We talk to two technology firms which work with private banks and wealth managers – Objectway and Wealth Dynamix – about their views on outsourcing, the requirements of firms, and the benefits of change.

While some banks continue to handle most technology tasks in-house, and see this as building value and knowledge, it appears that the trend to outsource many tasks is as strong as ever. 

In a tough economic environment as now, pressure on margins remains intense, while regulatory and client expectations show few signs of abating. And that trend favours outsourcing.  

Firms such as Europe’s Objectway and Wealth Dynamix, which operate with a number of banks and wealth managers, aren’t slowing down. In July, Wealth Dynamix, the UK-based business focused on client lifecycle management solutions, extended its relationship with Banco Sabadell, Miami, for a further five years, to give one example. In June it launched its first CLM benefit calculator for wealth managers. In May it teamed up with Swiss firm Unblu, a platform specialising in the way in which clients and financial service providers can engage. It has offices in the UK, France, Switzerland, Singapore, the US, Lithuania and Vietnam.

In March, Rathbone Brothers, the UK-listed discretionary wealth manager, employed Objectway as a strategic partner. Last August, Objectway – founded in 1990 – bought Die Software Peter Fitzon, a German provider of core banking solutions. Italian financial firms account for about half of Objectway’s total revenues and the rest are in other parts of Europe, and some in other regions of the world. 

“We give clients a full outsourced solution,” Alexander Cassar, chief business operation officer, Objectway, told this news service in a recent interview. He said that one of the value-adds of a firm such as Objectway is helping to take certain risks out of an organisation. “This is about consistent reliability and at a competitive cost,” he said. 

At Wealth Dynamix, one of its co-founders, Gary Linieres, argues that the outsourcing trend is very clear. He told WealthBriefing how the pandemic accelerated a process under way, such as banks and other firms putting all their IT resources in the cloud. 

“Mirabaud decided to go with Wealth Dynamix and Temenos and put everything in the cloud…we are starting to get a bit of a domino effect now,” Linieres said. 

A lot of organisations are looking at putting tech into the cloud, working with the likes of AWS, Azure, and others. Concerns about cybersecurity are misplaced, based more on perception than reality. Studies show that cloud-based IT is safer than on-premise systems, he said.

“You have a very dangerous competitive environment for the established players,” he said.

In or outside
Not all firms are ready to go down the outsourcing path. Earlier this year, WealthBriefing interviewed Lombard Odier; the Geneva-based bank said that farming out functions, be they front, middle or back office, may be tempting if this saves in-house development spending, but the long-term effects of outsourcing aren’t always fully appreciated. In Lombard Odier’s case, its G2 platform – or now GX – is an important revenue driver, serving third-party clients such as external asset managers.

Handling a legacy
As far as Objectway’s Cassar is concerned, a challenge for the industry is how to handle an accumulation of legacy systems. 

Legacy systems that have been around for a while are a risk for firms. “That risk is going to get bigger, not smaller. I think a way forward is a hybrid one, creating partnerships, and this requires a mind-shift from both sides,” he said. “More and more wealth managers are opening up to that approach.”

Objectway adopts a modular approach to delivering its services; it does so via the cloud, via private clouds or through hybrid delivery channels. Clients have very different requirements…some go for a few modules and others go for a “full-stack suite.” “We believe in the composability of solutions,” Cassar said. 

In Europe, the issues are well understood and Objectway is receiving lots of requests for proposals (RFPs), he said. “This year, we had €100 million ($100.10 million) in turnover and that’s a lot for a privately owned firm. Of course, we are not going to be satisfied with that.”
 

Lifecycle
Linieres says that Wealth Dynamix, which is in the client lifecycle game, has revolutionised client lifecycle management operations.

It digitises the client lifecycle for private banks and wealth managers, from client acquisition and onboarding through to ongoing relationship management and client servicing. 

Linieres said that banks are looking at the mass-affluent/lower HNW segments of clients with $250,000 to $1 million of investable wealth and are serving this market in a “purely digital fashion”. “They [firms] are pushing the boat out a bit more.”

There is a need for better tools to serve remote-working managers, he said, adding: “A lot of firms are not ready for it yet.”

Firms must be digitally advanced. “If you are not geared up for it in all these ways you are not in a position to compete.”

“With more complex and innovative technological features (such as robo-advisory, artificial intelligence, and the metaverse) becoming available in the market, firms need to ensure that they are constantly innovating and kept abreast of these accelerated trends in order to remain competitive in the market,” Linieres said. “To be an early adopter of these technological capabilities will be able to add great value to the user experience and create stickiness with our client's adoption rate.”

“At the same time, with margin pressure becoming an increasing concern on the wealth management industries (due to growing compliance cost and also increasing client-demand for price competitiveness), CLM firms have a greater priority to ensure that they either remain cost-competitive or are able to justify premium prices in terms of their product superiority,” he said. 

A seat at the top table
One of the benefits of Objectway is that it gives the kind of tech prowess available to the largest players, hence allows different sized firms to compete, Cassar said. “We compose our offerings to the architecture of the client. You have to be able to bring a client on board in a flexible way.”

Cassar predicts that the wealth management sector is becoming more democratised. “It is not enough to think just in terms of high net worth and ultra-high net worth individuals. In the B2B space, smaller players are getting to use the same tech as the larger players and at profitable prices,” he said. For example, 70 per cent of the wealth sector is held by hundreds of small IFAs, not the big-label banks.

Cases
Cassar gives some case studies to illustrate how Objectway works. One example was that of an independent wealth manager, providing execution-only, advisory and discretionary services, and assets under management of less than £2.5 billion ($2.92 billion), and 10 to 12 investment managers serving 8,000 to 10,000 clients. The client needed to respond to two challenges: Digitise existing manual processes and retain clients as money moved to the next generation.  

Cassar said Objectway boosted the firm’s client/investment manager ratio by 30 per cent; cut its production time, costs and workload, and increased its conversion rates to fee-based services.

In the second example of a firm with more than £20 billion ($23.16 billion) of AuM, 250-plus advisors and more than 30,000 clients, Objectway helped clients increase client acquisition by 25 per cent in terms of AuM; increase digital penetration by 30 to 50 per cent; increase advisor capacity by 25 per cent, and boost a net promotor score by +45 to +51.

Wealth Dynamix’s Linieres says that firms ae introducing CRM platforms but they often only involve a task such as onboarding, and don’t give a 360-degree view of clients.

“Only a CLM platform which manages a client from engagement, through onboarding and into management provides the optimal solution. These systems operate via a single source of data, provide automated workflows from front office to middle and back – and vice versa ensuring collaboration throughout the firm. This enables the RM to deliver a consistent yet highly personalised service,” he said. 

“Failure to convert prospects into clients can be costly. Even small increases in bid-to-win ratios can reap substantial returns,” Linieres continued. 

“We firmly believe that digital onboarding is the key enabler to new client acquisition strategies and, done well, onboarding is the perfect opportunity to provide a new client with a first-class experience, cementing a client introduction and providing an example of what client management will look like going forwards,” he said.