How the right infrastructure can

enable you to reach your goals

Growing your
wealth management
business
This communication is provided by Advent Software, Inc. (Advent) for informational
purposes only and should not be construed as or relied on in lieu of, and does not
constitute, legal advice on any matter whatsoever discussed herein. Advent shall have no
liability in connection with this communication or any reliance thereon.
Investor wariness in the wake of
the crisis means many now want to
be more involved in the investment
process and are looking for wealth
managers that have, or can develop,
strong advisory capabilities.
Grow
2 | Growing Your Wealth Management Business
HNWI Market Bounces Back
After two years of strong growth in 2009
and 2010, followed by very moderate
growth in 2011, the worlds wealthiest
individuals realized considerable growth
in 2012, particularly at the highest levels.
According to Capgemini and RBC Wealth
Managements 2013 World Wealth
Report,
1
both the population and wealth of
global high net worth individuals (HNWIs)
reached signifcant new highs in 2012
despite the turbulence of the global
economy, particularly in the Eurozone.
The global population and investable
wealth of HNWIs both increased
substantially to reach record levels in
2012. After remaining fat in 2011,
the population of HNWIs grew by 9.2%
worldwide, increasing by one million
individuals to reach 12.0 million. Global
HNWI wealth also rebounded substantially,
increasing by 10.0%, after declining in two
of the past fve years.
Ongoing Challenges for Wealth Managers
For wealth management organizations,
the growth rates in number and assets of
their target client pool is welcome news
for those frms with the proper skills
and support infrastructure after a brief
period of slow growth. The challenge going
forward will be to demonstrate to existing
and prospective clients that they can
provide a compelling value proposition on
an ongoing basis.
That will be no simple task. In the post-
fnancial crisis world, investors are re-
evaluating how their assets are managed,
requiring frms to up their game when it
comes to the quality and type of services
they provide.
An array of factors are now putting pres-
sure on wealth managers performance,
including a drop in transaction volumes,
tough price negotiations, and an investor
shift towards lower-margin products.
In short, wealth managers must
concentrate on providing exemplary
service to attract and retain clients, and
thus grow their assets under management
and revenues. In addition, they will have to
run their businesses ever more effciently
so as to reduce costs and improve
proftability.
1
World Wealth Report 2013,
Capgemini and RBC Wealth Management
How can you grow your business
in the post-crisis world?
Grow
Hitting
New Highs
| 3
Ten Steps to Successfully
Growing Your Wealth
Management Business
So how do wealth managers achieve these
goals? There are ten proven steps frms
can pursue to foster their businesses.
And technology, intelligently adopted and
utilized, can be invaluable in supporting
each one.
1. Increase Investor
Confdence and
Ensure Client Satisfaction
Investors are becoming increasingly
sophisticated and more demanding in
terms of the range and quality ofservices
they receive. That requires asset
managers to:
Improve Service Delivery
Investor wariness in the wake of the
crisis means many now want to be more
involved in the investment process and are
looking for wealth managers that have, or
can develop, strong advisory capabilities.
To do so, frms must be able to track all
their interactions with customers at an
enterprise level to ensure they remain
in compliance with their regulatory
obligations, while best meeting clients
fnancial needs on an ongoing basis.
For example, utilizing a CRM system will
enable frms to move away from pushing
products to actually communicating with
clients, obtaining detailed knowledge of
their needs and wants, and thus building a
reputation as a trusted advisor.
Develop Transparency and Communication
The fnancial crisis highlighted the
widespread lack of transparency in the
industry. In many cases, investors had
an incomplete picture of the investment
strategies managers were pursuing, their
actual portfolio positions, how and where
investment performance was achieved,
and the levels of risk they faced. It is no
surprise then that investors now want
more visibility into and understanding of
the investment decisions being taken, the
risk profles and performance of those
investments, and the fees they are being
charged.
To meet these transparency demands,
and regain investors confdence, wealth
managers need tools that allow them to
analyze how their clients portfolios have
performed. In addition, they must be able
to communicate clearly and frequently with
clients to explain their actions and results.
