Top 10 Trends in Wealth Management 2017 Capgemini

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Table of Contents,Introduction 3, Trend 01 Business as Usual Taking Up a Significant Share of. Investment Allocation of Firms 5, Trend 02 Continued Focus on Cybersecurity in Light of Increasing Digitization 7. Trend 03 Fiduciary Duty Gaining Prominence Due to Regulatory Focus 10. Trend 04 Increasing Collaboration between Incumbents and FinTechs 11. Trend 05 Increasing Application of Artificial Intelligence Based Analytics Solutions 13. Trend 06 Surge in Robotic Process Automation in Mid and Back Office 16. Trend 07 Growing Demand for Digital Tools by Wealth Managers 18. Trend 08 Emerging Advisor Client Relationship Models to Cater to Client Demand 20. Trend 09 Evolution of New Fee Models 22, Trend 10 Intergenerational Wealth Transfer Remains a Significant. Growth Opportunity 24,References 26,Wealth Management the way we see it. Introduction, The wealth management industry around the world is witnessing a multitude of changes.
due to weak economies in the developed world strong growth in developing markets. like China and India an uncertain political future in Europe increasing regulatory. supervision and new competition from rising FinTechs and their innovative services for. High Net Worth Individuals HNWIs 1, Our analysis in this paper revolves around the impact of the above mentioned. dynamics on the industry players and how they are adapting through this phase of. transformation see Exhibit 1, Regulatory supervision in the form of the DOL fiduciary rule will have a considerable. impact on thousands of brokerage and wealth management firms in the U S and will. fundamentally change the landscape of the industry as they will be required to act as. fiduciaries for their clients, The rapidly changing client and wealth manager demands for seamless digital. channels of communication and access to portfolio management are driving a lot. of attention of the firms toward digital transformation Delay in this transformation. on the part of the incumbent firms has allowed innovative FinTechs to fill the needs. gap and start threatening the seemingly dominant market share of the incumbents. Incumbents are now mitigating this threat and speeding up their transformation. journey through collaboration with them, Apart from digital demands of clients technology is also changing different aspects. of this industry The advent of robotic process automation RPA increasing focus. on cybersecurity applications of artificial intelligence AI and analytics are also some. major ongoing trends in this industry, Implementation of new regulations such as Implementation of Markets in Financial.
Instruments Directive II MiFID II increasing demand from clients for self services and. personalization and intensifying competition is also forcing wealth management firms. to redesign their fee structures and operating models to put clients interests first and. add value to their relationships to make them sustainable in the long run. The next section provides the overview of the top 10 wealth management trends that. we think will be strategically critical for firms in the near term. HNWIs are defined as those having investable assets of US 1 million or more excluding primary residence collectibles consumables and consumer durables. Exhibit 1 Top 10 Trends in Wealth Management,Focus Area Trend. Business as Usual Taking Up a Significant Share of Investment Allocation of Firms. Risk and Continued Focus on Cybersecurity in Light of Increasing Digitization. Compliance, Fiduciary Duty Gaining Prominence Due to Regulatory Focus. Increasing Collaboration between Incumbents and FinTechs. Innovation, Increasing Application of Artificial Intelligence Based Analytics Solutions. Efficiency Surge in Robotic Process Automation in Mid and Back Office. Productivity Growing Demand for Digital Tools by Wealth Managers. Emerging Advisor Client Relationship Models to Cater to Client Demand. Client Centricity Evolution of New Fee Models, Intergenerational Wealth Transfer Remains a Significant Growth Opportunity. 4 Top Ten Trends in Wealth Management 2017,Wealth Management the way we see it.
Trend 01 Business as Usual Taking Up a Significant. Share of Investment Allocation of Firms, High cost of keeping up with day to day activities is precluding. investment in forward looking initiatives,Background. The wealth management industry is facing one of its biggest disruptive challenges. since the 2008 financial crisis and over the coming decade change in the. industry will likely accelerate, Client needs are changing and becoming more diverse spanning to include more. emphasis on wealth transfer retirement planning and social impact investing. which poses a challenge to wealth management firms. Increase in the number of regulations and compliance operations costs are further. aggravating the challenge, Although firms recognize the need to respond to the changing dynamics of the. industry they are struggling to square those needs against the ongoing pressures. of running the day to day business,Key Drivers, In the face of changing demands of customers and the rise of agile FinTech.
competitors firms are under pressure to reinvent their business models and invest. in development of new propositions, The ever changing and increasing regulations continue to burden firms for keeping. up with day to day activities,Trend Overview, Wealth management firms are adopting different approaches to tackle the. challenging requirements of the changing industry but are struggling to transform. their businesses as they are occupied with ongoing pressures of running the day. to day business see Exhibit 2 2, 39 4 of firms investment budgets are going into internal and external. modernization initiatives with another 15 8 into people and culture. Just keeping up with business as usual takes a further 15 3 of investment. leaving only 14 8 and 14 7 for proposition development and business model. respectively, The time money and mindshare geared toward all these basic running the bank. efforts appear to be making it more difficult for firms to engage in activities such. as re orienting the business model or focusing on new propositions where real. differentiation could occur, Many wealth management firms executives are of the opinion that after the.
