New research from Citi Business Advisory Services, in partnership with Citi Securities Services, released today highlights the need to transform business and operating models amongst wealth managers as declining fees, low margins; and increasing costs of regulation and compliance continue to pressure the industry.

The global study “Disruption and Transformation in Wealth – Future-proofing Service and Operating Models” found that 71% of participants surveyed identified the overall client experience as a top priority. This heightened focus on client experience and more specifically the digital client experience stems from evolving client expectations and the threat of digital disruptors.

Structural shifts including the emergence of new wealth, coupled with uncertainty in global markets and a fluid regulatory landscape, have pushed the wealth industry to address the fundamental challenges of maintaining and growing relationships with their end clients.

In order to effectively deliver an enhanced and digitally-enabled client experience, wealth managers and private banks should focus on transforming their operational, technology and service models, the report suggests. When asked about their preferred technology development strategy, an overwhelming 75% of survey respondents prefer to work with external parties.

The study also found that there is a clear distinction on which functions are more likely to be outsourced or considered for outsourcing.

• 46% of respondents prefer a hybrid model, upgrading their in-house systems with third-party tools
• 66% of respondents either already outsource or are likely to consider outsourcing post-trade services
• The top three areas that respondents are unlikely to consider or outsource include most of the client-facing activities such as onboarding and KYC (56%), client services, reporting and data (50%), and compliance, regulatory and tax reporting (54%)

Okan Pekin, global head of securities services at Citi, said: “The emergence of new technologies, demands for a native digital client experience and the largest intergenerational wealth transfer in history pose significant challenges to the entire wealth industry. Our research outlines ways in which we can re-imagine service and operating models to deliver solutions to wealth managers to address these challenges.”

“Disruption and Transformation in Wealth – Future-proofing Service and Operating Models” includes quantitative and qualitative data gathered from 23 interviews and almost 160 survey participants across retail, wealth, and private banking segments in APAC (40%), Europe (41%), and North America (17%). Collectively, these insights provide a rare, holistic view into the ongoing developments across the entire wealth spectrum.

Other key findings include:

The three most important areas of focus for technology and operations were identified as:

• Digital client experience (67% of respondents)
• Trading and execution services (53%)
• Global operating and client service models (39%)

Almost half (43%) of survey participants ranked budget constraints as the top barrier to transforming their technology and operations

As we look to the future of wealth, the drive for scale and efficiency is accelerating consolidation across the entire industry.

Andrew Pitt, head of research and content for institutional client group at Citi, said: “Based on our study, it is clear that the wealth industry is at an inflection point, and it is critical that wealth management providers servicing the mass affluent to ultra-high net worth clients need to get their operating model right. Moving forward, we see trusted partnerships as key to success as consolidation continues.”

Re-disseminated by The Asian Banker