Analyze and Optimize Portfolio
Performance
Performance has always been important,
but as long as it was positiveas seen
during the long recent boominvestors
didnt ask too many questions. The trauma
of the fnancial crisis, when many wealthy
investors saw assets plummet, has
changed all that.
Post-crisis, investors are focusing more
on risk-adjusted portfolio returns, and
are keen to see how they are achieved
and to what extent the performance can
be attributed to the managers. Likewise,
managers want to understand the drivers
of performance so they can improve their
future investment decisions, and thus the
service they offer to clients.
To meet these requirements, managers
need an infrastructure that enables them
to gather details on a complex array
of fnancial and physical assets, some
of which may be handled by a range of
Risks Many Faces
Trading Risks
> Market Risk
> Credit Risk
> Liquidity Risk
> Counterparty Risk
> Country, Political and Currency Risk
> Issuer/Name Risk
Operational Risks
> Inadequate or failed internal processes,
people and systems
> External events, such as natural disaster,
hacks or terrorist attacks
4 | Growing Your Wealth Management Business
Managers want to understand the
drivers of performance so they can
improve their future investment
decisions, and thus the service they
offer to clients.
| 5
managers, so as to obtain an aggregate
view of their clients holdings and
positions. They also require sophisticated
performance analysis tools that can:
> Provide accurate performance
attribution to identify the sources of
performance relative to a benchmark or
model portfolio.
> Calculate performance contribution to
pinpoint which sectors, industries or
securities had the greatest/least impact
on performance.
> Analyze a portfolios risk, volatility and
risk-adjusted return based on historical
performance with ex-post risk statistics.
Equally important, this information must
be communicated to clients in a readily
intelligible way.
Segment your Audience
Rather than segment clients by the
traditional categories of investable
assets and their broad risk tolerance
characteristics, the emphasis today is on
better understanding clients needs and
desires, so wealth managers can formulate
more appropriate fnancial plans to achieve
their long-term goals.
Therefore, capturing, storing and analyzing
client datato better segment customers
and identify the right products to meet
their needs at any given timeis becoming
ever more crucial.
However, it is not enough for frms to
collect the requisite information that
enables them to segment their customers.
In addition, they need a systems
infrastructure that can keep pace with
the segmentation, so they can see when
a customer migrates from one segment
to another, and alter their services
accordingly.
2. Develop Your Positioning
and Expansion Strategies
The majority of the worlds HNWI
population is now concentrated in the
US, Germany and Japan, accounting for
53.3% of the worlds HMWIs in 2011. In
fact, the Asia-Pacifc region is now home
to slightly more HNWIs than any other
region, though North American HNWIs still
account for the largest regional share of
HNWI wealth. Asia-Pacifc HNWIs reached
3.37 million in 2011. On the other end of
the spectrum, India and Hong Kong topped
the list of countries losing HNWIs in 2011,
with Indias HNWI population declining by
18.0%.
This global pictureof the ongoing
importance of Europe and the Asia-Pacifc
regions as key wealth centers, and rapid
growth in North America and the emerging
marketsis crucial in determining frms
business strategies.
In order to expand into new product,
geographic and client markets, managers
will need a fexible operating platform
that allows them to offer differentiated
services to each segment. And with
competition intensifying as more frms
target the same pools of money, improving
operational effciencies through the use
of an automated support infrastructure
that can reduce costs and deliver the
necessary market scalability is increasingly
important.
Given the myriad rules with
which frms have to comply,
especially when operating in
multiple jurisdictions, there
is a great risk of errors.
6 | Growing Your Wealth Management Business
3. Meet Compliance and
Regulation Requirements
One overriding theme to emerge from
nearly all Advents recent discussions with
clients is the impact that new and ongoing
regulationsand amendments to existing
oneswill have on the wealth management
industry.
Expanded regulation in some form is a
virtual certainty in the months and years
ahead. At this stage no one is sure exactly
what the long-term effects of recent
legislation such as Dodd-Frank and FATCA
will be. Nevertheless, what is clear is that
changes to the regulatory landscape will
force wealth managers to make additional
investments in staff, training and/or
technology to ensure they comply with all
their regulatory responsibilities, as well as
meet their clients requirements and the
frms internal investment policies.
