Wealth and Asset Management Transformation: A Technology Balancing Exercise

A growing number of full-service companies, those that offer both asset management and wealth management services, now recognize that they need to re-evaluate their operations and their use of technology to achieve economies of scale and prepare for the future. These companies realize that maintaining two separate technology stacks creates inefficiencies, drives unnecessary costs, and fails to generate new opportunities at a time when their businesses are growing rapidly. They must adapt quickly to be competitive.

To MeradiaA global leader in investment operations and technology consulting, Tina Madel, CFA, Senior Director and Head of the Wealth Management Practice, identifies common challenges companies face when embarking on major transformations.

“The most common driver of change is the acquisition of a new business to expand services, which sees the business entering either wealth management or asset management for the first time,” says- she. “These acquisitions force companies to support new processes and often integrate with new software solutions.”

Unique business requirements

Despite a growing movement towards transformation projects aimed at achieving greater consolidation of front, middle and back office operations, full consolidation may not be feasible due to differing requirements.

“On the wealth management side, it’s important to deepen relationships with clients and to be able to guide individuals through different and sometimes challenging situations,” says Madel. “The client portal for wealth clients should strengthen the advisor-client relationship more than for an asset manager relationship. »

“Calculations and reporting needs vary from company to company. For example, the wealth management department team must understand the end client’s tax status and margin tax rates to invest tax-efficiently in all portfolios. In addition, reports should support this objective with tax-corrected statements and detailed information: sources of income by type of taxation, cumulative realized gains classified by short term or long term, as well as details of tax batches for held positions,” says Madel. .

“On the other hand, asset managers provide after-tax reporting in accordance with fund reporting standards for pre-liquidation and post-liquidation, which require a different set of inputs and calculations. In general, asset management needs are more focused on the portfolio manager and the investment strategy being pursued. They need analysis against benchmarks and universes of peers as well as tools that visualize the impact of their decisions on performance.

A hybrid of these two types of businesses is the family office. They tend to have complex investments, require data aggregation, support alternative investments, and report on managed and unmanaged investments. Family offices typically employ a team of people with broader skill sets, ranging from relationship management to tax planning and wealth management, each requiring technology to support the scope of services.

How to approach consolidation

Nevertheless, there are still overlapping functions in asset management and wealth managementwhich can be consolidated to achieve cost savings through economies of scale.

One of the best ways to achieve a unified solution is to look at and address the core needs of both businesses, Madel says. “Areas such as accounting, performance measurement and data management are typically shared services within the enterprise. They can be consolidated while continuing to provide required services to multiple business segments,” says Madel.

“Individual business requirements that fall outside of these common requirements can be met through plug-in components that optimize the solution set as needed,” she explains. “In terms of the level of analysis required for each, this is where we see major differences that require a decentralized approach.”

For multi-service companies reassessing their operations and technology, Meradia offers a range of services from developing a roadmap for change, solution design and vendor selection to project management and conversion. system design, implementation and large-scale business transformation.

Madel points out that Meradia takes a “retreat view” and examines both the similarities and differences between the two companies. “[We consider] a broader perspective of where they are now in terms of operations and technology, and to assess both the consolidation opportunities that exist, as well as the ‘weak spots’,” she says.

Additionally, Meradia offers guidance on building or purchasing a solution that can be used by both asset and wealth management teams.

In some cases, a purely “build” approach can result in a solution that better meets the needs of one business unit than the other. Selecting an external vendor could also be a long and laborious process given the thousands of vendors offering different solutions.

“A company’s approach to supplier selection must be forward-looking to meet its future needs,” says Madel.

“Taking into account the cultural differences that exist between the two different companies can also be a problem when selecting a third-party supplier,” she concludes. “The people selecting this vendor need to be unified and consolidated in both their approach and their requirements from the start of this process.”

Michael J. Birnbaum