The Eleventh Tech And Ops Research Report 2023 by ClearView Financial Media

NOW IN ITS ELEVENTH ANNUAL EDITION

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023 PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

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CONTENTS FOREWORD & CONTRIBUTORS ......................................................................................................................

EXECUTIVE SUMMARY ...................................................................................................................................

SURVEY FINDINGS AND THE EXPERTS’ ASSESSMENT:

DIGITISATION AS PART OF THE CLIENT JOURNEY ......................................................................

AUTOMATION AS A COMPETITIVE DIFFERENTIATOR ...................................................................

DATA INTEGRITY - THE STRUGGLE FOR DATA QUALITY ............................................................ 11

LEVERAGING CLIENT CUSTODIAL DATA TO OPTIMISE INVESTMENT STRATEGIES ..................... 13

OUTSOURCED SERVICES .............................................................................................................. 14

EXPANDING AND DIVERSIFIED TECHNOLOGY BUDGETS ............................................................. 17

ESG INVESTMENTS ON THE RISE ................................................................................................. 18

ARE WE SEEING THE RISE OF AI IN WEALTH MANAGEMENT? .................................................... 20

GENERATIVE AI – WHAT IS THE CUMULATIVE VALUE TO WM? ................................................. 22

A STRATEGIC APPROACH TO MANAGING OPERATIONS, PEOPLE AND TECHNOLOGY ............... 23

CONCLUSION & REFERENCES .......................................................................................................................... 24 METHODOLOGY ................................................................................................................................................ 25 SS&C ADVENT’S VIEW .................................................................................................................................... 26

FOREWORD & CONTRIBUTORS This eleventh edition of the Technology & Operations Trends in Wealth Management report, produced with SS&C Advent as our research Partner, captures the industry’s challenges, thoughts, strategies and actions as wealth management firms navigate an increasingly complex environment.

The question facing the industry now is how to merge the business and tech agenda while staying abreast of technology to create the right digital customer experiences for the increasingly tech-savvy client base and bolster assets under management.

This year’s study casts a wider net, representing firms globally from across Asia-Pacific, North America, Latin America, Europe and the Middle East. With learnings and observations from C-suite leaders and technology experts from private banks, family offices and fund managers across the industry, we have assembled what we believe to be one of our most timely and insightful reports.

The possibilities in wealth management operations presented by this dynamic technology landscape have never been more exciting. This publication looks forward to continuing to trace the industry’s transformation for many years to come.

The recent advances in technology have been nothing short of breathtaking. They have not only accelerated the pace of innovation but also introduced new operating models and trading environments. The result is a renewed focus on the wealth management digital roadmap and its profound impact on operations, client experiences and expectations. Our approach for this report was all-encompassing. We spoke to leaders and experts to understand the strategies employed. We examined real-world examples. We also gathered insights from an online global survey which provided the back story for our conversations and analysis. What we found was that staying ahead of the curve is as vital as fine-tuning every aspect of the business to ensure peak performance and an optimal client journey. The current environment is complex. As this study reports, progress continues in the digitisation of wealth management, but much work remains to be done. Transformation is taking place at all levels, reshaping our understanding of operational efficiency. There is a productivity uplift through digital transformation. Many firms are already well ahead in their planning and investments, seeing improved benefits and efficiencies across operations and client servicing. In addition, AI-driven algorithms, machine learning, and big data analytics are redefining the way value is delivered to clients. Yet not every firm or institution lies at the same position on the technology grid. Firms are still looking at use cases and mapping out digital journeys. Their focus is on identifying where technology could add the most value to operations and the digital client journey without any impact on client service quality. This 11th study reflects this environment. It shows that the industry is still learning and there are many uncertainties, particularly around the increased risk across operations. Data is a critical factor, as is the right infrastructure required to optimise the client experience, increase productivity and comply with regulations. Equally important is the issue of trust: trust in the technology, trust in governance and trust in the ecosystem.

Stephen Harris CEO - ClearView Financial Media Publisher, WealthBriefing, WealthBriefingAsia and Family Wealth Report

CONTRIBUTORS WealthBriefing and SS&C Advent extend their warmest thanks to all the professionals who took the time to participate in our global survey, as well as to the following experts who kindly contributed their thoughts on its findings and shared research by their own consultancies: Edouard Legrand Laurence Mandrile-Aguirre

Chief Digital & Data Officer, BNP Paribas Asset Management Global Market Manager (GMM) Switzerland and Monaco; Managing Director - UHNW and Family Offices, Citi

Carolyn Christians Director of Business Operations, Delegate Advisors Benoit Barbereau

Group Chief Operating Officer, EDMOND DE ROTHSCHILD (SUISSE) S.A.

Vipul Kapur

Managing Director, Head of Private Banking, Mashreq Bank

Jürgen Pulm

Chief Digital Information Officer Wealth Business, NatWest Group; CEO, NatWest Services (Switzerland) Ltd

Michael Wagner

Co-Founder and Chief Operating Officer, Omnia Family Wealth

Vibhaw Arya

Chief Operating Officer, Shufro Rose

Steve Young

Director - EMEA & APAC, SS&C Advent

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXECUTIVE SUMMARY 1. Our eleventh global study confirms that institutions are narrowing gaps, and making significant strides in their progress on their digital roadmaps, albeit with a watchful eye on the impact of emerging technologies on client experiences and overall expectations. 2. Digitisation: This year, following the substantial progress seen in 2022, respondents gave their firms an average score of 4.7 out of 7. This is a slight shift from 4.9 in 2022 and 5.2 in 2021 but in line with the pace of progress. Overall, 85 per cent reported that their firms are showing good and acceptable progress against expectations while 6.5 per cent of respondents felt able to give their firm a full rating for digitisation. 3. Regional Differences: While the digitisation gap between the type of organisations appears to be closing, there is still a regional difference with a significant variation in digitisation. This year, we extended the study to include MENA and Latin America. From among the eight regions being examined, Swiss-based firms appear to be slightly ahead of those in North America, closely followed by firms in Europe (except Switzerland) and Asia-Pacific. 4. Automation: Likewise, there is a similar acknowledgement of both progress achieved and work still to do on portfolio management automation. On average, institutions are reporting that 65.3 per cent are making headway on maximising automation in portfolio construction and rebalancing, motoring ahead from the 58 per cent scored in the previous year. 5. Data: Data continues to fuel the effectiveness and success of the automation of processes and digitisation of the client journey. And yet, the industry is still facing challenges related to data weaknesses. When asked to rate the reliability, timeliness and accessibility of data at their organisation, respondents gave an average score of 65 per cent, an increase of 10 percentage points from the previous year. Even the best-rated firms, wealth managers and private banks still only attained between 64 per cent and 65 per cent. There clearly is still a way to go. 6. As a result, improved leveraging of client custodial data in automated processes is likely to feature strongly across the sector for the years to come. With an average score of 70 per cent and strong scores from service providers, accountants, multi-family offices, wealth managers, insurance and fund managers, the industry has engaged in the adoption of automated data processing applications, digital transformation and migration to cloud and SAAS.