Given the myriad rules with which frms
have to comply, especially when operating
in and expanding into multiple jurisdictions,
there is a great risk of errors or oversights
occurring where an organization relies on
manual policies and procedures.
By contrast, an automated portfolio
monitoring, trading compliance and
reporting environment provides a more
robust safeguard against the threat
of accidental or malicious compliance
breaches, countering the reputational
and legal risks that can otherwise result.
Moreover, an infrastructure that allows
a manager to demonstrate adherence
to strict compliance standards, as well
as meeting investors and regulators
transparency requirements, can give the
frm a competitive advantage in attracting
and retaining assets.
4. Systematize Risk
Management Strategies
Along with the newfound stress on
transparency, the fnancial crisis has
provoked an industry-wide reassessment
of, and heightened focus on, managing
risk. This emphasis includes both a
greater awareness of the risks industry
participants face, not least around issues
such as counterparty risk, and a need to
control risk more effectively.
To meet their risk management require-
ments, wealth managers will need:
> Scenario analysis capabilities to
demonstrate in a transparent and
comprehensible manner the risks
clients face by pursuing proposed asset
allocation strategies, and from investing
in different products.
> Performance attribution reporting
facilities that detail the risks associated
with the investments made, so clients
can see the risk adjusted return fgures
achieved. Going forward, regulators may
also help drive this trend by mandating
investment managers to deliver risk-
adjusted information to end clients.
> An integrated and automated front to
back offce environment to remove
manual intervention in the transaction
chain wherever possible, including with
external providers and counterparties,
and institute data validation and audit
trail capabilities, thereby helping frms
mitigate operational risk exposures.
The majority of the worlds HNWI
population is now concentrated
in the US, Germany and Japan,
accounting for 53.3% of the worlds
HMWIs in 2011.
| 7
5. Manage Talent and
Structure Your Teams for
Growth
A frms staff is its most valuable, and
expensive, resource. Therefore, it is
imperative employees devote their time
and expertise to the most value-added
activities possible.
Cut Red Tape
Burdening front offce revenue generators
with administrative functions, or
employing people to conduct repetitive
back offce tasks that can be carried
out faster, cheaper and more accurately
by an appropriately implemented IT
infrastructure is an all-too-common
occurrence in the wealth management
industry. Yet such wasteful practices are
unsustainable.
Ongoing staff cutbacks are forcing wealth
managers to do more with less in all areas
of the organizationwhether it is in the
front, middle or back offce. Since a return
to pre-2008 staffng levels is not expected
anytime soon, if ever, wealth managers will
need the support of technology solutions
that drive automation and enhance
effciency.
Beyond the use of traditional enterprise
portfolio management systems, we
expect to see greater emphasis on
automated solutions for customer
relationship management (CRM), reporting,
reconciliation and research management.
The automation such tools bring allows
wealth managers to curtail manual
intervention in their operational processes,
removing the high staffng costs and
error rates that go with it, while providing
employees with sophisticated functionality
to help them better do their jobs.
That will aid the frm by:
> Making it more operationally effcient--
and thus more cost effcient.
> Putting the information staff need at
their fngertips to improve investment
performance and client service.
> Ensuring the organization meets its
compliance obligations.
> Providing the scalability to grow the
businessby adding client assets and
expanding into new customer segments
and marketswithout a commensurate
increase in expenditure.
Prioritize Value-Added Focus
In addition, relieving staff of mundane
activities will free them to concentrate
on the tasks where they can add most
value: addressing clients service demands,
researching the market for investment
ideas and opportunities, focusing on
improved risk management, and marketing
the frm to prospective clients. Moreover,
because employees are given the freedom
to concentrate on the most interesting
and rewarding parts of their jobs, they
are likely to derive more satisfaction
from their work, be happier and more
productive.
