The shift in the wealth management landscape from a client and regulatory perspective have significant technology implications for Asian Wealth Managers. There are three key areas in Wealth Technology that is taking centre-stage; namely, an increasing focus on client-centricity, using compliance as a competitive advantage, and a relentless focus on lowering the cost to serve through platform change.
Private banks have seen an increase in younger high net worth clients, a consequence of successful entrepreneurs getting wealthy at a younger age and wealth inheritance. This younger client group is technology savvy, more proactive and demands greater transparency in investment management. The mobile generation want to be the first in the know of changes in the marketplace that might affect their investments. With a client-centric platform in place, banks can gain competitive advantage through next-generation mobile sales and financial planning tools, as well as consolidated reporting functionalities. This will drastically change the client experience in the entire investment advisory process.
Financial Planning can be done on IPads, investment research materials or price alerts will be sent from client websites, or have the information pushed via short message service (SMS), emails or mobile applications. Trade instructions will be input into the remote banking solutions that are integrated with the banks’ trading platforms. Clients will also review the performance of their investments anytime and anywhere, and create their own customized reports on client websites for analysis.
Compliance for Competitive Advantage
Against the backdrop of increased regulation, Banks that adapt their processes and technology platforms to meet regulatory requirements will not just meet the hygiene factors of compliance but more importantly, regain client confidence and trust. For banks in Asia, there are two key compliance focus areas – FATCA and investment Suitability.
Adapting a bank’s IT systems to meet FATCA requirements is a big challenge. Systems and data from front-to-back will need to be reviewed, e.g. KYC controls during client account opening and pre-trade checks for FATCA compliance will need to be embedded. Many banks are also starting to invest in compliance technologies (e.g. KYC, AML and anti-fraud technologies) in a bid not just to comply with new regulations, but also use it as an opportunity to consolidate client data and revamp decades old, siloed technology that has diffused throughout the organization.
Regulators have proposed new requirements that sales intermediaries evaluate the knowledge and sophistication of their investors and attempt to classify investment products according to risk or complexity. A next-generation bank aiming not just stay compliant with investment suitability guidelines but turn it into a competitive advantage would be prudent to focus on platforms which can help monitor clients’ adherence to their investment objectives. Pre-trade, some best-of-breed platforms are emphasizing the ability to check, in real-time, if a client’s trade is in line with his objectives. Post-trade, many vendors are introducing standard investment suitability reports or incorporating transaction monitoring engines to detect anomalies in investment behavior.
Lowering the Cost to Serve through Platform Change
Many Banks in Asia are optimizing processes and undergoing platform change to satisfy the need for business agility and newer investment product offerings. Second, there is also heightened consolidation activity, with banks running heterogeneous core platforms merging into one operation. Third, off-shoring and near-shoring of non core functions continues as there is increased maturity and experience of what works and what does not.
A key question asked of platform change is the “Buy or Build” one. It is worthwhile considering if a prospective private banking package has the functional fit for a bank in the region, particularly around localization considerations.
Another key lever on successful platform change is architectural governance - implementing formal processes in the bank to monitor all activities which can impact the technological landscape in any way e.g. RFP issuance, architecture reviews, deployment to production
The role of technology in the evolution of wealth management remains critical and is definitely the key enabler to achieve all the changing requirements and client demands, as well as the key differentiator to stand-out from tight competition
Liew Nam Soon, Partner, Financial Services Advisory Leader, Asia Pacific at Ernst and Young Solutions LLP.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Liew Nam Soon is Asean Financial Services Market Leader at EY. He has over 20 years of consulting and industry experience in business transformation and implementation of technology and operations. He has worked in industries including retail, private and investment banking, asset management, corporate banking and life insurance.