7. Tech Budget: The major part of this year’s respondents (78 per cent) are confident that their firm’s tech budget will increase over the coming three years, rising even higher than the average score in 2022 of 65 per cent. At the top of that leaderboard driving that score of 65 per cent are wealth management firms, followed closely by multi-family offices. Just 3.0 per cent of institutions were looking at cuts in spend, while 15.2 per cent reported that budgets would remain the same. This score reflects the ongoing importance of tech as an enabler and a driver for automation and innovation in future offers. 8. Outsourced Services: The question facing most CTOs is whether to ‘buy or build’. That same debate relates to outsourced services, and is especially relevant for independent financial advisors, or firms and institutions in retail. While all cohorts consider productivity applications as viable candidates for ‘buying in’ services, core wealth management applications are still considered proprietary ‘build’ projects by private banks, family offices and firms dealing with Ultra-High-Net-Worth clients. 9. Environmental, Social and Governance (ESG): Changing regulations and disclosure requirements are now par for the course, impacting governance and operations. Looking at the state of ESG integration into firms’ investment processes, the findings indicate that there is room for improvement. A majority of 57 per cent are well on their way to embedding ESG processes; over 30 per cent have ESG fully embedded while 3.1 per cent have reported that they have a leading ESG investment process in place. 10. Artificial Intelligence and Machine Learning: Artificial Intelligence (AI) is creating waves in the industry following the rollout of OpenAI’s GPT-4 and Alphabet Inc’s Bard. Early play and experimentation with Generative AI models, natural language processing (NLP) and machine learning (ML) processes can be seen across regions and institutions. Strategically, firms are putting together use cases to see how their solutions could be improved through operations, products and services powered by generative AI and ML. 11. Strategy: To fully capitalise on emerging technologies, especially those driving automation in processes and client servicing, firms and institutions must clearly define their digital journeys. Increasing regulations, rapid advances in technology, heightened cybersecurity and client digital expectations are creating gaps and constraints in solutions, operations and platforms as they seek to create the technologically-enabled client-centric, advise-oriented business model.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

DIGITISATION AS PART OF THE CLIENT JOURNEY

In recent years, digitisation has evolved into a key driver of change. Combining industry trends, emerging technologies, automated processes and a wider demand for democratised products and services, the requirement for digital platforms and client journeys has prioritised the need for digitisation across the industry. This is taking place at varying levels across regions, depending on the size and structure of the firms and institutions and the nature of their client bases. This year, following on from last year’s significant progress which showed a certain momentum of activity, respondents gave their firms an average score of 4.7 out of 7. This is a slight shift

EXHIBIT 1

Level of digitisation achieved across the business 2023

from the score of 4.9 in 2022, and 5.2 in 2021. It shows that the progress has continued at pace, even if it has slowed down slightly in response to global economic volatility and rising costs across the board. Overall, less than 10 per cent - just 6.5 per cent - of respondents felt able to give their firm a full score for digitisation, although 85 per cent reported that their firms are showing good and acceptable progress against expectations. What is increasingly clear is a strong confidence within the industry that firms and institutions are progressing their digital client journeys while keeping pace with technological advancements.

PRIVATE BANK

5.0

AVERAGE

4.9

MULTI-FAMILY OFFICE

4.9 4.8

ASSET MANAGER

4.7

WEALTH MANAGER Firms/Institutions Likert Scale Scores, with the highest score being 7. Base Year 2023

4.5

FUND MANAGER 0.0

0.5

1.0

2.5

2.0

1.5

3.0

3.5

4.5

5.0

5.5

2021

2022

2023

4.0

EXHIBIT 2

Level of digitisation achieved across the business 2021 - 2023 7.0 6.0 5.0

4.6

4.0

4.6

4.2

4.5

4.9

4.6

4.7

5.3

4.9

4.7

4.9

5.0

4.8

4.9

5.0

4.9

5.3

6.0

5.2

4.9

3.0 2.0 1.0 0.0

MULTI-FAMILY OFFICE

FUND MANAGER

WEALTH MANAGER

AVERAGE

ASSET MANAGER

PRIVATE BANK

PRIVATE CLIENT

Comparison of scores for Firms/Institutions Likert Scale Scores, with the highest score being 7. Base Year 2021-2023

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXHIBIT 3

Digitisation across the various regions 2023 7.0

6.0

5.2

5.0

3.9

3.5

4.0

3.0

3.0 2.0 1.0 0.0

NORTH AMERICA

SWITZERLAND

ASIAPACIFIC

LATINAMERICA

EUROPE (EXCL. SWITZERLAND)

MENA

EUROPE (ALL)

Firms/Institutions Likert Scale Scores, with the highest score being 7. Base Year 2023

“Some of the main challenges we have is combining efficiency and innovation, which is often driven by the cloud.”

innovative and optimise cloud, Software as a Service (SAAS) and automation of processes. An industry leader remarked that “some of the main challenges we have is combining efficiency and innovation, which is often driven by the cloud.” When discussing the progress of digitisation with our experts, we could clearly see this as an emerging regional digitisation gap, while year-on-year, the gap in progress by type of organisation appears to be closing.

