The RDR: Is the Wealth Management Industry Ready?, a new white paper by Advent argues that leveraging a technology infrastructure comprising portfolio management, research management, client relationship management and reporting solutions, can go a long way to improving operational capabilities and be a way of maximising the opportunities created by the RDR for wealth managers. The paper looks at the challenges and opportunities posed by the RDR, and considers six areas that form part of the technology discussion: automation, research management, fund order management and distribution, performance, client service and software as a service.

Automation

Automation, defined as an integrated and automated front-to-back office environment, will allow wealth managers to remove manual intervention wherever possible from their internal operational processes, as well as when interacting with external providers and counterparties, says the software giant. Key benefits of this include: allowing firms to streamline their costs by freeing staff to concentrate on added-value tasks; reducing error rates and the resulting operational risks; speeding up processing; and enhancing scalability.

Research management

“Leveraging expert fund research will be a critical feature under the RDR, with those wealth managers able to offer effective capabilities most likely to profit from whatever growth in advisor demand for outsourcing services results,” says Advent.

The ways to benefit might include: an enterprise-wide research management system, which would allow wealth managers to better capture and organise data used in their manager research; aggregating the manager research on a central platform with the aim of facilitating internal and external collaboration, which would create greater transparency and ensure the information is held at an institutional, rather than individual level, says the paper.

Fund Order Management and Distribution

An automated system for fund order management and distribution would enable wealth managers to target more IFAs faster. It would also reduce the order processing costs and minimise errors, says Advent.

Performance

Performance can be enhanced through what Advent terms “sophisticated performance tools”, which it views as having three key benefits: identifying the sources of performance relative to a benchmark or model portfolio; calculating performance contribution by sectors, industries or securities; analysing portfolio risk, volatility and risk-adjusted return based on historical performance with ex-post risk statistics.

Client service

“Those wealth managers most likely to benefit from the opportunities the RDR presents will be the ones able to communicate the value they provide to their partners, and their end-clients, in a clear and transparent way,” says Advent.

This can be achieved through performance measurement tools that dissect the risk-adjusted portfolio returns obtained; as important is the ability to deliver reports to account for and explain actions and results, the report's authors said.

SaaS – Software as a Service

SaaS, an outsourcing model, is seen to be a lower-cost alternative to making a considerable in-house investment in an IT platform. Advent’s paper says that this approach allows wealth managers to “leverage the functionality they require without having to implement and maintain the software internally.” Additionally this kind of service would allow ready access to application upgrades.

Advent’s research confirms the speculation by many that the RDR will push wealth managers, private banks and IFAs into a “survival of the fittest” mentality, and in this way encourage an engagement with technology that puts client satisfaction at the top of the agenda.