Optimizing the Wealth Operating Model

The wealth management industry is at a crossroads. Evolving client needs, disruptive technology and general cost, revenue and regulatory pressures are putting a strain on overall profitability. Firms continue to invest in obsolete, complex and rigid platforms that are decades old and cobbled together from mergers and acquisitions. Data has become siloed, making it more difficult to unwind manual processes and technology. The cost of investments to maintain the status quo continues to hamper the bottom line. As a result, wealth management firms continue to operate a suboptimal business model that prohibits growth. Firms must take steps now in order to transform the way they do business to manage a changing and challenging landscape.

Meeting and exceeding shareholder expectations on higher profit margins in the post-2008 financial crisis era has become increasingly challenging for wealth management firms. Improving business performance is paramount as firms continue to understand the myriad of changes affecting the industry. Total client assets reached an all-time high of $19.2 trillion at the end of 20151, a modest 4.1% CAGR since 2007. However, pricing pressures, increasing operating expenses and greater investment in capital expenditures (CAPEX) have narrowed overall profit margins, thus putting even more pressure on firms to continually reduce costs at a more dramatic rate.