Meanwhile, we notice regional differences that spotlight various challenges faced by firms and institutions as they grapple with legacy systems, siloed data points, corporate structures and agile competitors. It appears that smaller, newer and, as a result, more nimble firms and institutions are maximising their ability to be agile and invest in fintech and systems that are

Migration to the digital world is catching up across the regions. This year, we extended the study to include two new regions, MENA and Latin America. We also looked at the UK,

EXHIBIT 4

2021

2022

2023

Digitisation across the various regions: 2023, 2022 and 2021 6.5 6.0 5.5 5.0

4.9

5.1

4.9

5.1

5.2

5.0 4.8

6.0

5.0

4.8

4.5 4.0

3.8

3.5

3.0

3.0 2.5 2.0 1.5 1.0 0.5 0.0

EUROPE (ALL)

NORTH AMERICA

ASIAPACIFIC

SWITZERLAND

LATINAMERICA

EUROPE (EXCL. SWITZERLAND)

MENA

Comparison of scores for Firms/Institutions Likert Scale Scores across regions, with the highest score being 7. Base Year 2021-2023. *UK and Switzerland were considered as one region in 2021 and 2022.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

Switzerland and Europe (excluding Switzerland and the UK). From among the eight being examined, Swiss-based firms appear to be slightly ahead of those in North America, closely followed by firms in Europe (except Switzerland) and Asia-Pacific. North America and Asia-Pacific are still trending on their current trajectory, maintaining good and acceptable progress as are WealthBriefing Tech and Ops Report newcomers Latin America and MENA. MENA in particular shows remarkable agility in its digitisation and is fast catching up – and surpassing - other regions - a reflection of the region’s approach to occupy a global leadership position in digitisation, aided by investment in national digital systems. When considering the industry’s overall progress, although all cohorts felt that they were on course, there was still a way to go, with only 6.5 per cent globally reporting that their firms are fully digitalised. And that is reasonable when considering the speed with which new software applications and technology are being released and adopted in non-core services. Our findings indicate that the majority of firms and institutions are still scaling up their digitisation plans and projects, and working at pace, within the parameters of the regulatory constraints, and in line with client requirements and anticipations. And there is good reason backing this momentum. The expectation is that they will immediately start to see gains across the board, in fact, as soon as they embark on automation and digitalise the process. “As soon as you have digitalisation across the business, you can reduce some of your costs and increase your efficiency and your productivity in advising clients.” Notwithstanding, the digital journey is still considered a challenge for many functions across various firms and institutions. Firms were reporting that there are Ultra and High-Net-Worth clients, especially the younger, digitally natives and tech-savvy generation, who don’t trust the firm’s digital or web-based services, or those who don’t want to access the firm’s or institution’s digital portals - especially those delivered via the cloud - for their financial transactions. The landscape is varied. As our industry leaders reported, firms and institutions working with Ultra and High-Net-Worth clients are facing different challenges to those in the retail space. Improvements in efficiency through technology, be it automation of processes or digital touch points, are weighed against the need and expectations of that “white glove” experience, the meticulous and personalised service which is very hard to deliver via generative AI, robo advisor or automation. Interestingly, there is a marked shift in digital expectations between the different generations, where the younger digital natives demand access and communications via their own secure networks or social apps such as Signal and WhatsApp. “We have clients that refuse to access our portal or digital services such as Sharefile for their confidential documents… they only want to use their personal Google drive that they’ve shared with us. It’s because of the way they only trust their rules and systems. And they certainly don’t want anything to be sent by email. They prefer text, and in as brief a message as possible. Their preferred channel is through messaging apps such as WhatsApp, Signal and Telegram. We don’t even have an email address for some of them. So that’s our challenge. They

are not interested at all in having access to our digital portals. We’re living in a world that is on fast track. And this is purely one-way communication.”

“We have clients that refuse to access our portal or digital services such as Sharefile for their confidential documents… they only want to use their personal Google drive that they’ve shared with us. It’s because of the way they only trust their rules and systems. And they certainly don’t want anything to be sent by email.” These systems and approaches are proving to be challenging for the industry. Whereas previously such messaging channels and apps were banned outrightly as non-compliant, they are now the preferred tools for many clients. The shift to hybrid work and the growing use of mobile communications in the post-pandemic environment means clients prefer simplicity and convenience. The issue is keeping up with technology while staying on the right side of the regulators. The questions facing most firms and institutions are ingrained in the digital roadmap: How can they capture all the conversations and ensure they are all compliant? And how do they prepare for an increasingly mobile and connected client experience? This is an area that is still evolving, as clients gain confidence in their ability to use the new apps and technology, and adapt their behaviours to suit. Future reports may shed more light on the changing client behaviours and their impacts on our industry. Private banks and institutions dealing with Ultra and High-NetWorth Individuals are currently preparing and studying use cases to determine the level and pace of automation of processes which could be deployed to improve efficiencies and support productivity across the client touch points. Overall, the focus appears to be on digitising the provision of information rather than the transactional processes.

EXHIBIT 5

Number of firms that are fully digitised globally FULLY DIGITISED

6.5%

Global snapshot for digitisation: The 7/7 top score on a Likert Scale Score was attained by only 6.5 per cent. Base year 2023.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

AUTOMATION AS A COMPETITIVE DIFFERENTIATOR

“If you do not have the technology today, you simply cannot operate.” Technology is a competitive differentiator across all cohorts of firms and institutions. It is driving investment decisions and presenting a wider range of options and opportunities for firms and institutions alike. Seen as a tool, an enabler and thus, a strategic differentiator, the challenge is managing the level of automation and investment in data quality and complex models to deliver consistent, accurate and quality outcomes to their client bases while optimising internal efficiencies and straight-through processing as much as possible. However, at the heart of any decision-making on automation is the consideration of risk, and the management of that risk. Buy vs Build: The ‘buy vs build’ debate is intertwined with control, risk management and an ongoing search for operational

efficiencies. The current trend is for productivity – or non-core applications such as the Microsoft Windows Environment, which are not purely wealth management applications, to be moved to the cloud. Delivering benefits such as improved processes without carrying much risk, this is seen as a ‘buy’ rather than ‘build’ decision. It is freeing up time and resources, allowing for a higher degree of agility and client relationship management while minimising risks associated with human error and fatigue using tools such as CRM, email and Excel sheets. On the other hand, dedicated core applications, such as banking applications, are traditionally proprietary builds, and tend to be retained on-premises. They are also typically heavily reliant on data and a host of legacy systems. In this space, SaaS is gaining popularity with firms and institutions as they develop their roadmap for automation, and consider efficiency, mobility and reliability against repetitive, low-skilled tasks which can easily be incorporated into productivity software.

