By Tamsin Hobley, country head, UK & Ireland, SIX
While growth returning to the UK economy can only be seen as a positive, wealth managers can ill afford to be lulled into a false sense of security.
From the pandemic to Brexit, the subsequent hangover of these unprecedented events means wealth managers have no choice but to continue to innovate in order to survive in this new and highly unpredictable world.
As Covid has forced the majority of companies to work from home for an extended period of time, the wealth management industry, which has traditionally relied on in-person interactions, has also been forced to go digital.
On top of this, the lack of a full post-Brexit equivalence agreement between the UK and EU has caused further market unrest, particularly in respect to funds data. UK funds subject to both EU and UK rules (or with clients also subject to both), will need clarity on whether or not they will need to split out reporting duties so that they can commence the necessary information.
However, Brexit and Covid have by no means been the only shows in town for so far this year. Unexpected and highly volatile market events such as the GameStop/Melvin Capital and Archegos/Viacom sagas have raised some serious question marks around risk management procedures across the industry.
Tamsin Hobley
It is hard to think of two events that better argue the case as to why modern-day wealth managers need a real-time, as opposed to end-of-day, view of prices.
If wealth managers have any hope of navigating themselves through similar future bouts of unexpected stock volatility, they need to combine their heritage of human engagement, with more automation and the smart use of technology to meet the increasing demands of a second-generation investor.
The investment maturity and sophistication of the next generation should not be taken lightly and if they expect to generate 10-15 percent revenue out of their capital, wealth managers need to deliver quickly.
Often during and after periods of extreme market volatility, as experienced with Viacom and GameStop, corporate attention is refocused around cost and risk control. As a result of an event, greater emphasis on seeking efficiency gains across the business, so the availability of new technology and new ways to access data becomes even more important. The data that wealth managers require is broad and highly diverse.
Ultimately, due to the breadth of data firms now need to handle, a more robust business infrastructure is required. In order to improve efficiencies, workflows and manage working remotely with their own clients, wealth managers are increasingly turning to technology to support all aspects of their offering, including front, middle, and back office operational issues.
Wealth managers are also looking to invest resources in technologies which enable them to continue servicing their own clients to a high standard now more than ever before. This includes investments in digital reporting, underpinned by high quality data and services, better self-service tools and systems which demonstrate greater transparency into their investment decisions and related products.
The operational burden of digital relationships has also caused wealth managers to consider earlier transitions to automated systems such as machine learning and artificial intelligence to efficiently manage client communications.
Yes, events such as Covid and the continued aftermath of post-Brexit Britain continue to loom large.
But what other highly volatile markets events of this year have shown is that wealth managers can’t predict what is round the corner.
When it comes to helping wealth managers overcome these challenges, regardless of the event in question – the provenance and purity of data and the security of the decisions made are crucial to identifying those all-important key risks.
The business models underpinning these risk areas, which include macro and geopolitical events, are fundamentally changing.
Firms need data sets that can adapt quickly to any sudden bouts of market volatility. In turn, systems and technologies will need to modernize in order to accommodate such data and help wealth managers increase their data assets without increasing the associated costs.
As such, adopting the right technology will go a long way to ensuring that the UK wealth management industry can be certain that they can manage client money in the most efficient and effective way possible, regardless of what the wider world has in store next.
PAM Insight and SIX are hosting a webinar on 'Why wealth managers of the future need a Chief Data Officer' on Thursday, 1 July between 9.30am and 10.30am. Register here.
