Wealth Management in the cloud

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1 Wealth Management in the cloud e xperience e xcellence e xpertise e xecution

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3 Wealth Management in the cloud As the wealth management market continues to evolve and embrace new technologies, cloud technology has emerged as a primary enabler for growing wealth and investment firms to deal with increased regulatory pressure, a demanding client base and shifting generational wealth from baby boomers to millennials. Millennial-Ready Technology Millennials as a generation are increasingly tech savvy, up to date on trends - and spoiled for choice; by 2020 millennials will control over half of all investable assets 1 and wealth managers are counting on new online and mobile offerings to attract new clients. With the wealth of technology on offer, firms are now shifting toward more client-orientated products, where cost efficiency, ease of use and 'a state of the art customer experience' 2 are paramount to success. With the threat of shifting generational wealth, new technology orientated and robo-advice firms, wealth managers of all shapes and sizes are facing enormous pressures to remain compliant, increase client retention rates and meet clients increasing needs. The Rise of Cloud Technology Solutions and the CRM Ecosystem For wealth and investment management firms, the value proposition for leveraging cloud technology affects the entire business. In a world that is increasingly underpinned by cloud technology, a growing number of systems and solutions are now being delivered in the cloud, with chief innovators looking to the cloud to drive new delivery channels and vastly expand product stacks. Microsoft Dynamics CRM Online is leading the way with this trend, having outlined a Mobile-First, Cloud-First mantra indicating their focus for the future. In the wealth management industry with fierce competition for clients and new business, changing attitudes have shifted the traditional business paradigms from product-centric to client-centric. 1 PwC Wealth Management Trends PwC Blurred Lines: How Fintech is shaping Financial Services, Global FinTech survey 2016 Clients now demand more control and convenience over their information, their products and portfolios and the methods in which they are serviced. Cloud technology offers an effective model for delivering innovative client experiences, enhanced collaboration and improved speed to market propositions. Legacy systems can be replaced with agile, best of breed systems that can quickly respond to new business needs in an ever changing environment. Rigid processes and stilted methods of client interaction can be replaced with omni-channel experiences to better engage with clients, whether it be through self-service, video conferencing or simple transparency of information across the firm. The driving force behind cloud technology in Wealth Management has come from the revolution of cloud based CRM systems. In days gone by, thoughts of Customer Relationship Management (CRM) systems brought about images of large, complex and expensive installations of often internally focused and siloed systems. Today CRM can act as an ecosystem. It can bring together disparate groups of people who can collaborate and share resources, information and processes. The ability to respond to rapidly changing client needs is a key competitive differentiator. Much like other industries, wealth management firms are continuously seeking ways to improve their agility and adjust to market demands. By enabling businesses to rapidly adjust processes, products and services to meet the changing needs of the market, cloud technology can help drive speed of innovation, and reduce time to market..0303

4 experience 94% of wealth managers believe the industry is lagging behind in the use of IT Regulatory Scrutiny Technology is playing a significant role in the industry, especially in providing evidence to the regulator, and it comes as no surprise that 69% of respondents said their CRM / KYC system will need significant changes as a direct result of MiFID II 3. The ongoing revision and fine-tuning of regulatory policy around KYC and suitability of recent years has demanded a greater degree of transparency. Technology that supports this is fast becoming a necessity and can ultimately help firms avoid hefty fines from the regulator. With mounting pressure and scrutiny from the regulators, wealth managers are facing increased pressure to change the way they operate; adapt processes and bolster their technology. A staggering 94% of wealth managers believe the industry is lagging behind in the use of IT 4. Huge demand for CRM technology and digital transformation has made it the fastest growth area in the UK FinTech sector as the investment industry gets to grip with tightening conduct regulations, increasing demand for optimal client operations and digital service provision. For many firms this means facing huge costs to overhaul their current legacy systems which are now increasingly out of touch with today s changing regulatory environment and client demands. The FCA has responded to the needs of wealth and investment managers and published guidance for firms outsourcing to the cloud in November 2015 to provide regulatory clarity. The report highlighted choice and control regarding the jurisdiction in which the data is stored, processed and managed and access to data as key points of consideration. Key cloud technology providers such as Microsoft and the Microsoft Azure platform have looked to address jurisdictional concerns around data sovereignty by enabling firms to choose the jurisdictions in which the data is held and processed, providing both flexibility and security to large firms. Around 85% of firms in wealth management are already using or are planning to implement cloud based technologies in the next two years 4. Concerns about regulatory issues, legacy systems, connectivity and perceived costs dropped by 19% on average between 2014 and 2015, and firms are increasingly seeing the cloud as a means to not only survive in a challenging industry, but also to prosper quickly and efficiently Compeer WealthTech Compeer WealthTech

