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An Overview Of Technology Challenges Facing Wealth Sector

Daniel Giannotti, March 20, 2020

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Capita Consulting is this publication’s consultancy partner on a ground-breaking new research report, “Technology Traps Wealth Managers Must Avoid”. Here, Daniel Giannotti, head of capital markets and investment management, outlines the main technology challenges his firm sees wealth managers grappling with out in the market – taking in a number of “classic” technology traps along the way. 

Trap 2: Getting caught up in hype at the expense of strategy 
Wealth managers are falling behind: 68 per cent say that learning about and keeping up with new technology is a top challenge. (v)  They are not alone. Leaders around the globe are reporting poor returns on their digital investments due to an inability to scale digital innovation beyond early pilot work. (vi) The problem is not technology choice; it’s the ability to navigate the options. Will a build or a buy strategy deliver the desired outcomes?

Third-party technology vendors with flashy new toys may excite, but don’t be blinded by the lights. Due diligence is vital, encompassing the following as a minimum:

•    Carry out an in-depth assessment of the underlying third-party technology: This can uncover hidden issues early, avoiding problems during implementation.

•    Consider the alignment of the solution to the business strategy: This will help to focus your investments.

•    Do the numbers: What are the use cases? How will they generate tangible value for core and next generation clients? What return on investment can you expect?

On the other hand, firms pursuing a build strategy need to be confident in their ability to deliver and then manage the technology. Common pitfalls include extended time to market, lack of a product roadmap and cost management.

In both instances, evaluating ongoing costs and selecting technology partners that can support the business through technology change are important. Smart, controlled pilots lower risk, so start small, keep it simple and iterate quickly. Remember why you started and constantly test alignment to business objectives and value. Return on investment is king!

Trap 3: Building on shaky data foundations
Strong data management practices that support data quality and governance are central to successful digital transformation. With regulatory changes democratizing access to data, and advancing technologies offering new ways to use data, robust data management practices are becoming critical to digital technology change. Yet many organizations miss the opportunity to improve and reinforce these critical foundations.

Wealth management firms have a vast amount of data at their disposal. It’s a valuable strategic asset that is being under-utilized. This data, currently held in myriad (often legacy) systems, can be turned into actionable insight to enable better outcomes for clients, end-users and the organization. However, it takes upfront planning and disciplined execution.

Key data challenges include:

•    Poor data quality and governance

•    Inadequate strategies to prevent and respond to data breaches

•    Missed opportunities to connect data across systems and harness insights across the estate

•    Underestimating data orchestration and migration challenges

Investing more time and effort to leverage the power of data when delivering technology change can result in better end-user outcomes, improved regulatory compliance, and more cost-effective programme deliveries.

Trap 4: Forgetting to invest in people
Under-investment in people and culture change is one of the biggest technology change traps for wealth managers.

The right skills, culture and behaviors are vital to drive adoption and unlock value from the investment. Getting this right will take some planning, but put simply, without it the technology will fail.

The current skills gap in the sector presents a real threat to growth. This requires consideration at the project and organizational level. While partnering can alleviate emerging digital skills gaps somewhat, the firm must prepare for long-term delivery and management of the current and future technologies it intends to operate. That means putting change management strategies in place, as well as recalibrating talent management.

Adoption of new technology tends to fail where employees do not understand or experience the value of the new technology. If training and communications are only covering “how to use it”, they are falling short - technology change needs to be introduced with context of the business problem it is trying to solve. In wealth management, where there is some inherent resistance to change, it can really pay off to simulate the new world so the workforce can fully appreciate the benefits. Be careful not to gloss over any shortcomings (e.g., interim manual processes), as this can have long-term consequences.

Treading a mindful technology path
Digital transformation is non-negotiable if wealth managers wish to stay competitive and market-relevant. But they must pick their paths carefully.

As this report highlights, many hidden technology traps lay in wait for wealth managers. Firms avoiding them will realise the full potential of digital technologies faster, and maximize their positive impact right across the business. Those falling prey to them may be counting the costs for years to come. Much depends on knowing where missteps commonly occur.

At Capita Consulting we work alongside an ecosystem of innovative, world-class technology partners dedicated to wealth management. Our expertise and best practices can help you deliver successful and sustainable digital technology change. Have an idea or a problem? We can help.

Contact the author: Daniel.Giannotti@capita.com 

This forms part of this publication’s latest research report, Technology Traps Wealth Managers Must Avoid. Download your free copy by completing the form below.

Footnotes:

i,  BCG, 2019

ii,  McKinsey, 2018

iii,  Forrester, 2019

iv,  UK Treasury Committee, 2019

v,  Thomson Reuters, 2018

vi,  Harvard Business Review, 2019

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