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.