Aug 11, 2021

Wealth managers today are under increasing pressure and face fierce competition. But for some, legacy technology and process inefficiencies are hampering their ability to respond to a changing industry.

What if there were a way to drive revenue growth, enhance the customer experience, and meet the expectations of a new generation of investors? Well, there is a way…but you’ll have to ask some tough questions and transform your operating model. The technology and business decisions you make today will dictate whether you succeed or fail in the digital age.

Why Now?

A common refrain we hear is, “I’ve been successfully doing this for over 20 years and I think I know what my clients want and how to run my business.” While this is certainly true, if you want to continue to successfully do this for another 20 years, you’re going to have to future-proof your business. What has worked in the past will not work as well in the future. Client demands and expectations are changing. They want more digital tools and advice delivery channels, more investment choices, and holistic financial and life planning. Being just a portfolio manager won’t cut it ─ tomorrow’s clients will be younger, more diverse, and they’ll need an advisor who’s trustworthy, empathetic, and creative when it comes to solving their most pressing life challenges.

What Is an Operating Model?

Let’s first answer the question, “What is an operating model?” The clearest definition we have found is from a Harvard Business Review article1: “How a company organizes and manages its resources to achieve its strategic ambitions and is the bridge between strategy and execution.”

In wealth management, the operating model covers your most important asset – your people. It also encompasses the front, middle, and back-office processes and the technologies needed to help your clients attain their financial goals.

When performing a strategic assessment of their current state operating models, most firms like to employ a top-down approach, whereby they attempt to identify their ideal target operating model (TOM) and work their way down the value chain.

However, our philosophy is that the target operating model ─ people, process, technology, and data ─ should be based on a business services model that delivers the business capabilities with optimal modes of operation. In other words, a bottom-up approach. As such, our approach ensures that your future state is customized to your business, as the in-scope business capabilities are identified early to pinpoint improvement opportunities relative to industry-leading best practices.

Where to Begin?

When evaluating your operating model, what questions can you ask of your business leaders as you begin to make these crucial decisions? We’ve outlined a few below:

  • People: What’s your human capital strategy? Wealth management is a “people business” where recruiting and retaining the best talent are essential. Does your current staff have the skillset to take your business to the next level? If not, what level of training and education are required to support any new business capabilities? With 43% of advisors over age 55, do you have a succession plan in place to retain existing clients when their current advisors retire?
  • Process: Expectations are changing, and investors are demanding more from their wealth advisors. From the front, middle and back office, is your business operating at peak efficiency to deliver a superior client service model to your clients? Can technology enhancements automate manual processes? Are there processes or entire business functions that can be outsourced?
  • Technology: Many firms struggle with legacy tools that were neither designed for, nor have kept up with, today’s investment needs. The COVID-19 pandemic accelerated the adoption of digital tools for advice delivery, and advisory firms that hadn’t invested in their technology previously were caught off balance and had to scramble to adjust. Do you have the right technology solutions in place to support your business capabilities?

Our upcoming research report, Wealth Management Operating Models, will look at how firms are looking to transform their target operating model to solve their most pressing business and operational challenges. We’ll explore the client experience, the changing demographics of people who consume wealth management services, discuss client/advisor engagement, and how to craft a client services strategy built to retain existing clients and generate referrals for new clients.

If your firm is interested in participating in the research via an anonymous case study, please contact Howard Corey at [email protected]

Howard Corey brings more than 15 years of financial services industry experience to his current role as a Senior Research Analyst at Cutter Associates. His broad experience in both wealth and asset management includes client services, portfolio operations, multi-asset class trade execution, and client performance reporting. Howard earned a bachelor of arts in economics from Roanoke College and an MBA from Vanderbilt University.

Jon Chandler brings over 15 years of experience in the financial services industry to his current role as a Director at Cutter Associates. Prior to joining Cutter, Jon was a senior business analyst for State Street Global Advisors (SSGA), where he was involved in a number of projects for the front and middle office. Jon earned a bachelor of arts in history from the University of Florida and an MBA from Northeastern University.

1 Harvard Business Review