limited. Institutions are starting to dip down into the bigger pool of less wealthy clients with the idea of trying to get hold of them before they potentially become high or ultra high net worth (UHNW) customers.
Client spotting
Large banking groups that have retail platforms can use CRM systems to spot the affluent clients and sell them their private banking products and services.
“Having an integrated system makes it much easier for a bank to expand its outreach to different client segments,” says Avaloq's Mr Dingomal. “The additional effort for on-boarding target affluent customers is much smaller than the old legacy spaghetti scenario. Today’s affluent clients could be tomorrow’s UHNW, so it makes sense to use the tools available to offer a better service via the system to the affluent segment.”
Manual errors are also reduced significantly. “A fully-integrated, front-to-back office system allows for complete tractability of any order, full automation and control of the process,” he says. This enables a very high STP rate, consistent handling of orders and a reduced error rate, as it reduces manual intervention.
 |
Clients themselves are demanding higher levels of service, such as consolidated reporting. “Most private banks dealing with ultra high net worth clients are realising that in order to compete, they need to be able to provide aggregated portfolio reporting,” explains Norman Jones, CEO, at WealthTouch in the US.
“This means providing a dashboard on their entire wealth, whether their assets are sitting at that bank or other banks or managers.”
Ultra wealthy individuals and family offices have very complex portfolios. Having all their wealth information aggregated on one single platform allow them to know immediately for example their exposure to a certain security or how much they are worth today, he explains.
Family offices have become aware that just using Excel spreadsheets to pull out all the information related to their investments at the end of the month takes a long time, it is often an inaccurate process, being very manual and prone to error, and also extremely expensive, says Mr Jones.
“Private banks have got a huge incentive to provide this service to this segment, as it is a very sticky proposition,” he explains. It offers them the opportunity to have an additional conversation with the client and, more importantly, to increase their share of wallet.