termination of the brokerage model it has become difficult to predict and create. the right product offerings as noted in the 2016 World Wealth Report. 2016 World Wealth Report Capgemini,Implications, Firms will have to fully develop and execute clear cut strategies for the future. Each firm is unique and its investment priorities should vary based on current and. desired levels of digital maturity management priorities and the markets in which. it operates, However to deliver a better digital experience to increasingly demanding clients. firms can follow a specific investment approach or a combination of different. approaches depending on their unique circumstances. Balanced Approach Focus equally across different themes including internal. and external modernization people and culture keeping up proposition. development and business model, Innovator Major focus on business model innovation. Modernizer Focus mainly on internal and external modernization. Exhibit 2 Wealth Management Firms Future Investment Allocation Q1 2016. Business Model Modernization,Proposition Development Modernization. Keeping Up People and Culture, Source Question asked Please tell us how you would expect to allocate your investments both effort and monetary investments Imagine you have 20 investment.
chips to allocate across key future investment themes Total 30 responses included. Source Capgemini Financial Services Analysis 2016,6 Top Ten Trends in Wealth Management 2017. Wealth Management the way we see it,Trend 02 Continued Focus on Cybersecurity. in Light of Increasing Digitization, Cybersecurity is a focus area for wealth management firms as digitization. and multi channel models lead to an increase in risk exposure. Background, With evolving digitization in the industry more customers and asset managers. are leveraging the power of massive amounts of financial information for real time. asset and portfolio management, This means that there are proprietary and third party services that have access.
rights to clients and firms financial information in order to provide the end user a. window into their investment performance and management. With significant amounts of assets and sensitive financial information involved the. wealth management industry is one of the prime targets of data breaches. Key Drivers, With the rapid pace of innovation in digital wealth management tools the number. of touch points for the clients also increase and therefore client data privacy and. security concerns are rising see Exhibit 3, This implies that regulations are likely to get stronger and firms will be held. accountable and likely be penalized for lapses in data privacy and security. Exhibit 3 Drivers for Increased Focus on Cybersecurity. Increasing,Regulatory Shift to Cloud,Guidance on Focus on. Cybersecurity Cybersecurity,Access to Data,for Third Party. Service Providers,Source Capgemini Financial Services Analysis 2016.
The Securities and Exchange Commission SEC also listed cybersecurity as a. top priority in its Examination Priorities for 2016 notice given that at least 74 of. wealth managers had been a target of a cyberattack 3. The Financial Industry Regulatory Authority FINRA in its annual Regulatory. and Examination Priorities Letter of January 5 2016 mentioned cybersecurity. as a technology management issue under the priority area of supervision risk. management and controls,Trend Overview, With evolving client expectations and competitive pressure toward becoming. responsive and client centric wealth management firms are now increasingly. moving their technology infrastructure to the cloud. Cloud based services are needed for better response times quicker rollout of. portfolio management services globally and real time analytics. Moving to the cloud also means that risk of data privacy and security increases. when compared to in house IT infrastructure that is maintained by the firm itself. As third party service providers build their services on the data held by wealth. management firms the risk exposure of the service provider is going to affect the. vulnerability of the firm, Proper risk assessment of third party providers should be conducted and. effective risk mitigation measures are required before access rights could. be granted, The first line of defense at most wealth management firms is education of. employees and clients on the basic principles of cybersecurity and periodic. internal and external audits of information systems at the firm and its vendors. Implications, Investments in cybersecurity measures are expected to increase globally as wealth. management firms respond to this ever growing threat. Wealth management firms will increase spend on hosting their private cloud. platforms in order to provide proprietary services to their wealth managers. and clients while also avoiding the risks of data leakage and cyberattacks of a. public cloud, Investment in cyber insurance policies is also an important measure that wealth.
management firms should ideally take in order to protect themselves from bearing. the financial burden in the event of malicious cyberattacks. Is your wealth manager a target for a cyberattack Deborah Nason CNBC February 3 2016 accessed October 2016 at. http www cnbc com 2016 02 02 is your wealth manager a target for a cyberattack html. 8 Top Ten Trends in Wealth Management 2017,Wealth Management the way we see it. Trend 03 Fiduciary Duty Gaining Prominence,Due to Regulatory Focus. Fiduciary duty in conjunction with a best interest advice model. is gaining significance due to further focus on client interests by. regulators,Background, In April 2016 the Department of Labor expanded fiduciary responsibility to wealth. managers to recommend what is in the best interest of their clients. This rule is expected to have widespread impact on the U S wealth management. industry when it goes into effect in April 2017 such as requiring adherence to new. protocols and emergence of new business and fee models. The main thrust of the regulation is for wealth managers who were not previously. subject to fiduciary obligations, The U S often leads by example in consumer rights related regulations as has. been seen before with know your customer KYC and anti money laundering. AML laws and this move opens the door for other countries to follow suit in case. they are not already doing so,Key Drivers, The regulation aims to curb a US 17 billion per year cost to clients due to firms.
incentivizing wealth managers to recommend products that have higher fees 4. The regulation aims to help raise investment advice standards for. retirement accounts by increasing transparency in fees and holding wealth. managers accountable, There has been huge public support to standardize the quality of investment. advice and regulate wealth managers,Trend Overview. The DOL rule will force wealth managers to satisfy the best interest contract. exemption BICE conditions which mandates the wealth manager must disclose. Top 10 Trends in Wealth Management 2017 What You Need to Know Wealth Management the way we see it Table of Contents Introduction 3 Trend 01 Business as Usual Taking Up a Significant Share of Investment Allocation of Firms 5 Trend 02 Continued Focus on Cybersecurity in Light of Increasing Digitization 7 Trend 03 Fiduciary Duty Gaining Prominence Due to Regulatory Focus 10 Trend 04

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