Moreover, by having tools that allow the
frm to report internally on their managers
performance, executives can see details
such as who is signing or losing the most
accounts, whether any managers churn too
much, how their portfolios are performing
relative to any other, and so on. The frm
can then reward or admonish its staff
accordingly.
6. Manage Your Data and
Intellectual Capital
Information quality, and the ability to
collate and share it across the enterprise,
is critical in todays fast-moving,
interconnected, customer service-oriented
environment. Teams must be able to
leverage all the information across the
organization that is relevant to them. At
the same time, the frm must preserve
its institutional memory and intellectual
capital through a centralized data
repository to ensure the organizationand
not the individual portfolio or relationship
managerowns all its client and research
information. In that way, it wont lose
valuable client details and relationships
if key staffers leave or are let go, as was
widespread during the fnancial crisis.
Manage Your Research
One key component is an enterprise-wide
research management system for the
capture and organization of the proprietary
data used in frms manager search,
selection and oversight processes. By
aggregating manager research in a single
location, a central platform will facilitate
collaboration, create greater transparency,
and enhance institutional memory.
Having a formal research management tool
in place to keep track of all this information
and have it available at the click of a button
brings an essential competitive edge.
Manage Your Customer Relationships
Similarly, a centralized CRM system
can provide signifcant competitive
advantages. Unfortunately, employees
are often reluctant to use whatever
CRM application the frm has adopted
for fear of losing control over the client
information they have obtained, and thus
the relationships they have built.
However, an effective and easy to use
CRM system offers an attractive quid pro
quo. For the employees, having complete
and accurate portfolio and personal
information they can access quickly and
use constructively will enable them to
provide more responsive and proactive
service and improve client acquisition
and retention. So by seeing the beneft
they can reap from such a platform they
will be more inclined to use it. The frm,
meanwhile, now has a centralized store of
information, helping make the clients its
property rather than that of the individual
manager.
The CRM system is just part of the answer
though, since it is only as good as the data
with which it is populated. Therefore, it
is important to link the CRM to relevant
asset management systems to create
processes that force the data to be kept up
to date.
8 | Growing Your Wealth Management Business
A company that reinvests a high
percentage of its revenues on
R&D to provide its users with new
functionality to meet their future
requirements.
What to look for in the due
diligence process
| 9
7. Improve Your Performance
and Productivity
Many wealth management organizations
remain burdened by signifcant manual
intervention in their operational processes.
That results in high staffng costs and
error rates, limited scalability, and a lack
of insight into and control over clients
portfolio performance and risk exposures.
To address these problems, and ensure
their long-term sustainability, wealth
managers must focus on ways to
improve their business performance
and productivity by implementing
robust end-to-end technology solutions
that introduce a high level of straight
through processingboth internally
and externallyin the frms operating
environment. In this way organizations will
be in a position to:
> Increase automation and eliminate
manual processes.
> Reduce redundancies and achieve
economies of scale.
> Analyze returns and identify sources of
performance.
Technology can offer a wide range of
benefts in these areas. In particular, IT is a
principal avenue for improving service and
overall effciency to clients. Therefore, the
challenge for many industry participants in
the short to medium term will be to close
that gap between recognizing the benefts
a dedicated IT platform can offer and their
current business practices.
8. Manage Your Costs
Allied to the issues surrounding
performance and productivity addressed in
point 7 above is the question of managing
costs.
While often necessary these days, cutting
costs is proving diffcult for many in the
industry. Changes in regulations and the
associated investments in compliance
processes have led to higher IT and
operating costs. In addition, one of the
largest drivers of cost, compensation, has
also increased in some regions.
IT investments may represent an
expenditure some organizations are
unwilling to undertake at the current
time, given the cost pressures they face.
Nevertheless, utilizing a strategically
implemented systems infrastructure can
yield cost savings and business growth
dividends. To do so, the technology needs
to fulfll certain requirements:
> Introduce a straight through processing
environment to free up staff from
mundane processing tasks and redirect
them to higher value client servicing
functions.
> Automate reconciliations with external
counterparties.
> Connect to third-party market data
providers to ensure the organizations
systems are populated with the
necessary data in a fast and seamless
manner.
