Wealth Management and Private Banking

15 November 2018

Client Data ManagementSharing EconomyWealth Management and Private BankingWealth Management and Private Banking

Wealth managers must adapt their operating models and infrastructure to take advantage of new opportunities in the ‘sharing economy’. The demands of client data management are evolving with the advance of technology and have elevated the issue of digital governance to boardroom tables across the industry.


  • Business models must adapt to meet the needs of the ‘sharing economy’ where wealth managers work with external providers to adapt their value proposition.
  • Increasing amounts of client data are putting pressure on private banks to improve data infrastructure and migrate legacy platforms.
  • Meeting client needs will become an increasing challenge as wealth managers gear up to serve five generations of clients rather than one or two.
  • Governance approaches toward the storage and sharing of client data will change as private banks become intertwined with the ‘sharing economy’.
  • Only a quarter of wealth managers consider themselves as high performers in terms of gross margin and cost-income ratio.

Key themes

Initial discussions centred on research findings that suggested a shift in business models to meet the needs of wealth management clients in the ‘sharing economy’. A recent survey of 50 C-level stakeholders across wealth managers operating in the UK, Switzerland and the Far East provided plentiful discussion on the ever-changing demands of clients in the digital age. These demands are pushing wealth managers towards shared economy models where firms work with external partners to deliver additional specialisms to clients.

Demographic, social and intergenerational changes are at the forefront of client trends that wealth managers must adapt to attract new clients. The wealth management industry has traditionally lagged other industries when it comes to delivering client-centric value propositions although the need to keep pace has become increasingly obvious. Only a quarter of wealth managers in the survey considered themselves as high performers in terms of maintaining a gross margin of 80bps and a cost-income ratio of below 60%.

Moving toward a shared economy model allows wealth managers to enhance their client capabilities although such an approach demands new governance standards. Delegates noted that governance considerations around external technology partners are now going further up the food chain to board level. Reputational risk is a significant concern for large banks with several delegates noting UK CEOs that have recently had to resign in the event of cybersecurity failings.

Indeed, cybersecurity is a delicate balance between the risk of losing money and a risk of putting up barriers to clients’ usage of services. One example was given of a global private bank that had immediately ruled out an external data storage provider because it wanted to use internal servers to hold all client data. However, the bank quickly realised that the cybersecurity standards of the third-party provider greatly exceeded that of their own therefore it chose to work with a cloud storage partner.

The implementation phase of adopting a technology partner as part of a sharing economy business model is seen as a significant challenge in practice. One delegate noted private banks who had trialled new technologies in Asia before seeking to implement these solutions in their core European markets. It had taken this decision because of a looser regulatory environment and the smaller size of their Asian operations meant that the risk of failure was more contained. However, delegates commonly highlighted that procurement has become a larger hurdle to overcome than getting providers to adhere to their compliance procedures. Smaller firms were seen to have ‘first mover’ advantage as they can be nimble. New entrants also do not have the problem of having to migrate data from outdated legacy systems.

Delegates noted the variety of approaches and considerations that industry operators adopt when analysing how to incorporate technology in their business models. Size and culture are important determinants in the pace of technology adoption across wealth managers.  Several private banks have up to ten different proprietary platforms in operation and are facing a choice whether to consolidate all platforms at once or phase implementation more gradually. Several delegates noted that wealth managers were still at the ‘ideological’ stage of designing client-led propositions where the advances in technology threatens to outpace the development of their business models.

The most eye-catching adoption of technology in the wealth industry is seen among Asian operators where cultural trends differ from UK and European clients. It is now commonplace for Asian clients to send payments to each other through WeChat, an instant messaging platform, with transactions fast becoming disintermediated. However, one delegate wryly observed that UK clients are more likely to change wives or husbands than they are to divorce from their banking provider. Several delegates discussed the prevalence of account aggregation services that allow clients to view all their accounts with different providers in one single interface:

“Clients can now see all their accounts in one place within five minutes of setting it up - private banks used to charge £50k a year for that!”

The session closed with discussion around the future direction of the wealth industry and challenges presented by connecting client data. As the amount of information held on clients increases, the demands on IT systems continue to intensify with wealth managers seeking out partners to share the cost of building the necessary infrastructure. 80% of client information is still ‘unstructured’ and firms face the challenge of connecting data from different sources in a way that makes sense for their business models.


  • Wealth managers must be able to segment their current and future client bases to understand changing service requirements.
  • Private banks are working more with external technology providers to better adapt their offering in the information age.
  • The threat of disruption continues to increase in tandem with the pace of technology as the costs of entry appear to have fallen for new competitors.

 Experts: Richard Berry, Avaloq and Ian Woodhouse, Orbium

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