The Wealth Management Agenda
Rise of the Wealthy                                     solutions to help increase sales, reduce costs,
Offerings: componentized view

The changing landscape                                path to profitably serve the mass affluent segment
assets’ of customers. Loan products bundled with       functionality for all asset classes, product types
insurance, margi...
Infosys Technologies Limited, Plot No. 44, Electronics City, Hosur Road, Bangalore - 560100. India • Tel.: +91 80 28520261...
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Rise of the Wealthy-ChinaThe Wealth Management Agenda


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Rise of the Wealthy-ChinaThe Wealth Management Agenda

  1. 1. PERSPECTIVE China: The Wealth Management Agenda
  2. 2. Rise of the Wealthy solutions to help increase sales, reduce costs, retain current clients and attract new ones. For The potential for the wealth management wealth managers to succeed in this marketplace, business within China is on the rise. However the they must coordinate their processes around their geographic spread of the country has created customers. They need to carefully evaluate and some doubts for service providers, as to whether quickly deploy the right technology solutions that the ‘one model fits all policy’ will work in China. are already providing competitive advantage in the Private banking was a restricted market till about market. The considerations to create or strengthen 2005-2006 and thus in a relatively less a customer-centric model are complex, but most sophisticated market, private banks and wealth firms have recognized that long-term success in management service providers are retaining focus this competitive market is dependent upon the on the urban markets. ability to deliver customer-centric products and services. China is the second largest wealth management market in Asia with significant wealth creation The wealth management service canvas for driven by unprecedented economic growth in banks includes: recent years. Reports state that in 2007, the number of High-Net-Worth Individuals (HNWIs) in Delivery channels: Anywhere & anytime China reached nearly 350,000 in 2006, up almost through branch/call center/online/POS/PDA 8% from 2005. In terms of HNWI wealth in Asia- Pacific, about one-fifth resides in China. Personalized services: Advisory services /relationship managers/financial planning However, the wealth management market in experts to manage accounts and plan financial China remains in its infancy, but it can be expected goals to evolve rapidly, in line with the development and de-regulation of financial markets. The key to Investment tools for customers and their growth is dependent on a number of factors but financial planners to manage wealth: Analyze will first be prompted by continued local portfolio, rebalance portfolio against model regulatory relaxation. portfolio, portfolio simulation and ‘what-if’ tools The growth figures coming from a low base in an emerging market can often be misleading as every Product types: Traditional banking, traditional increment can appear substantial. However investment products and alternate investments analysts across all foreign private banks are betting strongly on the local Wealth Management Straight Through Processing: End-to-end business. There is a strong expectation of robust transaction processing for investments growth over the coming few years. A majority of the private banks are now expanding wealth Tax planning: Country-specific tax and social management services into Shanghai, Beijing, security Shenzhen and Guangzhou which roughly accounts for 60% of China’s wealth. One stop financial shop: Interface with market data vendors/banks/depositories/clearing Wealth Management: The Business Model house/ custodians/brokerage house Celent defines wealth management as a suite of Concierge services: Lifestyle related value services and products designed to assist in the added services accumulation and management of wealth for individuals with at least US$100,000 in investable Customized views and reports: Portfolio assets. specific or across portfolios The wealth management marketplace is evolving Consolidated view: Complete financial picture with the expansion of the affluent client pool and in one screen increased competition through mergers, acquisitions and the introduction of non- Strict adherence: Financial regulation, traditional players. Wealth managers are setting compliance and other country-specific business goals that require innovative technology mandates Secure and trusted environment: Data storage
  3. 3. Offerings: componentized view Normal Discretionary Investment A/c Non-Discretionary Pension/Retirement A/c Customer Advisory Super Annuation A/c RM / Advisor Delivery Channels Transaction RM Desktop based Fees Wrap Fees Planning Tools Portfolio Management Order /Transaction Advisory Fees PortfolioReporting Management and Analysis Financial Planning Relationship Based Charges Data Aggregation Layer In House Products BankingProducts Loans | Deposits | Cash External Distribution Products Accounts Investment Equity | Fixed Income | External Entities Bundled Products Products Investment Funds Market Data Vendors Gearing Products Alternate Private Equity | Structured Investments Products | Hedge Funds | Real Estate Online Trading systems Insurance Life Insurance | Non Life Products Products Regulatory Reporting Insuranc e
  4. 4. The changing landscape path to profitably serve the mass affluent segment or must suffer a severe competitive disadvantage. Dynamics of the mass affluent pie Increasing focus on advisory services he markets across the globe have experienced Private banking and wealth management several highs and lows over the years and analyst’s customers are turning cautious with their have recognized and accepted this as a key investments and are seeking better service challenge which would affect the profitability and providers. Quality of service, reporting and the growth of the private banking and wealth quality of investment advice remain some of the management sector. important selection criteria for customers. ‘Know- While wealth management is essentially a service all’ advisors, offering advice across different provided across customer categories, there is an product types, suggesting unique product increased focus on the mass affluent and HNW bundling, predicting trends in the local and as well segments where a combination of advisory as global markets and suggesting investment services, do-it-yourself services, management and protection mechanism are key to the success of customized reporting is required. The ultra HNW wealth management services. With the frequent segment continues to be serviced by the private highs and lows in the markets, there is an banks, while retail banks woo the mass affluent apparent disconnect between advisors and segment with a vast array of products across customers. Advisors are turning to fact-based banking and investment domains, topped with analysis and even detailed case studies to bridge insurance offerings and unique product bundling the gap. features. However, it