Evolving operating models in wealth management

Wealth managers and private banks are rapidly evolving their operating models in response to seismic shifts across a range of business-critical areas and, for many, alternative sourcing models are looking increasingly attractive.

The findings of the research1 we conducted on Business Process Outsourcing (BPO) in cooperation with senior Wealth Management from more than 65 financial institutions2, brought to light ten key insights:


1. Wealth managers have strong desire to step away from standardised processes to focus more on value-adds

Some 56% of institutions regard reducing the effort they spend on standardised processes in order to focus on value-added ones as an important or critical priority. Fewer than a tenth of respondents said that this was not on the agenda at their firm.

Evolving operating models in wealth management

2. Focusing on core business the biggest BPO driver

Of all the potential drivers towards outsourcing, a desire to focus on core business ranked top, with some 85% of respondents rating this as an important or very important driver. (Correspondingly, only just over a tenth of institutions have offered or are considering offering BPO services to their peers.)

3. Quality and efficiency close behind, data security tops worries

Institutions’ second- and third-biggest drivers towards BPO are accessing best-in-class processes (82%) and improving efficiency through industrialisation (80%). Data security tops wealth manager’s worries with 69% citing it as a top 3 risk factor.

4. Firms are eying efficiency gains of at least 20%

In assessing the business case for BPO, over nine-in-ten (93%) institutions would seek efficiency gains of at least 20% to enter a contract, and 58% of respondents would want 30% or more.

5. Relationships, investment advisory and CRM remain closely held

Almost nine-in-ten (89%) do not outsource relationship manager CRM and advisory workplace. The survey also showed high reluctance to outsource investment advisory processes and portfolio management. Respectively, 86% and 83% have chosen to keep these activities in-house.

Unsurprisingly, over half (52%) said that relationship and quality service is where their firm provides most value for clients, with this belief even stronger among the UK and Asian respondents, and those working at private banks.

6. Client-facing elements most customised

Portfolio management is regarded as a customised/very customised activity by almost half (48%) of participants, closely followed by investment advisory processes (47%) and product management and services (46%).

7. Payments, corporate actions and securities-transaction processing ripe for BPO

The most standardised processes at institutions are payments processing (deemed standardised/very standardised by 70%); corporate actions processing (68%); securities-transactions execution routing (66%) and bank accounting and regulatory reporting/tax reporting (63%).

Client reporting is where the survey respondents really expect outsourcing providers to excel, as yet there is fairly muted take-up of outsourcing here.

8. Cost-savings from alternative sourcing earmarked for client-facing technology

The survey indicates that almost half (43%) of institutions would redeploy any cost-savings and capacity enhancements delivered by BPO on client-facing technology as a first priority, with 72% placing this in their top three. Meanwhile, enhanced technology for advisors was the top option for 29% of respondents and a slightly higher 74% put this as a top-ranking aim. Developing products and services was a strong third-choice for participants at 34% (71% had this as a top-three option).

Overall, we see that enhancing both client and advisor technology, along with developing new products and services are top-three priorities for 70-74% of participants collectively.

9. Tax services, standardised processes top the outsourcing rankings

According to the survey, the activities most commonly outsourced wholly are: tax services (37%); client tax reporting (36%); reference data and market data management (31%); securities-transactions execution routing and settlement (32%); and digital channels for clients, such as ebanking or mobile solutions (29%).

10. Two-thirds at least partially outsourcing IT; room for improvement on client-facing digital channels

The picture including partial outsourcing is rather different, however. With two-thirds (65%) of respondents outsourcing at least in part, IT ranked top, with investment research also figuring highly (52%).

While the survey found relatively high levels of outsourcing in client-facing digital channels, these don’t appear to be very well regarded. Strikingly, 61% of respondents who fully outsource digital channels rate the overall offering as either immature or very immature.


Deloitte industrialisation framework

These findings also demonstrate the imperative of industrialisation in banking in order to address increasing cost pressures. Although industrialisation in banking is not a new concept, its benefits have not been fully realised, as industrialisation has not been a top-priority for many banks.

Monitor Deloitte Financial Services Switzerland identified nine distinct levers for banks to improve and accelerate their industrialisation efforts, the report ‘Evolving operating models in wealth management’ covering the lever ‘Value chain re-engineering’. These levers enable banks to re-configure themselves into fully industrialised financial institutions, increasing productivity and economies of scale, whilst reducing error rates.

Monitor Deloitte Financial Services Switzerland is currently conducting a comprehensive survey to gain deep insights on industrialisation in Swiss banking. Senior executives representing more than 30 banks are participating in the survey, providing “first-hand” perspectives on the impact, the benefits and the implementation effort associated with each of the nine levers. The findings of this survey are expected to be published in Q3 2016.


1 Evolving operating models in wealth management, May 2016, WealthBriefing report in cooperation with Avaloq and Deloitte

2 Geographical split: UK: 42%, Switzerland/Luxembourg: 15%, Hong Kong/Singapore: 23%, Other: 20%

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