EXHIBIT 6

Progress on automation in portfolio construction and rebalancing, 2023 ACCOUNTANTS

7.0

SERVICE PROVIDER

7.0

MULTI-FAMILY OFFICE

5.0

INSURANCE

5.0

FINANCIAL SERVICES

5.0

PRIVATE BANK

4.7

FUND MANAGER

4.5

WEALTH MANAGER

4.5 4.0

ASSET MANAGER 0

Firms/Institutions Likert Scale Scores across types, with the highest score being 7. Base Year 2023.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXHIBIT 7

2022

2023

Pace in progress on automation in portfolio construction and rebalancing (2023 vs 2022) 100 90 80 70 60

56%

65%

60%

64%

68%

72%

68% 44%

64%

59%

57%

47%

40 30 20 10 0

AVERAGE

WEALTH MANAGER

PRIVATE BANK

MULTI-FAMILY OFFICE

FUND MANAGER

ASSET MANAGER

Firms/Institutions scores across types, depicted in percentage points. Base Year 2023, comparison between 2022 and 2023.

This year on average we are seeing a higher level of progress on automation in portfolio construction and rebalancing, showing an increase of almost 10 per cent. The highest marked increases are from multi-family offices and fund managers,

while wealth managers and private banks have kept pace. Across all cohorts, there is an increased momentum of activity which we expect to see continued in the coming years, and which will be relevant to size and client base.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

DATA INTEGRITY - THE STRUGGLE FOR DATA QUALITY

Data is a crucial driver in wealth management, yet some firms and institutions are still grappling with data quality issues, despite allocating a considerable amount of time and resources to fix them and maintain their quality. Clean, reliable and accessible data is needed to make the right informed decisions. It is also the bedrock for many new applications rooted in AI and machine learning models. On average, all cohorts felt that in their opinion, their firm’s data was reliable, timely and accessible. The complexity of data management is increasing. In wealth management, data is accessed across many data points, and the complexity of the data stack expands exponentially by the increased interdependence from business functions, industry and productivity applications that share multiple relationships with that data. As the industry is now also considering a higher level of machine learning for many processes, it is even more important that data is consistent, reliable and accessible. This is keenly felt by large organisations dealing with legacy data structures where they have invested in cleaning and consolidating data as part of an enterprise-wide digital transformation. “The place where we struggle the most is maintaining data quality across the organisation. We have put a lot of effort into creating dashboards for monitoring. But still, we are always discovering some areas somewhere in the organisation where people are processing data which we were not aware of, data which was not in the master control plans. Officially I would say that

doesn’t mean that the data is not being controlled, but rather that it was not listed for us as a data office and included the central processing. So it’s an ongoing effort.”

“The place where we struggle the most is maintaining data quality across the organisation. We have put a lot of effort into creating dashboards for monitoring. But still, we are always discovering some areas somewhere in the organisation where people are processing data which we were not aware of, data which was not in the master control plans. Officially I would say that doesn’t mean that the data is not being controlled, but rather that it was not listed for us as a data office and included the central processing. So it’s an ongoing effort. Another area where firms struggle is when they are working with data quality issues related to specific topics that need to include the business teams, who do not necessarily have the resources or time to dedicate to that issue. This is espe-

EXHIBIT 8

How would you rate your firm’s data for reliability, timeliness, and accessibility? 6.0

FUND MANAGER

5.7

MULTI-FAMILY OFFICE ASSET MANAGER

4.8

WEALTH MANAGER

4.7

PRIVATE BANK

4.7

100

Firms/Institutions Likert Scale Scores across types, with the highest score being 7. Base Year 2023

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXHIBIT 9

2022

2023

How would you rate your firm’s data for reliability, timeliness, and accessibility? (2023 vs 2022) 100 90

86%

81%

63%

64%

68%

67%

58%

61%

69%

44%

50 40 30 20 10 0

AVERAGE

WEALTH MANAGER

PRIVATE BANK

MULTI-FAMILY OFFICE

FUND MANAGER

ASSET MANAGER

Firms/Institutions scores across types, shown as percentages. Base Year 2023, comparison 2022 and 2023.

cially the case with smaller firms: “We are always working in a best-effort mode, and that takes a lot of time. To gain a few percentage points in data quality level and coverage, it can sometimes take months.”

DATA INTEGRITY

“We are always working in a best-effort mode, and that takes a lot of time. To gain a few percentage points in data quality level and coverage, it can sometimes take months.” When asked to rate the reliability, timeliness and accessibility of data at their organisation, all cohorts averaged a percentage point higher than last year at 64 per cent (see Exhibit 9). Fund managers and multi-family offices made significant progress to lead this year at over 80 per cent. With the overall average having barely moved much during this last year, it is showing the struggle in firms as they deal with siloed databases, disparate legacy systems and multiple internal and external sources of information. As firms and institutions consider their increased expectations of consistent quality data, there will be higher levels of data monitoring to ensure that it is reliable and accessible for use with automated processes and complex machine learning models. We then expect to see continued high scores that reflect both confidence and trust in the data and those systems.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

LEVERAGING CLIENT CUSTODIAL DATA TO OPTIMISE INVESTMENT STRATEGIES

Client custodial data is crucial for both wealth managers and their clients to make informed investment decisions, monitor portfolio performance, and ensure accurate reporting for regulatory and taxation purposes. Firms that better leverage this data stand to see significant benefits in their efforts to effectively manage client portfolios, providing tailored financial advice that enhances overall satisfaction… from a comprehensive portfolio view, with a holistic view of the client’s financial holdings, to improved data-driven decision-making, personalised advice, risk that is managed more effectively and an efficient rebalancing of the portfolio allocations and asset distributions. With an average score of 70 per cent across the firms and institutions surveyed, an increase from 63 per cent in 2022,

the findings reflect the strategic importance placed on the leveraging of client custodial data. This is especially important seen in light of the data-driven and client-centric approach that has been the key driver in this year’s survey and in the current dynamic financial and technology landscape. Leading the strong scores were service providers, accountants, multi-family offices, wealth managers, insurance and fund managers. Across the sectors, we saw a consideration, engagement or direct adoption of automated data processing applications, digital transformation and migration to cloud and SAAS. As a result, we are likely to see a focus across the sectors on improved automated processes for the years to come.