would be pertinent to note that there In a space traditionally dominated by private banks is also a growing trend towards do-it-yourself and niche service providers, retail banks have services, where knowledgeable customers are not streamed into the space to handle the booming fully dependent on the advisory services provided mass affluent segment. Typical model on view is by the bank. the distribution model with end-to-end services across the banking and investment domains. Banks To provide such high levels of service, banks are have identified the key revenue drivers as: seeking help from systems that offer a holistic view of the customer relationship across assets and Revenue from distribution (3rd party products) liabilities, to tailor appropriate investment solutions. Revenue from advisory services Product range and innovation Cross sell opportunities to existing banking customers Banks have realized that product features and the range of products are key differentiators in the Product manufacturing and revenue based on fiercely competitive market. Product manufacture assets under management and ROI (Discretionary is not every bank’s cup of tea and the ‘gap’ in PMS) would be the way forward for banks. product offering is catered to by distributing products originating from other issuers. While There are critical challenges in serving the mass product manufacture is definitely the way forward, affluent segment, depending on the institution. distribution income continues to be a key revenue For example, private banks serving the HNW and stream. UHNW market, are scaling up to serve the larger number of clients in the mass affluent segment but The investment domain spans across a wide range have not yet clearly figured out the right of products and there is a definite shift from technology and process investments to make. traditional investments in funds, equities and fixed While, on the other hand, retail financial income to alternate investments like structured institutions have the technology and scale to reach products, real estate, private equity and hedge a large number of customers, but are struggling to funds. provide advisory services on a mass scale - so critical for the affluent segment. Wealth Banks have also realized the benefits of innovation management institutions will need to chart the in terms of product bundling and utilizing ‘sleeping
  5. 5. assets’ of customers. Loan products bundled with functionality for all asset classes, product types insurance, margin lending, self funding instalments and related process, Straight through Processing to gain geared share exposure and bundling of for all transactions, account aggregation and banking & investment products are some of the portfolio planning, monitoring and reporting. interesting products showcased. Wealth management is essentially a complex process which runs across various product types in Wealth management is new in China and the the investment and banking domains. There are range of domestic product offerings is limited. ‘one system’ vendors and ‘niche area’ vendors Typically, wealthy individuals have a bipolar asset currently servicing the ever increasing technology allocation with half of the asset holdings allocated requirements in this domain. to cash, deposits and money market funds, with the balance invested in equities and bonds. There In recent times there is a growing trend of is growing trend to invest in Structured Deposits adoption of the ‘one system’ approach which with Equity and Currency as the underlying, as the offers an integrated platform for traditional risk appetite of the HNW is steadily on the rise. banking and wealth management products and processes. Retail banks entrenched, expanding or Key tech trends venturing into the wealth management space are increasingly seeking such integrated platforms to service customers. Service Oriented Architecture (SOA) The typical ‘one system’ provides the necessary The wealth management process is dynamic and infrastructure to support various asset classes and involves change at a rapid pace, mainly to provide the bank with a consolidated view of the incorporate new products, new process, regulatory customer’s portfolio across banking and requirements and address ever changing customer investment products. With a topping of SOA, web demands. Service providers must quickly respond service standards and robust work flow engine; it to business changes with agility; leverage existing would provide the ideal ‘one system’ solution for investments in applications and application the banks to service their customers. However infrastructure to address new business going by the business domain it caters to, wealth requirements; support new channels of management systems inevitably need to interface interactions with customers, partners, and market with niche area systems and external entities. data vendors. The shortcomings of the ‘one system’ approach in Wealth management providers and private banks terms of depth of functionality and infrastructure must focus on open standards for communication changes which have to be optimally countered with external entities. Service Oriented across the system. This could entail higher costs Architecture and web service standards is and will and migration related issues. be the key components of current and future wealth management systems as it will help Future Trends technology vendors in delivering flexible and cost effective solutions. Wealth management is a In China, the level of sophistication and complex process and to support this complex experience with more complex products is lesser process the system needs to embed, incorporate than in advanced markets. However, as the and interface with multiple systems for customer businesses and the numbers of wealthy Chinese information, market data, transaction data and grow, expand and mature, there will be a marked accounting. change in the product offering, services levels and channels of offering. Account aggregation, one of the critical components in the wealth management process The Chinese wealth management market would will be served well by the ‘SOA trend’ as it will continue to liberalize, and there will be increased enable service providers to share, integrate and competition from both local and foreign banks in data mine across multiple systems and entities. China. ‘One system’ v/s multiple systems Author The ideal wealth management system should be Abhra Roy able to provide a complete ‘front to back’ Senior Product Consultant Finacle Infosys Technologies Ltd.
  6. 6. Infosys Technologies Limited, Plot No. 44, Electronics City, Hosur Road, Bangalore - 560100. India • Tel.: +91 80 28520261 • Fax: +91 80 28521747 e-mail: • “COPYRIGHT NOTICE: Copyright ©2009 Infosys Technologies Limited, Bangalore, India. ALL RIGHTS RESERVED.” Finacle logo is a registered trademark of Infosys and Infosys acknowledges the proprietary rights of the trademarks and product names of other companies mentioned in this document. Infosys believes the information in this publication is accurate as of its publication date; such information is subject to change without notice.