Figures from the private banking, consultancy and technology worlds recently debated where the easiest wins from technology in making savings can be found.

The efficiency gains from IT developments in wealth management firms are real but they are unlikely to be immediate, and will not always be as great as sometimes hoped, a Breakfast Briefing heard recently. 

“If I were setting out from scratch today as an owner of a wealth management business I would be opting for one provider of fully outsourced technology,” Glenn Murphy, of London & Capital, told the briefing, organised by the publisher of this news organisation and sponsored by ERI Bancaire, the financial technology firm.

“The control of costs lends itself to improving an existing system and enhancing it to the maximum. With innovation though, there is an element where cost doesn’t always mix well with 'best of breed’,” he told the briefing. The event was called “Operational Efficiency Gains and Cost Savings – where’s the lowest hanging fruit in terms of technology?” It was held at the Carlton Club, St James’s Street, London.

Speakers on the panel, which was chaired by Stephen Harris, chief executive and publisher of WealthBriefing, were Andrew Benson, director of IT, Bordier UK; David Harris, senior executive advisor, CEB; Gillian King, formerly head of strategy and change at Duncan Lawrie; Glenn Murphy, chief information officer, London & Capital; and Mark Hatton, director, consulting practice, at PricewaterhouseCoopers.

Kicking off the discussion, WealthBriefing’s Harris asked what sort of efficiency savings can IT deliver? Bordier’s Benson replied: “It can be hard to achieve immediate cost savings...what we do is that we take a phased approach to the delivery of solutions. We previously focused on business processes, such as those that were very manual or time consuming. A lot depends [in terms of savings] on the scope of the business.”

“The size of the organisation is pretty much key to establishing cost savings, the smaller the organisation the simpler the product lines and ability to rationalise towards a single operating model,” argued L&C’s Murphy. When organisations expand, he said, they have to be “more pragmatic” about how their IT systems interact.

“When the organisation becomes larger, it becomes more about tactical selection with an increasing number of dependencies and components,” he said. “Some asset managers have tried to change operational platforms unsuccessfully with the larger ones finding it more challenging due to the diversity of their business and the difficulty of servicing so many competing interests," he continued. 

Harris referred to his firm’s own research, carried out in January, which found that automation of client onboarding is the specific area where most private banks and wealth managers are likely to act, with 80 per cent of firms taking action in this area this year.

Bordier’s Benson said that if a firm can use IT to deliver a superior client experience, that clearly gives competitive advantage. “If we were starting from scratch today we would not necessarily develop our own in-house solutions but instead look at best-of-breed systems that are now out there,” he said.

PwC’s Hatton observed that organisations – not just wealth managers – do not change their core operating technologies very often, so when they do, it is a challenging decision and sometimes a daunting one.

“Successful ones [organisations] don’t think of it in terms of technical changes but in terms of being the best business change programme,” he said. “With any change programme, the most successful firms are those with different skillsets in the change team. Don’t start with technology first, start with the right understanding of the right team,” Hatton continued.

A member of the audience noted that a lot of wealth managers do not necessarily know what is in the market in terms of the most suitable solutions. King said this proves the need for having the “right view from the top” in setting business objectives. “People who think this issue is just an IT problem and that 'we’re different from everyone else’ are wrong,” she said. “You have got to get people at the top to understand what the processes are,” she said, referring to the need for company boardrooms to contain people with the ability to handle IT and other questions. “Look at the information and what the clients are looking for,” she said.

Cost control
The issue of controlling costs tends to lend itself to improving existing systems rather than replacing them for brand new ones, L&C’s Murphy said. He said desire for best-of-breed systems came at a cost: “You have to be prepared to put that cost in, not just into the technology but also the plumbing and the people to maximise the investment.”

King said: “It does come down to costs versus what is the performance that you are likely to get; there’s an element of subjectivity in it. It may be that best of breed for bigger wealth managers is not the same for the smaller ones.”

Bordier’s Benson said that suitability is an important consideration in purchasing decisions on IT. Another challenge where buying “best of breed” is concerned is integrating systems if there is an older platform still in use. 

PwC’s Hatton observed that the best of breed versus in-house debate had to be understood against a background of M&A activity in wealth management, which is seeing firms with very different systems having to marry up with one another. “And another thing is that a lot of clients I have worked with want immediate results,” he said. 

One problem in not being willing to change a core banking system, for example, is that it will generate more costs in the future, Hatton said.

“If you want immediate results then of course changing core systems is a very large undertaking,” he said.

Asked about APIs [application programme interfaces], L&C’s Murphy said: “Having a top layer that collects all data and integrates into a diverse range of applications as a primary source is truly valuable to a business. This can be used for a wide variety of systems and reporting and allows you to be agnostic about the systems you use. In M&A this is particularly advantageous, but also in migrating from one technology to another.”

Finally, the panellists were asked about research stating that, on average, relationship managers devote two hours to preparing a pitch to clients. CEB’s Harris said “he was not surprised” to hear such a figure. “Sometimes, that’s what is required in preparing material for a new client...and sometimes that takes a bit longer.”

He added: “A lot of it does come down to data management and how it is used and retrieved, and looking at the tools and processes provided."

PwC’s Hatton, asked about the purported time-saving benefits of tech, said the merits of saving time were “too simplistic” in evaluating it. “You should not assume that if you free up people’s time, results will increase. Aim at 15-30 per cent productivity improvements – those are the kind of numbers we go after. Often, technological change cannot be done in isolation; it must be business-led and part of a wider change in an organisation,” he said.