EXHIBIT 10

How well do firms leverage client custodial data? SERVICE PROVIDER

100%

ACCOUNTANTS

100% 81%

MULTI-FAMILY OFFICE WEALTH MANAGER

71%

INSURANCE

71%

FUND MANAGER

71%

AVERAGE

70%

PRIVATE BANK

66%

ASSET MANAGER

66% 29%

FINANCIAL SERVICES 0

100

Firms/Institutions scores across types, shown as percentages. Base Year 2023.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXPANDING AND DIVERSIFIED TECHNOLOGY BUDGETS

Technology budgets have been steadily climbing over the years. Personalised client experiences, regulatory compliance, data security, automation and the need to leverage data analytics are driving the importance of technology as a key factor in enhancing client services, improving operational efficiencies and staying competitive.

EXHIBIT 11

Technology budget change 2023-2025 (amalgamated) 15.2%

As the impact of the pandemic on the industry eased off, remote working and the expectations of a digital, hybrid service offering has made sure that tech spend does not decrease. Indeed, the reported tech budget change this year shows little difference from that surveyed in 2022. The majority of this year’s respondents (79 per cent) are confident that their firm’s technology budget will increase over the coming three years, rising even higher than the scores in 2022 of 65 per cent. Indications from our conversations with industry experts are that the low scores where budgets will remain stable or decrease significantly (a total of 21.2 per cent) reflect areas where budgets have either been high in past years and are now beginning to stabilise or where businesses are taking stock to refocus budgets in the coming years.

DECREASE SIGNIFICANTLY INCREASE STAY FLAT

78.8%

Firms/Institutions scores across types, shown as percentages. Base Year 2023.

Just over 15 per cent expect it to remain the same, while 79 per cent expect it to increase, a change from 65 per cent in 2022. The number expecting it to decrease has gone down from 15 per cent to just 6 per cent.

EXHIBIT 12

“We’ve committed 4-5% of revenue to technology. As the company expands its revenue base, we intend to allocate spend towards technology expenses and investments accordingly.”

Technology budget change 2023-2025 (full) 60 46%

50 33%

40 30

15%

INCREASE INCREASE SIGNIFICANTLY MODERATELY

STAY FLAT

DECREASE MODERATELY

DECREASE SIGNIFICANTLY

“We’ve committed 4-5% of revenue to technology. As the company expands its revenue base, we intend to allocate spend towards technology expenses and investments accordingly.”

Firms/Institutions scores across types, shown as percentages. Base Year 2023.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXHIBIT 13

% of cohorts increasing technology budgets by type of firm 41%

WEALTH MANAGER 26%

MULTI-FAMILY OFFICE 11%

ASSET MANAGER 7%

FUND MANAGER SERVICE PROVIDER

FINANCIAL SERVICES

INSURANCE

ACCOUNTANTS

0 5 25 20 10 15 Firms/Institutions scores across types, shown as percentages. Base Year 2023.

Investment in tech is not constrained by geography or size. With firms spanning continents and jurisdictions, technology has significantly enhanced efficiency, reliability and consistency in service delivery. “When allocating spend, technology is a key factor in controlling and reducing costs, although the budget split on efficiency vs client journey is never at the expense of the client experience.”

“When allocating spend, technology is a key factor in controlling and reducing costs, although the budget split on efficiency vs client journey is never at the expense of the client experience.” The focus for the next two years for all cohorts will be to look at front-office organisational changes for efficiency and growth, and where possible, a move to or change of outsourced suppliers for productivity systems and processes. While all cohorts reported changes to technology infrastructure, there is still a pressing need to invest in productivity tools, to continue improving efficiencies and to reduce costs to maintain their competitive market positions. When analysing responses by type of firm, it is evident that wealth managers will continue to account for the most substantial portion of tech spend across regions, followed by multi-family offices. All cohorts indicated that they expected an ongoing increase in their budgets, notwithstanding applied breaks on riskier projects and reviews arising from the current economic uncertainties. These viewpoints are directly aligned with recent research carried out by Deloitte in February 2023 with leaders in

technology, who considered boosting efficiency, improving current offerings, and creating new products and services as key outcomes in their digital transformation. We asked our industry leaders and respondents to explain their approach to investments in technology as a way to reduce risk involved in daily operations across key functions such as data quality control and monitoring, core processes, KYC, cybersecurity, and fraud among others. Their responses showed that across all sectors, technology investment is being considered in cases where it can improve operational efficiency. These responses mirrored the major investments being seen across wealth management, especially by firms and institutions spanning states and jurisdictions. These investment decisions have been largely driven by regulation and the ongoing imperative to enhance operational effectiveness while driving down overall costs. Functions such as KYC and cybersecurity are typically being outsourced to third parties, while firms are involved in the process of building proprietary technology to create automation across data, systems and staff to maintain integrity in operations. As expected, there is still a sizeable amount of work going into manual processes across the industry. This is mostly due to the poor quality of data received and processed. Firms are looking to enhance feeds with financial institutions in an effort to reduce that manual labour, freeing time for other, more productive and value-creating tasks. Operationally they are still incorporating traditional human checks and balances in transaction workflows, (i.e. trading and payment systems). As one leader noted, “Technology is seen as “aiding processes”, and none of the firms or institutions surveyed indicated they intended to replace critical human functions.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXHIBIT 14

Primary outcomes expected from digital transformational effort % of cohorts increasing technology budgets by type of firm 16%

INCREASING EFFICIENCY

16%

12%

IMPROVING EXISTING PRODUCTS &/OR SERVICES

18%

11%

CREATING NEW PRODUCTS &/OR SERVICES

23% 8% 10%

CREATING NEW MARKETS

9% 6%

REDUCING RISK IMPROVING SUSTAINABILITY IN SUPPORT OF ENVIRONMENTAL ISSUES

8% 13%

6% 8%

4% 3% 2%

0 Source: Deloitte, TMT survey of tech industry leaders, October 2022

10%

19%

14%

CREATING NEW INTERNAL PROCESSES & WORKFLOW

23%

21%

REDUCING COST INCREASING ORGANISATIONAL AGILITY

22%

PERCENTAGE RANKED 3RD

The leader continued, “Our interest in technology is more rooted in our desire to deliver a superior client experience than it is in a desire to cut costs or have the shiniest toy.” Overall, there is a widespread move towards a digital operating model, as firms and institutions across the sector invest in proprietary and third-party software applications that allow them to have secure online feeds from custodians to increase efficiency in the different teams. Functionality is seen to be further enhanced through tools such as flexible report building.

PERCENTAGE RANKED 2ND

PERCENTAGE RANKED 1ST

“Our interest in technology is more rooted in our desire to deliver a superior client experience than it is in a desire to cut costs or have the shiniest toy.”

