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Embracing change - technology and ecosystem synergy in wealth management

By EAM.Technology from the Swiss WealthTech Landscape Report 2024

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by The Wealth Mosaic
| 12/04/2024 11:00:00

Dimitri Petruschenko, Co-Founder and Managing Partner of EAM.Technology, introduces the EAM section by looking at the challenges and opportunities for the EAM community.

A central component of the Swiss wealth management community, external asset managers (EAMs) find themselves at the forefront of a paradigm shift driven by technological advancements, regulatory complexities, and evolving client behaviours. This transformative era is marked by both challenges and opportunities, compelling EAMs to an unparalleled reflection on strategy and their organisation.

But what is the critical role of technology and ecosystem collaboration in reshaping the future of independent wealth management? How can adaptation and integration contribute to future success in this dynamic environment?

Indeed, the Swiss wealth management industry is witnessing a seismic shift led by technological innovation. Digital transformation has ceased to be a mere option; it has become a necessity for EAMs striving to remain competitive. From streamlining complex compliance requirements to enhancing operational efficiency and client engagement, technology is at the heart of this transformation and plays a crucial role in the daily activities of an EAM.

Technologies such as data analytics, Artificial Intelligence (AI), and Cloud computing are revolutionising how EAMs can process information, make decisions, and interact with clients. These technologies not only provide a competitive edge, but also address the increasing demand for transparent and personalised services from clients. In an industry where precision and speed are paramount, leveraging technology to automate routine tasks allows EAMs to focus more on strategic decision-making and client relationships.

Furthermore, the adoption of FinTech solutions is reshaping the wealth management landscape. It enables EAMs to access sophisticated portfolio management tools, risk management systems, and customer relationship platforms, previously available only to larger institutions. This democratisation of technology empowers smaller EAMs to compete on an equal footing with their larger counterparts, ensuring a more dynamic and competitive market.

Challenges recognised and key topics identified
EAMs face the task of integrating new technologies into their existing operations, a decision that requires both financial investment and organisational adaption and cultural change. This situation is further complicated by the scarcity of skilled professionals who can manage these specialised tasks on a pro-rata basis, downsized to the size of the EAM’s needs. Moreover, the increase in regulatory demands places additional pressure on EAMs’ compliance, often necessitating significant resource allocation.

Our recently published efficiency study asked EAMs about the importance and urgency of various technology-related topics for the next 12 to 36 months, resulting in an insightful technology roadmap.

Findings show clearly that operational efficiency, IT and cyber security, IT infrastructure and the Cloud, automation of repetitive tasks, and audit and regulation are the most important and urgent topics, making them foundational for EAMs in a time of transformation.

For many EAMs, there is a technological gap to be closed, which not only is a matter of business case, but also a risk of operational disruption. The target lies in finding the right approach to stabilise the cost base while enabling the organisation to scale the business.

The evolving ecosystem in wealth management
The last decade has seen the ecosystem surrounding EAMs mature into a robust and dynamic network, comprising custodian banks, technology providers, and various service platforms. This evolution has been pivotal for EAMs, enabling them to refocus on their core competencies while leveraging external expertise for non-core functions.

The ecosystem's maturity provides a fertile ground for collaboration and innovation. EAMs, by partnering with specialised service providers, can enhance their operational efficiency and client services. This collaborative approach allows EAMs to harness the strengths of each ecosystem solution, creating a synergistic relationship that benefits all involved parties.

The potential for outsourcing non-core functions to specialist service providers in the ecosystem is still large, especially in the domains of IT infrastructure, data management and reconciliation, compliance and risk management, and digital marketing. Furthermore, there is also much room for digitally supported processes in the domains of archiving and document management, fee management and invoicing, internal control systems, order management, and automation of repetitive tasks, showing the untapped potential of most EAMs.

In conclusion, the landscape of independent wealth management is undergoing a significant transformation driven by technology and ecosystem collaboration. For EAMs, adapting to this new paradigm is not just about adopting new technologies; it is about rethinking their business and operating models and embracing the power of collaboration.

As the ecosystem provides mature and proven specialist’s solutions and EAMs are compelled to address the key challenges for their business, the remaining part for many is to find the right balance between in house performed functions and the potential for outsourcing non-core functions to the market, and which processes can and will be automated, and where human action is paramount.

Further insights and experiences will be shared by industry experts in their respective contributions. One thing is clear: the future of wealth management will be shaped by those who successfully integrate technology and ecosystem synergies into their operations and strategy.

Interested in reading the full report? You can read this edition of the Swiss WealthTech Landscape Report 2024 online here.