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A Slice of the Boomer Pie

Firms are upping wealth management spending and examining enterprisewide solutions in hopes of luring mass-affluent clients.

Firms are upping wealth management spending and examining enterprisewide solutions in hopes of luring mass-affluent clients.

Mix together retiring baby boomers, an increase in the number of mass-affluent Americans and better bottom lines at financial services institutions, and what do you get? A spike in wealth-management technology spending.

According to Alois Parker, an analyst with Boston-based Celent Communications who recently coauthored a report on the subject, tech spending on wealth management is on the rise as firms try and position themselves for a slice of the baby boomer pie. To get that slice, financial institutions are binding together the various links in the wealth management chain from the front office to the back office, while simultaneously integrating horizontally across asset-class silos so managers can gain a complete single-screen view of their clients' holdings.

"Firms are starting to take an enterprise approach," Parker says. "Rather than having a separate financial-planning unit, private banking unit and trust unit, they are gearing more toward the client-centric, enterprisewide approach, and spending is going into those areas."

Enterprisewide is exactly the direction in which Philadelphia-based Janney Montgomery Scott, a regional, full-service broker-dealer with more than 1,000 financial advisers, is moving. The firm has standardized its advisers on the Thomson One Advisor wealth management solution from New York-based Thomson Financial. Janney has integrated the platform with its back office and is trading within the system.

Jerry Lombard, president of the private client group at Janney, says that as the wealth management industry continues moving from a transactional model to an advisory model, technology must reflect that change to give advisers a more complete picture of their clients. "If we are going to take a comprehensive approach then we need a comprehensive view of all a client's financial assets as well as liabilities, and there needs to be a tool at our financial consultants' ready that can corral that information as easily as possible without the need to constantly update information and pricing," he says.

Lombard notes that Thomson One does a "good job" of corralling client information held throughout the firm, but he concedes that Janney still is struggling with the integration of financial data held at other institutions. "The technology for that is out there, but I would say we are waiting for it to be more readily available," he relates. According to Lombard, while Thomson One can gather information from inside Janney, in order to input client holdings from other institutions, the information must be entered manually, and any change in those holdings consequently will not be automatically reflected in the Thomson system.

Adoption Is Key to Success

Adoption rate is a key measure regarding the success of any application implemented at a financial institution, and such certainly is the case when it comes to wealth management systems. Though Lombard does not have exact adoption numbers at press time, he says the Thomson One wealth management solution, which launched at Janney in the spring, has received "heaping praise from active users."

But the implementation of enterprisewide wealth management technology does not always go so smoothly. According to Sandy Bleustein, director of the planning group at Memphis, Tenn.-based Morgan Keegan, the firm recently took a step back from the enterprisewide approach after its experience with Tysons Corner, Va.-based netDecide Corp.'s AdvisorDecide software. After Morgan Keegan - which has 200 institutional financial advisers and 600 advisers focused on retail - signed a contract to roll out AdvisorDecide in November 2001, the software was acquired by New York-based Informa in the middle of 2003.

"The AdvisorDecide application was a living, breathing thing that needed improvement and input, and [Informa] had never dealt with that before," Bleustein relates. In addition to the software's limitations, Bleustein concedes that the solution was doomed to fail from the start. "We need to get proper support in the field and branch manager buy-in. We were too early with AdvisorDecide," he says, explaining that the firm's advisers had yet to fully embrace the industrywide move toward wealth management and away from a transactional-pricing approach. "They did not see the value of the tool."

Rather than look for another enterprise solution, Morgan Keegan decided to deploy NaviPlan wealth management planning software from Winnipeg-based Emerging Information Systems Inc. Now, Bleustein notes, the firm is working to convince branch managers that adopting NaviPlan is in their best interests.

According to Bleustein, to date, Morgan Keegan has rolled out the software to its financial planning department in Memphis and a "limited number" of its financial advisers around the country. The NaviPlan system, he notes, is geared to planning and does not include asset allocation. It also is not linked into the firm's back office, as was the AdvisorDecide application.

