Wealth managers are planning to invest significantly in their digital capabilities in the coming years, as they target more efficient client-facing processes.

Wealth managers are preparing to take a digitisation leap over the next few years, with client-facing and advisory processes set to become key priorities, according to new research by Avaloq and Deloitte.

The reports, entitled Evolving Operating Models In Wealth Management and Innovation In Wealth Management, are based on a survey of 65 wealth management professionals across regions including the UK, Switzerland, Luxembourg, Hong Kong and Singapore. 

A significant 85 per cent of respondents said their firm will increase its technology spend on innovation in the next three years. On average, senior wealth management executives placed their organisation’s current level of digitisation at 48 per cent, with hopes of hitting 76 per cent by 2019. The jump is expected to cover the entire client lifecycle, from onboarding to portfolio monitoring to performance reporting.

Attitudes towards automation in the investment advisory process – otherwise known as “robo-advice” – were mixed. Only a fifth of participants are actively pursuing this, while half appear categorically against robo-advice. In general, wealth managers still view outsourced robo-advisory offerings as very immature.

As firms seek to innovate, they are taking a closer look than ever at how to achieve operational efficiencies. For more than half (56 per cent) of institutions, shifting from standardised processes to value-added ones is high up on the agenda. Client-facing elements are regarded as the most customised, with portfolio management in the lead (48 per cent of respondents), followed by investment advisory processes (47 per cent) and product management and services (46 per cent).

Correspondingly, over half of respondents consider relationship and quality service to be the top value-adds for clients. This view is even stronger among UK and Asian respondents, and those working at private banks. Wealth managers are keen to keep customer relationship management close. Almost nine in ten do not outsource relationship manager CRM and advisory workplace. As for investment advisory processes and portfolio management, a respective 86 per cent and 83 per cent have chosen to keep these activities in-house.  

Avaloq, originally a financial services technology provider, began to develop business process outsourcing (BPO) services five years ago to run the back office of wealth managers and banks. The firm has since seen a sharp increase in demand for both innovative digital technologies and BPO services, head of marketing, Jacquet-Lagreze Thibaut, told WealthBriefing, hence why it chose to delve into these particular areas of research.

The survey found that almost half (43 per cent) of institutions would use any cost-savings from BPO on client-facing technology as a first priority, with 72 per cent placing this in their top three. Overall, enhancing both client and advisor technology, along with developing new products and services are top-three priorities for 70-74 per cent of respondents.

Compliance was flagged as the biggest barrier to innovation for wealth managers, with 30 per cent of respondents identifying this as their number one limiting factor and 50 per cent placing it within their top three.