Friday Highlight 

Key questions to ask your wealth tech provider

Key questions to ask your wealth tech provider

Rising costs and growing client demand are making technology an increasingly important force in the wealth management space.

Numerous ‘wealth tech’ providers have joined the market to offer traditional wealth managers the opportunity to outsource parts of their client book as a way of increasing profitability and reducing regulatory burden.

With current wealth tech providers offering everything from an ‘end-to-end’ service to basic model portfolio software, it is essential that wealth managers do their due diligence to ensure that whatever solution they find ultimately serves their clients’ needs.

Here are some critical questions to ask when looking into wealth tech solutions.

Who is behind the offering?

A significant contributor to the wealth management sector’s sluggish adoption of technology has been a lack of suppliers that genuinely meet the sector’s demands.

Many digital solutions come from pure software boutiques with little or no ‘real world’ experience in critical areas like portfolio management, compliance and onboarding – which are constantly having to adhere to new regulatory requirements.

These firms can develop a piece of software tailored to a list of needs.

However, do they really understand what is required by wealth managers and their customers?

Ultimately, client needs may not change much over the years, but the industry itself is in constant change.

Technology is great, but experienced knowledge of the industry will ensure that technology does not become the tail that wags the dog.

Does the service meet my needs?

Areas like onboarding, reporting, and compliance have become as important as portfolio management in the wealth management process.

However, many wealth tech providers chose to outsource their back-end requirements and focus entirely on developing a basic investment offering. This may be adequate for consumers, but it is far more complicated when it comes to providing a broad range of services to wealth managers.

A digital service that does not control onboarding, portfolio management and reporting itself cannot sell itself as a complete service.

If you are looking to outsource more than investment management, then you should look at solutions offering an ‘end-to-end’ service to reduce regulatory burden and costs.

Can the service improve my profitability?

The cost of meeting compliance and regulatory requirements have increased significantly for wealth managers over recent years.

As a result, servicing the lower end of client books has become uneconomical under the traditional wealth management model.

Outsourcing the management and engagement of these clients can reduce costs significantly, turning unprofitable books into profitable ones.

It is worth comparing the fees charged and services offered by a range of services to find the ones that can both reduce your cost/income ratio and provide a full suite of services.

How will my clients’ money be invested?