Robert Rümmler, Senior Manager, IT Advisory Practice, EY asks what the CIO can do to help wealth managers turn digital into a source of competitive advantage.
Whereas, traditionally, CIOs in wealth management companies used technology to drive back-office efficiency and cost reductions, today, the focus has to be on front-office digital capabilities. The smart use of technology is emerging as a source of competitive advantage, improving the customer experience, digitizing the value chain and empowering key revenue and risk decisions.
According to EY’s IT in Wealth Management 2015 survey, digital technologies are fundamentally transforming client value propositions and wealth managers’ operating models.
Key IT trends in the sector include:
- Mobile developing into the preferred channel for wealth clients, owing to the “anytime, anywhere” and context-aware capabilities that mobile devices offer
- Social media and collaboration tools helping clients interact with peers on portfolio strategies and client advisor performance
- Applying advanced analytics to revenue, cost control and risk mitigation data to improve insight and decision-making
- Cloud-based computing helping wealth managers reduce infrastructure costs, and increase agility and time to market
Wealth managers are tapping into the use of digital technologies as a source of competitive advantage. The CIO is expected to take on a leading role in driving business change through digitization.
How can the CIO spearhead this change?
Wealth managers who invest significantly in IT are adopting two different strategies to modernize their systems. Those who have underinvested in technology in recent years are migrating to newer platforms. Others, who are looking to minimize business disruption and reduce up-front costs, are focusing on simplifying their IT architectures.
While wealth managers’ investment in IT has increased, the majority is still not seeing a significant level of business return and, therefore, are hesitant to spend even larger amounts on transformational projects. It falls to the CIO to create the business case that will convince C-suite colleagues to focus IT spending on improvements and innovation in front-office tools and enablers such as mobile banking and client analytics. Naturally, it will also be for the CIO to implement these changes.
To compete in the digital economy, IT has to address the organization’s most complex technical problems and engage senior business leaders. This means CIOs need to build an innovative workforce and revamp the traditional IT operating model.
On top of all that, IT organizations within wealth management are “forced to do more with less.” They have to become more cost-effective and more outsourced. For the internal IT organization to survive amid increased outsourcing, the CIO will have to wear several hats and equip IT teams with key capabilities to define IT strategy, manage supply and demand, and orchestrate the delivery of IT solutions among multiple stakeholders.