If You Build It, Will They Come?

While the Yankees and Red Sox get ready to battle it out on the field, wealth-management businesses are gearing up to compete on the Street. With affluent investors and growing fortunes dangling in front of them, firms need to parlay their wealth-management technologies into a winning lineup. Yet, instead of turning to their tried-and-true technology departments to help them win the game, many firms are hoping that outsourcing and vendor partners will make them the teams to beat.

As advisers are being pushed to provide an overall plan for clients, rather than simply offer advice on a transaction-by-transaction basis, the time is ripe for wealth managers to invest in technology, explains Donie Lochan, vice president of Cap Gemini Ernst & Young's global financial services' wealth-management business. "Most of the systems that have been built up over the years [at wealth-management firms] are for transaction-based businesses, [rather than for] a holistic wealth-management business model," he adds. In addition, "The huge cost of maintaining applications has caused firms to look at tech spending differently," he says, lending credence to new operating models.

Wachovia Securities, a Richmond, Va.-based broker-dealer, is the latest player to step to the plate with new wealth-management technology. The firm recently turned to Thomson Financial to provide its 19,000 advisers with both front- and back-office tools. According to Sharon Rowlands, Thomson's president and chief operating officer, Wachovia's $200 million strategy involves migrating the 6,000 desktops of Prudential Securities, which recently merged with Wachovia, from Reuters workstations to Thomson's newest broker workstation, Thomson One, while upgrading its own Thomson ILX desktops to the Thomson One version, as well. Thomson will supply the firm with back-office processing through its BETA system and provide integration between the back and front offices.

While Wachovia declined to comment for this story, Rowlands says that the end-to-end system will be almost entirely a combination of Thomson and Wachovia products, demonstrating Thomson's ability to act as a service provider and business partner.

Will Thomson take on the general contractor role with Wachovia? "We are going to be involved in managing a lot of the Wachovia project," Rowlands answers, noting commitment to migration, rollout and training. "A big chunk of the work sits with us, but we're confident there will be a strong combined Wachovia-Thomson effort."

If this story is giving you deja vu, you're not alone. We all heard something similar just a year ago, when Merrill Lynch signed on Thomson as the general contractor in its own multi-million dollar wealth-management project. Recently, though, there has been media speculation that the deal has gone awry. It has been reported that the customer-relationship-management tools contracted to be implemented by Siebel Software were no longer part of the deal, and that Thomson has fallen behind on many of its deliverables, but a spokeswoman for Merrill says only that the schedules have changed. As far as the participants go, she says, "Nothing has changed; the contracts are the same."

Richard Campione, group vice president and general manager at Siebel, echoes her statement: "Merrill is committed to Siebel being the CRM [customer-relationship management] component of its wealth-management platform."

Thomson's Rowlands adds that Thomson and Merrill are rebuilding new online systems for every global retail customer, as well as advisers' desktops and the technological infrastructure, to serve all branch networks. The original plan was to roll those components out simultaneously, she explains, but the partners have decided to first roll out the online aspects, beginning in March. "As we get a couple of months under our belt, we'll try to roll the desktops out, closer to the middle of the year," she says.

One thing that is certain is that the management on the project has changed. Merrill Lynch's Byron Vielehr, chief technology officer of the private client group, reportedly left by request of upper management in December, according to industry sources, and his responsibilities were taken over by John Killeen, who was named head of global private client technology. The Merrill spokeswoman denies Vielehr was asked to leave, saying he made the decision to leave on his own.

Jaime Punishill, a senior analyst at Forrester Research, points out, "The Merrill deal hasn't died yet, so we must reserve judgment on whether or not it's a failure." He adds that much of the industry is "still watching and waiting. Let the other guy be the leader and get the arrows in his back."

However, Wachovia is hardly watching and waiting. In fact, Wachovia may turn out to be another firm that is itself being observed, and observers are waiting to see if outsourcing wealth-management technology will be the next big move in the industry.

"The big debate is, do you run your own system, buy another system and run it in-house, or outsource altogether?" questions Punishill. "You don't gain any differentiation by running your own back office. We are starting to see the same kind of thing happening in the front office," he adds. "What separates Merrill from Morgan? The expertise, the investments, the strategy. How many clients would say 'technology?' Virtually none," he asserts.

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