Wealth Management & Private Banking

Wealth Management & Private Banking

Experts: Mark Shields and Jacquet-Lagreze Thibaut, Avaloq                                          avaloq-240-x-120.png

Facilitator: Tasha Vashisht

Key message

Despite HNWIs wealth being projected to rise by over 20% between 2015 and 2025, profit margins are shrinking (-9bp) compared to 2007. Rising operational costs are also further increasing these margin pressures.

With increasing regulation, its associated costs and pressures on margin growth, wealth managers are being forced to re-evaluate their internal technology processes and explore new markets for growth.

In a session led by experts from Avaloq, a technology-driven financial services provider for wealth managers, universal and retail banks, delegates discussed the future market opportunities as well as solutions for growing costs and concerns around regulation.


  • A constant wave of regulation is hitting the wealth industry which is increasing costs and leading to reduced profit margins.
  • In response to tough requirements of new regulation, some wealth firms are looking towards outsourcing solutions and automating their technology processes.
  • The wealth industry is missing opportunities to better understand their clients through leveraging the wealth of data that firms have access to. APIs and open banking presents an opportunity for wealth firms to use client data more efficiently. It was also debated whether this data should be monetised and at what cost to the client’s trust.
  • Almost half of high-net-worth individuals have multiple wealth management providers. Delegates discussed the need for a strategy to become the core wealth management provider.

Key themes

Margin pressures

Delegates began by discussing slim margin growth due to stagnating revenues and equally growing costs spurred by tight criteria of regulations such as MiFID II and GDPR.  One delegate pointed out that the difficulty with costs is that wealth firms are unable to pass these costs onto clients in the same way that other industries are able to. If wealth firms do consider passing costs onto clients, how can they increase the fees as well as the service value for clients? It was suggested that a new type of service needs to be developed that clients are willing to pay more for.

However, one delegate raised the issue that there are barriers to entry for new services. For example, if a firm offers an investment advice service, this may involve new regulations and a new skill set but the question is: will clients be willing to pay more for that? It was quickly agreed that wealth firms need to mutualise costs in the industry or take the cost into account and set aside the funds for it.


The discussion about technology was broad and touched on areas such as on-boarding, outsourcing and back office processes.

Recent trends indicate that the number of high-net-worth individuals and their collective wealth is increasing thus presenting an opportunity to move towards automating on-boarding processes. One delegate stressed that the promise of technology is that businesses can be automated from the point of request through to execution. On the other hand, one delegate posed the question of whether back office costs have been reduced to the lowest cost possible before considering automation.

This led to an interesting discussion around the costs of automation and whether it is a viable solution for all wealth providers regardless of size. It was agreed that automation is an expensive digital solution which is difficult to make a business case for, especially if you offer a broad service or have a small business model. One delegate shared the example of having to move from serving affluent individuals to high-net-worth individuals because the firm lacked the resources and capacity to support the move to automation. In the scenario where the firm is unable to automate processes in-house, it was suggested that firms consider outsourcing solutions. However, one delegate added,

“Outsourcing isn’t necessarily the answer. The rule of thumb is that 40% savings should be made”

In reality, an 11%-15% basis cost is what can be achieved in savings as added by the experts.  Although one of the ways to combat margin pressures is through outsourcing, this doesn’t necessarily result in growth. If clients see a decrease in costs for the firm through outsourcing or technology strategies then they will expect to see these reductions to be passed on in the form of decreased costs for clients. A few other caveats to outsourcing are the huge amount of resources required and the new wave of costs it creates just to keep pace with regulation. Outsourcing also impacts the client experience and reduces control over it.

Delegates pondered whether there are alternative solutions to outsourcing. It was suggested that outsourcing makes sense for businesses where growth is imminent. The smaller the player, the harder it is to justify the spend.


Is it possible for banks to leverage or buy data in a regulated environment? This is the question that was posed to delegates, prompting a discussion around the potential for wealth management providers to use and/or sell the data they are privy to. Delegates agreed that,

“Data is gold because it can be used to generate revenue”

However, as one delegate pointed out, even though banks have access to client data, it cannot be used in the same way retail businesses do. Delegates in the room seemed more cognizant of the challenges of monetising data given that they operate in a highly regulated industry.

Where retail businesses may be able to sell their customer data, wealth firms are in a position of trust by clients who do not expect wealth firms to use their data in similar ways that technology firms do. It was stressed that although wealth firms may not see selling data as an option, it is important that the data should be used better internally to improve the client experience. APIs and open banking presents a looming opportunity for wealth firms to use client data more efficiently, however, wealth managers see more challenges in implementing this.

Briefly discussing competitive threats, delegates agreed that while challenger banks are skilled at leveraging client data, the relationship is paramount in this industry – that is where the relationship manager comes in.

Improving share of wallet

 “43% of high-net-worth individuals have five or more wealth management relationships”

Recent research indicates that although high-net-worth individuals have core wealth management relationships, many are choosing to give their share of wealth to more wealth managers who conduct different types of transactions for them. Experts put forward the question of whether banks should have a strategy in place to become their core wealth management provider, especially if their mission or goal is to provide a holistic service for clients. It came of no surprise to delegates that they are competing for high-net-worth individuals share of wallet but one delegate answered that it may not be necessary to have a strategy in place but rather clients should have multiple relationships with banks based on expertise and their wealth goals. Another delegate remarked that,

“A client who doesn’t multi-bank is really badly advised”

It was further suggested that having a lower share of wealth presents a lower risk to wealth firms (and clients). It was concluded that although firms can’t control all of a high-net-worth individual’s wealth, they can take a primary share and offer advice on other investments even if they don’t manage them directly.


To conclude, delegates agree that regulation costs are leading to margin pressures but it is difficult for banks to pass this burden onto clients. Instead banks must anticipate these costs and make funds available or find a way to mutualise these costs.

Many agreed that there is a need for automated processes to keep pace with changes in regulations. However, wealth firms (especially smaller firms) must weigh up the costs and benefits of this implementing this digital solution in-house or by outsourcing it.

In terms of the potential for data to be bought and sold, the imminent opportunities of API and open banking are interesting in theory but delegates see the drawbacks in client trust if they choose to monetise their data.

Lastly, firms see an opportunity to increase share of wallet of high-net-worth individual’s wealth as it may be another avenue for growth. However, wealth managers operate in a difficult and competitive environment where high-net-worth individuals are becoming reluctant to consolidate their wealth.