"We are looking at an enterprisewide deployment of Naviplan, but we are not there yet," Bleustein says. The hesitation in doing so, he says, comes from realizing that branch manager support of any new technology is key to success.

Integration Hurdles

In addition to adoption challenges, firms that decide to implement enterprisewide wealth management systems also are challenged by integration issues. Wilmington, Del.-based Wilmington Trust's 50 investment advisers manage $37 billion in assets on wealth management software from Philadelphia-based InvestEdge. Wilmington is trying to move as many management-related functions into the InvestEdge application as it can, according to Ken Edwards, asset allocation product manager at the firm.

Edwards says one of Wilmington's main goals is to add trading functionality into InvestEdge. Today, while the application is hooked into the firm's accounting system - SunGard's Global Plus - on the back end, trading is conducted outside InvestEdge in the LongView trader-order-management system from Boston-based LineData Services.

"We are in the process of reviewing that," Edwards says. "Our investment advisers want to trade through InvestEdge, and they are actually starting a project to do that now. We do everything in InvestEdge, with the holy grail of getting trading in there."

Wilmington advisers, Edwards says, will figure out which trades they wish to make using InvestEdge, and then execute those trades using LongView. The firm is bringing in a consultant to analyze the trading situation, and Edwards anticipates adding trading functionality to InvestEdge in six months to a year.

Matt Schott, a senior analyst with Needham, Mass.-based TowerGroup, says getting as much functionality as possible into one system is the No. 1 issue firms face when it comes to wealth management. "The biggest challenge today is getting all of their internal data consolidated and represented in a single place," he says. "There are many firms struggling with that right now."

Integration is the key to UBS' wealth management strategy, according to Bill Fitzpatrick, U.S. director of marketing technology for wealth management at the firm. He says that when UBS is looking to add any new technology to its proprietary wealth management suite - ConsultWorks - the question is whether to buy or to build, and the challenge is to integrate. The ConsultWorks system consists of "a blend of homegrown proprietary software products and some we have purchased from outside and integrated together into a total wealth management platform," Fitzpatrick explains.

ConsultWorks supports all facets of wealth management, Fitzpatrick notes - including mortgages, lending, cash management and investing. Managers also are able to open accounts, execute complex planning, see real-time market data, evaluate portfolios and initiate trades within the system, he adds.

'Get Your Own House in Order'

While many firms hope to integrate trading into their wealth management systems, the once-hot idea of external account aggregation has cooled over the past few years as firms looked to hunker down and cut costs in a soft market. "Every firm will tell you, 'That is something on our radar,'" Celent's Parker says. "But I think the integration of clients' holdings in-house is already enough of a problem with firms."

Wilmington Trust's Edwards says that's just where his firm is focused - getting internal aggregation in order before searching out client data from other financial institutions. "We are going to want to aggregate outside accounts eventually to get an overall picture, but the technology still hasn't been that efficient," he says, echoing the earlier sentiment of Janney Montgomery's Lombard.

Firms have to take a first-things-first approach to outside account aggregation, TowerGroup's Schott concurs. "The first thing you have to do is get your own house in order to be able to say to clients, 'I can look at everything you have with my firm, and I can show you what you have across our organization and show you how that fits and how we are managing holistically for you,'" he says.

For its part, UBS is focused on internal integration. To offer clients a more-seamless adviser experience, UBS' Fitzpatrick relates, the firm is strengthening the ties between wealth management applications. "We are really focused on integrated navigation," he says.

Celent's Parker cautions that before firms try to get ahead by embarking on a wealth management technology search or dumping dollars into integrating what they already have, it's important to define the end client. "Wealth management describes a wide area - you could go into retail as well as the ultra-high-net-worth space, and their requirements are completely different, and the vendors you have available are different," he says. "As a firm, you have to fence in your target audience and say, 'Those are the guys I'm going after.'"

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