Overall, there is a clear emphasis on technology being geared towards efficiency and growth. The balance between using technology to enhance the client experience and improve advisor productivity is being given almost equal weighting in the argument for spend on technological change.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

OUTSOURCED SERVICES

Outsourced services for productivity applications in wealth management is not a new concept. Outsourced services for the core technology, where providers offer to run the back office operations on behalf of wealth management clients, is a different offer altogether. Such services go beyond data centre management and the development of applications traditionally employed as SAAS business models. They are tempting, as they free up internal resources, allowing firms to scale up and focus on client service, making them more agile and competitive. Outsourced services are an attractive proposition – firms outsource core functions so that advisors can focus solely on clients and prospects. Speaking to industry experts, such

services appear to be more attractive to independent registered investment advisors and firms focused on retail rather than family wealth offices and institutions dealing with Ultra/High-Net-Worth clients. While asset and wealth management firms outsource productivity processes such as research, sales, and marketing to improve their functioning and gain cost efficiency, they are hesitant to outsource core processes and tasks. By outsourcing different aspects of their business, advisors can spend more time differentiating themselves and delivering super service and performance by providing a broader and better menu of investment solutions.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

ESG INVESTMENTS ON THE RISE

Changing regulations and disclosure requirements are now impacting governance and operations as firms are required to report on Environmental, Social and Corporate Governance (ESG) disclosures alongside financial statements. Looking at the state of ESG integration into firms’ investment processes, the trend this year is similar to that seen in 2022, where progress was highly variable. The general thinking is that the ESG process could be improved upon. Overall, 57 per cent are well on their way to embedding ESG processes. Over 30 per cent have ESG fully embedded, and 3.1 per cent have reported that they have a leading ESG investment process in place. ESG is increasingly seen as an area for innovation, and industry leaders spoke about remaining competitive by investing in innovation projects. At the start of this year, EY research for the EY Sustainability Finance Index 2022 confirmed that financial services firms are expanding and accelerating their sustainable finance efforts, after a pandemic-led slowdown in 2022 and despite the current economic and political volatility. Furthermore, investors, analysts, regulators and the media are looking for more detailed and reliable ESG data and disclosures. Regionally, the UK and North America are still setting the pace for ESG integration, highlighting gaps within other regions. Undoubtedly, all regions need to refocus their efforts after the pandemic to improve their reporting and ESG progress. ESG considerations are having an impact on investment strategies and asset allocations. Scoring an average of 15 per cent across all sectors, the industry is consciously avoiding any claims to be “greenwashing” their decisions, while increasingly integrating ESG into the decisionmaking process. ESG can also be a powerful differentiator as investors seek to align their investments with sustainability and responsible business practices. We can see a similar picture across the regions, scoring an average of 16 per cent.

EXHIBIT 15

State of ESG integration into firm's investment processes A LEADING ESG INVESTMENT PROCESS IS IN PLACE

ESG FULLY EMBEDDED, BUT THE PROCESS COULD BE IMPROVED

30%

PLANS ARE IN MOTION TO INCORPORATE ESG

24%

WAITING TO SEE HOW DEMAND EVOLVES BEFORE INCORPORATING IT

21%

NOT PART OF THE INVESTMENT PROCESS & NOT PLANNED TO BE

21%

Firms/Institutions scores shown as percentages. Base Year 2023.

EXHIBIT 16

ESG progress by region 70 60 50 40

36%

18%

10 0

36%

NORTH EUROPE (EXCL. ASIAAMERICA SWITZERLAND) PACIFIC Firms/Institutions scores shown as percentages. Base Year 2023.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

EXHIBIT 17

ESG impacting a change in asset class or investment mix 22%

SERVICE PROVIDER 19%

INSURANCE 17%

FUND MANAGER ASSET MANAGER

16%

ACCOUNTANTS

16% 14%

WEALTH MANAGER 9%

PRIVATE BANK 6%

FINANCIAL SERVICES

0 10 5 Firms/Institutions scores by type shown as percentages. Base Year 2023.

EXHIBIT 18

ESG impacting a change in asset class or investment mix by region 35 30 25 20

19%

18%

17%

16%

EUROPE (EXCL. SWITZERLAND)

SWITZERLAND

MENA

13%

NORTH AMERICA

10 5 0

LATINAMERICA

ASIAPACIFIC

Firms/Institutions scores shown as percentages. Base Year 2023.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

ARE WE SEEING THE RISE OF AI IN WEALTH MANAGEMENT?

As expected, Artificial Intelligence (AI) is creating waves in the industry following the rollout of OpenAI’s GPT-4 and Alphabet Inc’s Bard – two large language models. Early play and experimentation with generative AI models, predictive analytics and

machine learning processes can be seen across regions and institutions. Strategically, firms are putting together use cases to see how their operations can be improved through solutions powered by generative AI and machine learning.

THE RISE OF ARTIFICIAL INTELLIGENCE ARTIFICIAL INTELLIGENCE (AI) A technique which enables machines to mimic human behaviour. MACHINE LEARNING (ML) Subset of AI technique which use statistical methods to enable machines to improve with experience. DEEP LEARNING Subset of ML which make the computation of multi-layer neural network feasible.

Artificial Intelligence (AI)

Machine Learning (ML)

Deep Learning

Refers to the use of technologies to build machines and computers that have the ability to mimic cognitive functions (sense, reason, act or adapt) associated with human intelligence. It uses decision-making informed by data to solve problems. Although artificial intelligence is often thought of as a system in itself, it is a set of technologies implemented in a system enabling it to reason, learn, and act to solve a complex problem.

Is a subset of artificial intelligence that automatically enables a machine or system to learn and improve from experience. Instead of explicit programming, ML uses algorithms to analyse large amounts of data, learn from the insights, and then make informed decisions. Theses algorithms improve performance over time as they are trained and exposed to more data. Machine learning models are the output, or what the program learns from running an algorithm on training data. The more data used, the better the model will get.

