Tom Wooders is Head of Sales, Clearing and Wealth Solutions at GPP, which provides wealth platform, execution, settlement and custody services to a broad spectrum of financial institutions. In this exclusive interview, he highlights low levels of technology outsourcing and explains why wealth managers should no longer overlook its many business benefits.
This may be even more true in the compliance arena, there being both safety and savings in numbers. “Firms want to know that they’ve got access to the learnings of a wider peer network through us, and appreciate the benefit in what we’ve developed not being ultra-specific to any one client,” he explains. “This means that whenever we build something for a new market, or a new regulation, all the clients get the benefit of that.”
The effect this has in levelling the playing field for firms with more modest technology budgets is easy to understand; so is the reduction in compliance risk that can come from using tools used by comparable organisations facing comparable complexities. Technology firms’ superior security might be another significant factor.
Recent WealthBriefiefing research indicates that no wealth manager is completely sure of their ability to tackle the cybersecurity threat today, confidence dwindling as an appreciation of the threat’s magnitude has grown. With the EU’s General Data Protection Regulation and the California Consumer Privacy Act threatening massive penalties for inadequate defences, here too there may be great comfort in working with a heavyweight technology partner.
The human factor
However, Wooders also counsels against focusing too much on the technology to the exclusion of the human factors upon which long-term outsourcing success rests. He explains: “As one COO said, ‘Many tech firms have 80 per cent of what you want, but getting the remaining 20 per cent will kill you if they don’t understand the real drivers and requirement set’. You need the functional provision, but also the business expertise, know-how and service. That’s why our key people have decades of experience in wealth management operations.”
Wooders sees the best outsourcing arrangements as “living breathing things” where although robust Service Level Agreements are in place “you’re not having to refer to them all the time”. The best providers will lead with their flexibility, in the shape of the solution as well as its price. As much as wealth managers, technology providers are showing a healthy recognition of their strengths and the varying configurations they may need to fit into, which for GPP may be anything from individual modules though to a comprehensive investment administration platform.
In Wooders’ view, “collaborative competition” is simply the reality of today’s technology landscape and any good provider will be focusing on interoperability between systems and allowing fi to pick best-of-breed solutions as their needs dictate. “’Agility’ and ‘flexibility’ really came through in our research, but that’s actually in our DNA,” he says. “Our wealth management system is API-driven and is built on the premise of connectivity to our clients’ third-party systems, for example SIPP [Self-Invested Pension Plan] administrators and advisor platforms.”
The possibility of an API-driven, modular approach to outsourcing should also allay any lingering fears about further disrupting business at a time when change fatigue must be running high in many organisations. “We see many firms looking to integrate best-of-breed components into their architecture on a modular basis,” Wooders concludes. “This gives them more flexibility and ease of implementation, so there is minimal disruption to the enterprise. This also allows them to go on extracting value from technology that they aren’t ready to move away from yet.” And so, another objection to technology upgrades can be headed off.
The case for outsourcing technology and non-core processes as far as makes strategic sense would seem compelling – and for a very wide range of firms which are looking to cut costs, stand out and scale up sustainably in today’s rapidly evolving markets. But this has yet to translate into levels of outsourcing anywhere near the levels its merits would predict.
It seems that many wealth managers could be overlooking their outsourcing options and therefore losing opportunities to achieve greater operational efficiency, economies of scale and improvements to service.
This forms part of this publication’s latest research report, Technology Traps Wealth Managers Must Avoid. Download your free copy by completing the form below.
i “C-Suite Confidential - Ten Key Tech & Ops Trends for the Wealth Management Sector Looking into 2020”, WealthBriefing, 2019