5 excellence Hassle-Free and Rapid Deployment Reliability and Access Flexibility to Grow Benefits of the Cloud Cost Savings and Subscription Billing Global Reach 0101 Security and Data Privacy Benefits of the Cloud 1. Hassle-Free and Rapid Deployment Wealth managers are finding that the state of their legacy technology is not helping due to constrained system capacity, limited availability of test environments, static release schedules and fixed maintenance timetables which make implementing change more challenging 5. Many wealth management firms are now looking to cloud based solutions which offer a delivery model designed to establish systems quickly and efficiently, reducing the time required for IT procurement to virtually nil. Testing environments can be created in a matter of minutes and with minimal in-house expertise. 2. Reliability and Access Relationship managers no longer need to wait for records and access to systems based around onsite servers and client data becomes a tangible asset to improve and maintain a client relationship. Cloud based systems give quicker access to more accurate client information, such as where the client is in the onboarding process, as it can be accessed directly any time, from anywhere with an internet connection. Many cloud platforms now provide guaranteed uptime of at least 99.99% and redundancy and disaster recovery at the highest levels ensuring that key client information is always available. 3. Cost Savings and Subscription Billing Cloud based solutions have come at a time when cost optimisation in the industry has become an increasingly important factor. It enables firms to move from variable cost planning to fixed cost planning which can offer a substantial capital cost saving, with no in-house server storage and no requirement to have on-premise infrastructure. There is also little need for hardware maintenance, removing the associated operational costs. User and component subscriptions are also offered at a fixed price per user per month allowing for greater ROI and scalability and many providers now offer an all in cost for infrastructure, software and support. 4. Security and Data Privacy Security levels at cloud servicing companies are much higher than those provided by an average local IT room. Almost all providers now offer advanced automated back-up policies and failover procedures to ensure that the system is always available and providers are also often accredited to the highest process and due diligence ISO standards. The wealth management industry has been sceptical of cloud technology in the past, due to perceived sensitivity of client data, but there are now strong safeguards in place to ensure security. Data encryption can now be applied by firms to remove any possibility of external access and large datacentres often have strong physical, network and data security protocols. Some firms have also reacted strategically to jurisdictional concerns by outsourcing management of datacentres to non US-based companies to ensure wealth management firms remain compliant. 5. Global Reach Cloud technology has the inherent ability to serve different content to different users, whether it be differing languages, currencies or business models. As wealth management firms grow into new geographic markets, they will need the software and platform to support them. Legacy infrastructure of disparate and localised systems will not support that growth; a single platform that can easily leverage multiple geographies without the need for a physical presence makes the cloud the strategic choice EY IT in Wealth Management 2015

6 expertise Around 85% of firms in wealth management are already using or are planning to implement cloud based technologies in the next two years Benefits of the Cloud continued 6. Flexibility to Grow The ability to respond to the changing business and regulatory landscape and remain agile is a core attribute of cloud technology. Traditional software systems can often require complex upgrade cycles and additional hardware or software to scale resources up or down. Firms that adopt a cloud based model can benefit from regular product improvements that adapt to industry and regulatory changes with minimal hassle. Technology is constantly updating and improving, and in order to remain competitive it is vital to keep pace with evolving client demands as a direct result of technological advancements. With the fine-tuning of regulatory policies and ongoing revisions of firm s processes, firms must ensure that the technology they deploy is constantly up-to-date and keeping step. The Cloud Revolution - The Essential Enabler for the Wealth Management Industry Cloud technology is the new normal. Technology service providers are supporting the industry in embracing this major step forward with dependable, forward thinking solutions that will enable wealth and investment managers to embrace this change without burdening their operation or limiting their individuality. Cloud is poised to transform the economics and performance of the wealth and investment sector in the next few years. As millennials take up senior positions in the industry, demand for technology that can aid and simplify processes are on the rise and increasing regulatory pressures have moulded today s systems and their functionality, and as a consequence old legacy systems are quickly losing their place. Firms needing to implement new systems quickly in order to remain abreast of regulatory pressures are looking for alternative technologies that can get them functioning and compliant in a shorter space of time. Greater control over retaining data sovereignty by enabling firms the flexibility to choose the jurisdictions in which their data is held is allaying regional concerns in the market. In an increasingly digital age, wealth management firms that utilise the latest innovative technologies to their advantage will continue to thrive

7 execution Technology is constantly updating and improving, and in order to remain competitive it is vital to keep pace.07

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