(A subfield of ML which learns from experience on large data sets), robotics, expert systems and Natural Language Processing (which refers to systems that can understand language), Automated Speech Recognition (ASR) which refers to the use of computer hardware and software-based techniques to identify and process human voice, are all subsets that sit within AI.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

MACHINE LE A

AI APPLICATIONS IN FINANCIAL SERVICES

Other areas where applications of ML are currently in use include: u Regulatory compliance, with algorithms developed to analyse vast amounts of data to ensure there is compliance with regulations, and identify any anomalies or potential violations. u Portfolio management to help optimise asset allocation and make investment decisions. u Client touch points where chatbots and virtual assistants powered by ML are providing customer support, answering inquiries and assisting with basic transactions. u NLP has been used in sentiment analysis of financial news and reports, gauging market sentiment and making in formed investment decisions. Most of these ML applications are tools aiding advisors. Their outputs optimise data analysis and modelling, driving efficiency where it is needed most. They automate processes, look at trends and propose certain specific actions for consideration by the advisors. The wealth management industry is powered by data. This means that technologies such as AI and ML can deliver improvements across a number of functions, in particular across document management, research, customer segmentation and marketing.

ROBO-ADVICE

G IN N R

NA TU PR R

AGE NGU LA G AL SSIN CE O

ML has been powering systems, processes and chats in financial services for the last two decades since the 1990s. Its impact is significant, even if it has been largely working in the background - from credit scoring to algorithmic trading strategies; ML algorithms analysing large data sets, identifying patterns and making real-time trading decisions, and complex quantitative models driving quantitative finance applications. ML has also been instrumental in improvements in fraud detection and risk management, working with large volumes of historical and current data to find trends and unusual patterns to detect fraudulent activity or areas of high risk.

I T V E C O M P U TI

ALGORITHMIC TRADING

CUSTOMER RECOMMENDATIONS

AML & FRAUD DETECTION

CHATBOT

MACHINE LEARNING USE CASES IN FINANCE

FINANCIAL MONITORING

MAKING INVESTMENT PREDICTIONS

PROCESS AUTOMATION

SECURE TRANSACTIONS

RISK MANAGEMENT

ALGORITHMIC TRADING

FINANCIAL ADVISORY

CUSTOMER DATA MANAGEMENT

DECISION MAKING

CUSTOMER SERVICE LEVEL IMPROVEMENT

CUSTOMER RETENTION PROGRAM

MARKETING

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

GENERATIVE AI – WHAT IS THE CUMULATIVE VALUE TO WM?

While all the industry leaders and technology experts we spoke to were fully aware of the benefits and applications of predictive AI, there are still too many unknowns surrounding the use of generative AI and its adoption across core functions. The challenge for each firm and institution is to determine how, where and when to apply it to optimise its potential and improve specific functions, and then understand its cumulative value. There are uncertainties around the technology. It is presenting risks that need to be considered, risks that the wealth management industry may not even be thinking of at this time. Firms and institutions are mapping out their journeys, and identifying where AI could add the most value to operations and the digital client journey without any impact on client service quality. Some are more confident about the future of technology in their industry and in their firms and institutions. They are working on use cases to consider the risks and opportunities.

As one leader explained, “We are looking to a time when we need to co-exist with technology. It enhances what we do, rather than replaces us. It also provides opportunities for us to develop new products and services. We should be co-piloting with technology, seeing how it enhances and augments our solutions.”

“We are looking to a time when we need to co-exist with technology. It enhances what we do, rather than replaces us. It also provides opportunities for us to develop new products and services. We should be co-piloting with technology, seeing how it enhances and augments our solutions.”

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

A STRATEGIC APPROACH TO MANAGING OPERATIONS, PEOPLE AND TECHNOLOGY

Strategically, the discussion taking place is about how to create the pathway to embrace digital, technology and AI in the future. Increasing regulations, rapid advances in technology, heightened cybersecurity and client digital expectations are opening up gaps and developing constraints in solutions, operations and platforms as they seek to create the technologically-enabled client-centric, advise-oriented business model.

accelerate their digital transformations, stay abreast of technology to create the right digital customer experiences for the increasingly tech-savvy client base and bolster assets under management (AuM). At the end of the day, the focus is on merging the business and tech agenda while optimising the human interaction and value for the client base.

ORGANISATIONAL IMPLICATIONS AND COMPETITION CONSIDERATIONS To fully capitalise on emerging technologies, especially those driving automation in processes and client servicing, firms and institutions must clearly define their digital journey. The C-Suite conversation is increasingly around understanding the emerging models, and identifying the optimum level of balance for operations, technology, and their people while managing risks. And this brings about organisational implications and competitive considerations.

“The opportunity is there to leverage the eco-system. There is a lot of legacy and with it a need to update, and migrate, either in cloud or to more efficient systems.” Another leader and technology expert said, “The opportunity is there to leverage the eco-system. There is a lot of legacy and with it a need to update, and migrate, either in cloud or to more efficient systems.” CHANGING BEHAVIOURS Furthermore, there is a new generation of investors whose expectations are now being shaped by new technologies. They have access to these technologies and many are comfortable conducting their own research. They are highly mobile and expect to access advice anywhere and at any time, through multiple channels depending on their preferences. Yet the wealth management industry still has a long way to go. Digital journeys currently provide portals for clients to access, but their expectations may be for a richer experience – they are used to social media platforms that are far more advanced in personalisation and multiple relationships across their peer groups Technology is democratising the industry. There are new players, new products and new service providers, all vying for a piece of the action. With such pressures at play, impacting the wealth and asset management firms across regions, firms and institutions need to define their digital pathway,

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

CONCLUSION & REFERENCES THE TRUST DEBATE – ARE WE IN A DOUBLE-BIND SITUATION? The industry is at a learning stage, grappling with new technologies and the opportunities they present in providing improved benefits and efficiencies across operations and client servicing. There is a productivity uplift through digital transformation, and many are already well ahead in their planning and investing in those journeys. However, while the future is attractive, it brings a lot of unknowns to the table. THE RIGHT INFRASTRUCTURE Fiduciary responsibilities demand that firms and institutions equip themselves with the right capabilities to ask questions and manage the risk presented by those unknowns. Technology is moving apace and regulation is catching up, and yet firms and institutions must get the infrastructure right to take advantage of opportunities presented by the new technologies. Not everyone is moving at the same rate. When working through regulations, there is an increased level of complexity as everyone is learning. And this was clear from our conversations with industry leaders across the regions. All cohorts are engaged in digital projects that are introducing changes to comply with regulations, in particular around ESG. These projects also provide enhancements to their outputs. DATA IS CRITICAL Data is a critical factor in the enhanced use of ML across functions and touches on every aspect of the business. Yet in some firms, there are still siloes, a feature of legacy systems with multiple data points. Furthermore, the integrity, consistency and quality of data are still a long way away, averaging 65 per cent across the cohorts we spoke to. The AI framework is practical and usually requires vast amounts of data to train. However, across the sectors, there are some datasets that are so limited in size, that it can be hard to know from where to start, or what to do next. This will impact its adoption across the sectors. THE TRUST ISSUE Then there is also the trust issue: trust in the technology, trust in the governance and trust in the ecosystem. The human element is priceless. Clients trust the output and value the experience and specialist advice. “Trust is being driven by the pace of change. How far would you trust the data used by your AI and ML models?” “There are risks around outcomes, and decisions made by technology have to be within algorithms that have parameters set by the business. The human element is crucial, for the firms and institutions, for employees, for clients and for the wider eco-system. We believe that AI will change skills and create new processes but it will not replace jobs.”

