The fourth workshop run by Objectway and Compeer about the “Wealth Management Firm of 2025” tells us that back office costs are increasing as the business grows and this is the reason why firms are struggling to achieve scalability.
A contributing factor behind these rising costs is the continual need to recruit additional staff, and pay them more than average, to support the additional business. Currently firms are suffering from inefficient back office systems, with legacy systems creating significant drag.
The demand is to have a single system than can meet all of the back office requirements, without the need for a large number of peripheral systems that are costly and sometimes unreliable.
There is an overwhelming demand for increased automation, with the regulator also pushing for improvements. Increased automation will not only have its cost benefits but will also encourage clients to invest more.
In payment systems, automation may encourage more standing orders and direct debits, creating ongoing investments as well as the initial lump sum investment.
For example, a manual process that is expected to be more automated is Corporate Actions. Other issues continue to arise with very little integration between new CRM systems and existing (outdated) back office systems.
OUTSOURCING BACK OFFICE FUNCTIONS
If the firms were to start again, the majority would be keen to outsource the back office.
However, this is expected to be a slow and gradual journey as significant issues arise when replacing the large back offices that are already in place.
For smaller firms the transition could be quicker, although when firms reach a certain size they will need to analyse if it makes economic sense to then insource.
EMPLOYING ARTIFICIAL INTELLIGENCE
Artificial intelligence is an area that wealth managers are starting to investigate but currently they remain unsure as to exactly where it will be used and how it will work.
As it stands, the closest the industry comes to using it is through Robotic Process Automation and some having relatively simple AI tools that can scan reports to check for anomalies and changes compared to previous versions.
The next post will concern the technology of 2025, stay tuned!