Over the space of more than ten years with Advent EMEA, I’ve had the opportunity to talk to a lot of wealth managers. Time and time again I run into people who say that IT infrastructure plays a pivotal role in their firm’s growth and profitability, yet not all of them have a Chief Technology Officer (CTO) or equivalent sitting on the board.
When I see lack of representation at the table, I see risk. In particular:
i) Regulation/compliance – Two-thirds of the wealth managers surveyed in the recent 2014 Technology and Operations Trends Report expect the pace and impact of regulatory change to increase over the next three years, further exacerbating the need to rapidly revise models and operations to cope with the reforms. Without a CTO on the board, firms risk missing out on ideas for leveragingtechnology to better support their regulatory reporting requirements.
ii) Cost control – The growing compliance burden, intensifying market competition, and profitability pressures turn cost control into a priority. Given more than half of a typical wealth manager’s costs are related to technology, I believe it’s vital firms have expert board-level input on how they can implement a more strategic and optimised approach to IT that enhances efficiency and productivity, and enables employees to provide a more professional service to clients.
iii) Client experience – High net worth individuals have on average over three banking relationships. Competition is fierce among financial firms, and the client experience wealth managers provide is being constantly compared against their peers. Technology is a key competitive differentiator, so it’s imperative firms identify ways to maximise the advantages it can bring.
As the 2014 Technology and Operations Trends Report pointed out: “At a time when tech-led models are gaining ground across markets and wealth is in younger hands than ever, digital is rapidly becoming the differentiator.”
Yet, for instance, less than half of UK firms currently use tablets in client meetings. Meanwhile, client reporting remains an acknowledged area of weakness at many firms.
Say an advisor were able to bring a tablet to their next client meeting, and generate relevant and intelligible custom reports with real-time portfolio and performance data, I’m confident the result would be more satisfied clients with a clearer sense of the value they receive. A board-level CTO would be better positioned to advocate for these sorts of technology improvements.
iv) Strategic direction – Wealth managers need a rigorous IT strategy and a clear understanding of what technology solutions are available if they are to plan for and make investments that can support their future business growth. Experience has taught me that without the expert input of a CTO, boards risk taking sub-optimal decisions that could lead to a loss of competitive edge and profitability underperformance.
According to the Technology and Operations Trends Report, almost 90% of the wealth managers believe technology could play a greater role. To me, the opportunities are evident and alluring: a reduced risk of regulatory censure, a more productive advisor force, an enhanced client experience … provided firms implement the right solutions, and leverage the capabilities effectively.
Furthermore, innovation is gathering pace. If organizations fail to make astute technology investments they will quickly lose out in the battle to win and retain business .
With so much at stake, doesn’t it make sense for the firm’s senior IT expert to have a voice at the board table?
2014 Technology and Operations Trends Report, produced by WealthBriefing/Weatherill Executive Consulting in association with Advent.
Martin Engdal is Market Strategist and Director of Solution Marketing at Advent EMEA. In this role, he has responsibility for strategic positioning of Advent’s solutions in EMEA and for driving Business Development efforts in Europe, Middle East and Africa.