"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
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.
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.
In general, the Latin American wealth management market is at a different stage of evolution than the wealth management firms in
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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