Innovation Tactics - Adapting business models for competitive advantage

09 November 2023

Back OfficeCompetitionInnovationIntegrationLegacy SystemsMindful OfWealthTech Matters

Expert: David Ferguson, Chief Executive Officer at Seccl Technology Facilitator: Blaise Cardozo, Director of Sionic


The overall cost to clients in the wealth management industry is currently quite high, around 180 basis points, but there is potential to reduce this significantly through better use of technology, process improvement, and pressure on fees charged by asset managers.


The discussion focused on how legacy systems, fragmented data, and lack of integration between front, middle, and back-office systems hinder efficiency and innovation. Many legacy technologies, platforms, and point solutions do not interoperate well, leading to high integration costs and duplication of capabilities across providers. But more simplified architecture with common standards could reduce this burden, and newer entrants are showing it is possible to have much more integrated and cost-effective systems using modern Cloud-based and API-driven architectures.

Cost to serve could be brought down significantly by innovation, leading to fewer but better-integrated core systems. For example, fixed overhead costs and complexity make it very difficult currently to serve smaller balance clients profitably.

For High-Net Worth Individuals (HNW), having the architecture and integrations to deliver the high-quality service that clients demand is now expected. Indeed, client expectations have been raised by good experiences in other areas of life, and they now require a Netflix or Amazon-like service delivery with high levels of personalisation from their wealth manager, too.

Digital onboarding, 24/7 access, transparency, personalisation, real-time data and the like are also now expected. But providing all this requires changes to systems, processes and mindsets. A culture of technological innovation that comes right from the top is therefore a must for wealth managers in order to successfully negotiate change and deliver what is necessary for strategic success.

In particular, concerns about security, risk management, and regulatory compliance can often act as a drag on confidence and thus slow the pace of innovation if people worry this will add to the workload. However, risk can be addressed through system design and automation rather than manual controls.

The learning and development of staff is also critical for successful innovation. Many inefficiencies stem from errors and rework caused by insufficient skills and outdated ways of working. However, a continuous improvement mindset as well as leveraging data and insights can significantly impact business transformation.

Finally, while there is much talk of being client-centric, firms need to actually capture and understand client expectations systematically and use them to drive change.

Indeed, there are opportunities for innovation in all parts of the value chain - front, middle, and back office; the key lies in identifying what needs to change, why, and what the ideal endpoint would look like – and then working towards that.

This could include assessing cost structure and margins to identify efficiency improvement opportunities and reviewing IT architecture, systems, and interfaces to develop integration and digitisation roadmaps. Wealth managers could also assess compliance and risk management approaches to identify ways to automate and improve efficiency. They could also create learning and development strategies and programs focused on a continuous improvement mindset, and then engage with key platforms, asset management and other providers to press for innovation and collaboration.

Key takeaways:

  • The challenges of legacy technology and integrating systems remain a concern for wealth managers and act as a barrier to innovation
  • Cost to serve could be brought down significantly by innovation - leading to fewer but better-integrated core systems
  • There is a need to improve the customer experience through more digitisation and personalisation
  • Concerns about security, risk management, and regulatory compliance can often act as a drag on the pace of innovation
  • The learning and development of staff is critical to successful innovation