Consolidation, Client Reporting to Lead 2009 Wealth Management Projects

Why It's Important: Wealth management has been more profitable than many areas of financial services, and this trend should continue: Wealthy individuals seek experts in uncertain times, and a recent PNC survey of 1,263 Americans with at least $500,000 in investable assets found that 65 percent still like stocks as an investment. In addition, baby boomers are setting up retirement income cash flows and transferring wealth to children, and high-net-worth individuals are migrating, along with their brokers, from large brokerages to smaller firms less damaged by the subprime mess.

Where the Industry Is Now: While TowerGroup estimates that wealth management technology spending budgets will drop 5 to 6 percent in 2009, firms continue to invest in wealth management technology. "Some of the bigger IT projects going on in the investment industry are wealth management-related," says Tom Secaur, managing director of consultancy Citisoft. "They're a combination of vendor-based implementations, projects that involve huge builds of software and multiyear initiatives that cater to a globally expanding business." In June Merrill Lynch opened wealth management offices in Russia and Turkey, and expanded teams in Europe. In November Citi announced a new wealth management service in Malaysia.

Small and midsize firms are investing in infrastructure as they watch the New York wirehouses struggle. In fact technology has leveled the playing field, says Galan Daukas, EVP of Washington Trust. While previously only the largest investment management firms could offer diversification through specialized teams of analysts and portfolio managers, today "Technology has enabled investment managers in small, independent firms to access the best investment ideas worldwide," explains Daukas, who says his firm uses Smartleaf's Concord overlay management technology to work with third-party managers, mutual funds, fixed-income and exchange- traded funds, and proprietary models from one platform.

The firm has also bought new CRM software (Unapen's ClientLogix). "By making investments while many of our competitors are distracted or otherwise engaged, we'll be able to grow our market share," Daukas says.

Smaller firms, however, have already begun belt-tightening. "We're doing all we can to consolidate resources," relates Robert Brandenburg, senior equity trader at Lotsoff Capital Management. Lotsoff recently dropped one of its two order management systems, saving $150,000 a year, and improved automation with a reconciliation tool from CheckFree APL.

Focus in 2009: Investment in new wealth management technology will slow as a result of the market downturn. Rationalization (read: consolidation) of wealth management platforms is expected. "The target is to support a single platform," says Doug McGann, a partner with Milestone, a management consulting firm that focuses on the financial services industry.

Client reporting is one area of wealth management technology investment that may remain strong in 2009. Surveys have shown that client communication is one of the top three things clients look for in a wealth management organization, according to Citisoft's Secaur.

Industry Leaders: Its purchase of Merrill put Bank of America in a leadership position in wealth management. Goldman Sachs, Morgan Stanley, Credit Suisse, UBS and Wells Fargo/Wachovia also are in the top bracket in terms of assets under management. Citi/Smith Barney has been retrenching along with the rest of the firm.

Technology Providers: Advent, NorthStar, SunGard and Thomson offer wealth management workstations. Smartleaf offers overlay management software, and Unapen and Salesforce provide wealth management CRM solutions. CorrectNet and Assette provide client reporting tools. CheckFree APL offers reconciliation software.

Price Tag: Large-scale global projects can cost upward of $20 million. Rationalization projects theoretically should save money, although there typically are training and integration costs.