And for those wealth managers with
budgetary constraints that prevent an in-
house software installation, Software as a
Service (SaaS) outsourcing models present
an attractive, lower cost alternative. With a
SaaS approach, wealth managers leverage
the functionality they require without
having to implement and maintain the
software internally. Furthermore, they gain
ready access to any application upgrades
as they become available, helping keep
the manager up-to-date with the latest
technology developments.
9. Choose External Partners
and Providers Carefully
The importance of a frms external
relationships was highlighted, at times
painfully, during the fnancial crisis.
The stability and service offering
of organizations brokers, trading
counterparties, administrators and
custodians, and the market infrastructures
and system providers they use have
all come to the fore as frms sought to
protect themselves as the crisis unfolded,
and prevent a repeat of the panic going
forward.
As a result, frms have become much more
aware of the need to:
> Assess their broker relationships,
and their reliance on them for trade
execution and research.
> Minimize counterparty risk.
> Choose partners and systems that offer
stability and support growth.
For example, sophisticated IT systems
will give wealth managers the ability
to track the performance of stock
recommendations that stem from brokers
research, and rank the frms accordingly.
Meanwhile, buy side efforts to assume
greater control over the execution of their
tradeswhether by connecting directly
to trading venues or by interacting with
their traditional sell-side partners or
agency brokerages through more low touch
electronic channelshave been given
further stimulus by the fnancial crisis. This
shift in market operation, and moves by
asset managers of all descriptions towards
greater self-determination and control,
require sophisticated software tools
that support activities such as pre-trade
analysis, order management, execution and
post-trade analytics.
Leveraging robust yet versatile
front, middle and back offce system
functionality is another key ingredient.
Such systems enable wealth managers to
run their existing post-trade operations
in an effcient, scalable and customer-
focused manner, while providing them the
fexibility to move into new markets and
pursue new product and pricing strategies.
10 | Growing Your Wealth Management Business
10. Optimize Your IT and
Operations Infrastructures
As highlighted in the sections above,
leveraging robust, scalable systems with
sophisticated functionality developed by a
software provider with extensive market
expertise can assist frms with many of
their cost and customer service issues, and
help improve their performance.
However, in addition to adopting an IT
infrastructure that addresses the frms
current needs, it is crucial to their future
success that organizations partner with
technology providers that demonstrate
an ongoing commitment to investing in
research and development.
Replacing a system involves enormous
expense. Along with the actual cost of
buying the software, there are payments to
consultants to help choose and implement
a system, training for staff to use it, the
risk of losing clients due to mishandled
data conversions, and so on.
Therefore, it is much more cost effective,
and less disruptive to clients, for a
wealth manager to stick with its existing
softwareprovided it is upgraded
frequently with new functionality, to work
on new platforms as they emerge, and keep
pace with industry market developments
and best practices.
Moving Forward: Targeting
the Opportunities Ahead
Wealthy investors are now recovering
much of the ground lost during the fnancial
crisis, with those in Asia and the Americas
making particular headway. However,
while asset levels are recovering, the
shift in investor attitudes stemming from
the painful lessons of the crisis means
the wealth management industry cannot
simply return to the old ways of operating.
Instead, the emphasis for wealth
management organizations has to be on
rebuilding trust and working in partnership
with clients to deliver risk adjusted
performance that meets their goals. In
this environment, frms must focus on
fnding ways to effciently run and grow
their businesses, so as to retain and
expand their client bases, control costs and
achieve the economies of scale that will let
them improve proftability and meet their
compliance obligations.
To do so, wealth managers must employ
a robust and sophisticated IT framework
with the automated functionality to deliver
operating effciencies, better manage
risk, help generate investment returns
and improve how they communicate
with clients. Furthermore, the systems
should be provided by a fnancially stable
software company committed to the
ongoing development of their offering.
Now more than ever, the right technology
capability is a critical component in
meeting wealthy investors demands.
Those organizations that implement
the requisite infrastructure, and use it
judiciously, will be best placed to proft
from the opportunities that lie ahead.
Make it happen
| 11
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