Wealth Managers Look to Technology to Free Up Time for Clients

Only fraction of advisors consider their client-related technology effective

Wealth management firms will focus on leveraging technology to provide a better experience for clients and advisors over the next two to five years, according to a new survey released Monday by Ernst & Young.

Though wealth managers already dedicate a significant portion of their budgets to client services, the survey found that less than a third of firms currently considered their client-related technology effective. Going forward, they planned to design segment-specific servicing models to provide different levels of high-quality service.

The 2012 Wealth Management Survey contains the views of 40 senior-level wealth management professionals across North America and Latin America. Each represents a wealth management firm with assets under management that vary from several billion U.S. dollars to more than $500 billion.

The survey found that firms were leveraging technology and automation to allow financial advisors to be more effective and spend more time with clients.

More than three-quarters of firms surveyed said they had initiatives in place focused on increasing face time with clients. It had become clear, they said, that the benefit of adding support resources quickly outweighed the cost.

Enhancing technology, in particular mobile technology, to free up advisors’ time was consistent across all firms, regardless of the number of clients and assets under management. Approximately 75% of respondents planned to invest in mobile tools to increase advisor collaboration and effectiveness.

Larger firms generally planned to provide better access to information via mobile in order to deepen client relationships, while smaller ones planned to introduce new products and services and increase sales using mobile applications.

Proprietary tools dominated client-related functions, the survey found. Some 80% of client and advisor-related technologies were proprietary, yet 40% of respondents said their client technology was ineffective.

The size of the wealth management firm was correlated to its technology model. Larger firms were far more likely to have a dedicated technology organization, while smaller firms relied heavily on a shared service model.

At the same time, more dedicated structures ranked higher in perceived effectiveness, while shared services models ranked the lowest.

Although wealth management firms’ strategic emphasis was clearly devoted to client and advisor experience through enhanced technology, 38% of respondents still saw regulatory compliance issues as their main operational challenges. As a result, spending related to compliance and risk management was strong, with firms currently allocating 22% of their overall operating budget to these areas.

The survey found the Latin American wealth management market in general to be at a different stage of evolution from similar firms in North America. The socioeconomic changes under way in the region will present a significant opportunity for wealth managers, it said. To profitably capitalize on this opportunity, they must overcome hurdles due to limited scale.

Because of their smaller size, Latin American wealth managers spend more of their operating budgets than their North American counterparts on trading support and trade order management, categories where economies-of-scale benefits are significant. 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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