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  • The world of finance finds itself at a crossroads. After years of record-breaking highs, the path ahead has suddenly become altogether less clear. Increasingly demanding investors, changing fee structures, the rise of ‘impact’ investing, and a steady stream of new regulations mean that the path ahead is strewn with challenges, but also opportunities. And this is no different for wealth managers. Their need to streamline processes and reduce costs has never been greater. But crucially, those who are able to do so successfully will have the chance to overtake the competition.

    Some have attempted to address the problem of rising costs by trimming staff numbers, whilst also hoping that this will boost efficiency. Recent headlines are testament to this. However, staff numbers are just the tip of the iceberg when it comes to cost pressures. With wealth managers required to fully disclose costs and charges under MiFID II, clients now have access to a detailed breakdown of what services they are paying for. This increased level of scrutiny is driving up pricing competition and, in such a competitive climate, it’s crucial that wealth managers cut their costs where possible.

    However, whilst cost efficiency is essential, wealth managers can’t afford to focus on this area exclusively. They must start looking beyond streamlining core processes, towards their investment proposition, if they want to race away from the competition. Fortunately, technology is here to help.

    Not only can it help keep a lid on costs, but it can also reduce the administrative burden of new regulations. By streamlining these core elements of wealth management, managers should be left with more time to focus on the areas that need their attention most: developing their investment proposition and managing clients’ portfolios.

    But whilst everyone is keen to make the most of digitisation, firms often try to run before they can walk. While other financial services sectors have made strides in their digital capabilities, PwC recently dubbed wealth management “one of the least tech-literate.” Wealth managers need to focus on building from the ground up and ensuring that they have the bare necessities in place first.

    Their first port of call should be ensuring that their operations are functioning as one, from front-office to the back-office. Not only will this eliminate time-consuming tasks for managers, but the digitisation of processes will boost efficiency, reducing costs and increasing margins.

    Client communications will also benefit. Streamlining core investment processes is ultimately pointless unless wealth managers are able to communicate the impact of this to the client. And having synchronised, digital operations makes that possible. The client experience will improve if wealth managers are able to explain the benefit of these changes to their portfolio and returns.

    As an example, digital wealth platforms allow clients to access real-time information regarding their portfolio and gain an understanding of how cost, investment and tax decisions have directly impacted portfolio performance. Not only can increased transparency nurture existing relationships, but it can also help when trying to attract investors.

    It’s unrealistic to claim that by getting their digital systems in order, all of wealth managers’ problems will be solved. However, it is at least a step in the right direction. By finding the right tech solution for their needs, wealth managers will not only find the right path, but they might also race ahead.

    Ed Lopez - Chief Revenue Officer, JHC