Wealth Management Takes Center Stage at WS&T Conference

At Wall Street & Technology's Wealth Management Technology Conference, executives discussed the trends taking shape in this growing niche of traditional investment management.

At a recent Wall Street & Technology conference on wealth management, one industry executive said that the next "killer app" in financial services would be one that could bring together all a customer's account information - data residing both at the institution in question and others - in a program that would then facilitate the total aggregated data to be sliced, diced and evaluated.

"The key is not just getting the data but what you do with it once you have it," says Harold Hughes, senior vice president, Legg Mason Private Client Group.

The sentiment expressed by Hughes was one of many similar thoughts voiced during the conference which provided a bellwether of where the financial-services industry stands in terms of wealth management.

Wealth management for the mass affluent, in the form of separately managed accounts, has become a growing trend in financial services as technology makes it feasible for advisers to handle a large number of accounts (containing a minimum of $100,000). Previously, only very wealth individuals (over $1 million in investable assets) were able to get personalized and customized treatment from a financial adviser, who would tend to their account on a frequent basis, readjusting securities holdings to keep portfolios in line with pre-established objectives, and trade securities to minimize tax liabilities.

This trend, in conjunction with another - to transform the commoditized business of executing trades into the value-added service of managing a client's wealth - has brought with it an attempt to morph brokers into wealth managers. Attendant with that, brokers/wealth managers, are largely moving their pricing models from transaction based to fee based, essentially charging a fee according to a client's assets under management.

But as the financial-services industry attempts to embrace the mass affluent and capture its assets, some are contending that technology is not yet up to the challenge.

"The wealth-management space is technology starved," says Brain Downer, vice president, private client services, State Street Corporation.

Though there are number of players in the wealth-management technology space, many feel vendors are not quite delivering a product that is flexible and functional enough to translate into higher profits.

Just as important as having technology for brokers, says Eric Stubbs, managing director, Bear Stearns, is having technology that's easy to use. If not, brokers simply won't take the time to learn a new application which takes them out of their regular workflow or requires them to enter additional information into new screens - keeping wealth-management applications simple was echoed by many executives as critical to broker adoption.

Technology will undoubtedly be the key to garnering assets from both the mass affluent and new millionaires, both of which are very tech savvy and demand to be more involved in their financial well-being.

"Communication is a big hole in adviser workstation offerings," says Jamie Punishill, senior analyst, Forrester Research, who divides investors into three categories: soloists, delegators and validators. The predominant portion of investors which financial institutions should be targeting, he contends, are validators - individuals who make use of financial advisers but also want easy access to their accounts, research and other investment information.

Punishill also talks about the importance of collaborative, synchronous technologies like video conferencing and also asynchronous technologies, such as Web interaction where an adviser and client can continue the investment dialogue by furthering their conversation whenever one party has a chance to log on.

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Hitting the Market
Selecting a Wealth Management Platform

Sander Bleustein, director of planning and executive services, Morgan Keegan & Co., describes his recent search for a wealth-management platform as "one of the most exhausting, laborious, frustrating things I've been through in my life."

Morgan Keegan, a regional broker/dealer, initiated the wealth-management-platform selection process in September 1999 and made its decision over a year later in December 2000. However, the price point which the vendor finally arrived at proved unacceptable to Morgan Keegan, says Bleustein, so the firm was still without the platform it needed.

In April 2001, the original vendor came back to Morgan Keegan at a price point the firm could live with. A pilot was run from June to September 2001 that featured integration between the wealth-management platform and Morgan Keegan's back office. In November 2001, Bleustein says, the system was approved by upper management, with final implementation completed in June 2002.

The selected system from netDecide, based in Tysons Corner, Va., is browser-based and modular, "so advisers can just do education planning, for example, if they want to," says Bleustein. To pay for the system, he estimates, each of Morgan Keegan's 750 advisers will have to raise an additional $500,000 in assets under management which Bleustein describes as "doable."

Bleustein says that during the search process he became frustrated with vendors that were just offering "calculators" in place of real wealth-management platforms and adds that the back-office integration which netDecide offered was very important.

Morgan Keegan Narrows it Down
The Initial Five: Sterling Wentworth (Sungard), Naviplan - EISI, Thomson CDA, Financeware, netDecide

The Top Two: Sterling Wentworth (Sungard), netDecide

The Winner: netDecide