REFERENCES 1 WEALTHBRIEFING, 21 August 2023, How AI Can Raise Wealth Management Game In The Gulf. Available from: https://www.wealthbriefing.com/html/article.php?id=198865 2 SAUDI VISION 2030. Available from: https://www.vision2030.gov.sa/ 3 DELOITTE INSIGHTS, TMT SURVEY OF TECH INDUSTRY LEADERS, October 2022. Available from: https://www2.deloitte.com/us/en/insights/industry/technology/digital-transformation-efficiency/_ jcr_content/root/responsivegrid_380572564/advanced_image.coreimg.95.800.png/1689831925135/ us176506-figure1.png 4 EY SUSTAINABLE FINANCE INDEX 2022: HOW TO PUT ESG BACK ON TRACK, 1 December 2022. Available from: https://www.ey.com/en_gl/financial-services/sustainable-finance-index-22-how-to-putesg-back-on-track

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

METHODOLOGY As part of this study, we carried out an online survey which was distributed globally through email invitations, social media and our website. In-depth interviews were then carried out with

C-suite leaders and technology experts from private banks, family offices and fund managers across the industry. The study took place between June and July 2023.

TYPE OF INSTITUTION 4%

LOCATION OF INSTITUTION

2%2%2% 4%

3% 3%

40%

10%

46%

12%

14% 22%

16%

WEALTH MANAGER PRIVATE BANK MULTI-FAMILY OFFICE ASSET MANAGER FAMILY OFFICE

FUND MANAGER ACCOUNTANTS FINANCIAL SERVICES INSURANCE SERVICE PROVIDER

EUROPE (EXCL. SWITZERLAND) LATIN-AMERICA MENA

NORTH AMERICA UK SWITZERLAND ASIA-PACIFIC

ASSETS UNDER MANAGEMENT 35

27%

30 25 20 15

15%

10 5

15%

$51100MN

$101250MN

15%

$15BN

$25BN+

≥$1TN

≤$50MN

$251500MN

$501MN1BN

$1-10BN

$5-10BN

$10BN

(% of total)

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

SS&C ADVENT’S VIEW The wealth management industry is at a pivotal moment, with digitization, data management, technology, and client preferences driving significant changes. Firms that adapt to these trends by embracing technology, optimising data usage, and aligning with ESG principles are likely to thrive in this evolving landscape, delivering better value and experiences to their clients.

Automation – Model portfolios are a core part of the business for many clients, often accounting for a significant element of a firm’s AuM. More effective and efficient use of portfolio construction and modelling processes is not only paramount to providing the benefits they promise, but also allow clients and AuM growth without a linear growth in costs.

1. Digitization and Automation: Digitalisation continues to be one of top drivers of change across all regions.

Getting firms out of ‘Excel hell’ is one of the best parts of completing an implementation for us; the risk reduction is immediate and the productivity gains not far behind. Our clients benefit from the ability to process significant rebalancing processes in a timely and transparent manner and in addition to optimal efficiency and scale, our solution simultaneously provides huge benefits in bringing clear controls and governance of these processes.

We do observe regional variances but it is key to ensure digitalisation is a holistic process across the whole operating model, from the initial client engagement, through onboarding to all client and stakeholder correspondence through portals, apps, automation and all elements of data management. There is no element of the operating model and technology stack that is unaffected by this requirement. Digitalisation also speeds up processes and allows limited, if any time, for organisations to rectify inefficient or inaccurate processes. Clients and key stakeholders want information in real or near time with more regular requests for change, and information shared in real time in the language and format that the client requests. 2. Data Challenges: The wealth management industry is dealing with a deluge of data, both structured and unstructured. To remain competitive, firms must invest in robust data analytics and management solutions. Another complication is that in many countries the data must have guaranteed stored within specific geographical boundaries. Privacy and regulation changes are only likely to increase in these areas. 3. Leveraging Custodial Data: Custodial data, which includes information on clients’ assets and transactions, is increasingly being harnessed to provide personalised services. Wealth managers can use this data to tailor investment strategies and recommendations. Advanced a nalytics tools enable them to identify trends and opportunities that might otherwise go unnoticed.

4. Outsourced Services: the debate ‘buy or build’ continues. There are fewer “build” firms then there were 5-10 years ago. Most of the self-build is in boutique firms looking to build niche and more unique processes to show differentials to the market. We have observed a significant trend, especially in firms of scale of reducing in-house developments. A bigger trend that we observe is that a growing number of firms are turning to outsourcing to enhance agility, improve efficiency and reduce costs. 5. ESG Integration: Despite ESG factors being increasingly integrated into investment strategies, progress is highly variable. Aside from regulatory reasons, we have not seen ESG being a huge driver in the small to medium wealth firms. Whilst still a topic of some discussion, smart firms are looking to allow technology to cover a broader spectrum of needs and not be solely ESG focused. Many of the aspects of ESG should be able to enable operational agility in a multitude of areas.

At SS&C Advent, we’ve always seen systems connectivity and APIs as paramount, which is why we’ve developed over 800 standard custodial connections and interoperability with a whole universe of systems – both our own and those of third parties. Our commitment is to support whatever model the client wants to run off.

TECH & OPS TRENDS IN WEALTH MANAGEMENT 2023: PIVOTAL DEVELOPMENTS EXPLAINED BY LEADING INDUSTRY EXPERTS

NEWS

AWARDS

EVENTS

RESEARCH

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The Eleventh Tech And Ops Research Report 2023

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EXECUTIVE SUMMARY