Wealth Management – Challenges and Priorities

Jamie Forrester

Wealth Managers have grown resiliently through recent market volatility and geo-political challenges, thanks to structural reforms and new wealth creation in key markets and segments. But the increased assets firms are managing has attracted competitive and regulatory interest and shone a light on the barriers to unlocking scale benefits. Wealth Managers are facing a period of deep-rooted and extensive transformation to adapt.

Wealth Manager Challenges: Despite a growing market, Wealth Manager margins are under increasing pressure from a comprehensive set of forces:

  • Increased Competition: Incumbents and newcomers alike can see the attraction of Client and Asset growth, coupled with the opportunity to remove structural inefficiencies. As a result, the market is active with consolidation, vertical integration and new market entries
  • Products and Services Democratisation: fuelled by competitive pressures, structural reforms and digital innovations, the availability of lower cost products increases. This includes commoditisation of investment funds, rise of low-cost alternatives, $0 commission trading, proliferation of Model Portfolio Services and more widespread access to Private Markets
  • Digital Demands: Client lifestyles evolve, expectations continue to rise, and opportunities to enhance and strip cost out of operational capabilities increase. Wealth Managers continue to react slowly despite the transparency into performance and pricing, as well as non-financial considerations – notably ESG – adding to the pressures.
  • Operational and Technological Inflexibility: A legacy of proprietary development, under-investment, tightly coupled architecture and reliance on people inhibits Wealth Managers’ ability to quickly and flexibly respond to competitive pressures, operational threats and regulatory change
  • Sustained Regulatory Overheads: Compliance with historic, data-intensive regulations (such as Transaction Reporting) continues to be problematic, while the rise of conduct-driven regimes demands data not previously gathered, controlled or analysed. Historic short-comings in data management and storage (including an over-reliance on excel) needs to be removed

Wealth Manager Priorities: Across Alpha’s markets and client base, we are seeing a range of transformation activities – we believe to be successful firms should focus on these priority areas:

  • Capturing Fair or Excess Share of Growth: A wide range of responses is evident: regional expansion and market entries, new product and service launches, broadening of offerings from solely Investment Management (e.g., MPS, Multi-Asset, financial advice), enhanced tooling and insights for client teams to attract and retain both today’s client and the next generation
  • Creating a Differentiated and Attractive Proposition: Investment propositions are broadening – globally in areas such as ESG, and locally with Direct Indexing in North America. New investment markets are beginning to open up to Wealth clients, such as Private Markets and Digital assets (Crypto, NFT’s, Stablecoins).  Service offerings are changing too, with improvements to client portals and self-service capabilities for reporting, advice or investing
  • Overhauling Operating Models and Technology: firms are reviewing their Front Office organisations and considering the benefit of centralisation vs. local access. This extends to reviewing the merits of fully centralised Middle and Back-office teams and an increased interest in outsourcing. Technology stacks are also under review, ensuring platforms are fit for purpose and flexible to accommodate evolving business needs, and architecture is appropriately integrated to enable rather than prevent agility
  • Capitalising on Innovations in Data and Analytics: deficiencies in data are being recognised and addressed Front-to-Back. Leaders are deploying new capabilities and re-tooling the organisation with more advanced capabilities, capable of supporting business needs and enabling more sophisticated reporting and insights
  • Digital Quandaries: While many Wealth Managers claim that Digital is a top priority, most are still grappling with the concept of Digital Innovation and few are taking advantage of the opportunities effectively, in-part due to inflexible legacy systems not suited to the “new world” (e.g. open API’s). Management buy-in, demographic and behavioural barriers to adoption and unexciting new capabilities have meant internal and client uptake remains low.

What is Alpha Doing?

  • Supporting inorganic growth initiatives with incumbents and peripheral players
  • Supporting national and multi-national players re-skinning operating models and tech stacks
  • Supporting a small number of innovators with data, analytics, and intelligence initiatives
  • Upgrading client servicing and engagement capabilities such as CRM, Portals or apps and equipping client-facing teams with insights
  • Adapting products, services and business across the value chain to regulations and client expectations, especially with ESG.

For additional details or for enquiries, please get in contact with us here.

About the Author

Jamie Forrester

Jamie co-leads Alpha’s Wealth Management focus in the UK and is an Advisor and Director on many of Alpha’s high profile Wealth engagements in the UK and globally. He has worked across the Investments value chain for over 10 years, advising and delivering programmes for Wealth Managers, Asset Managers, Platforms, Insurers and Distributors.