Wealth management firms to ramp up IT spend

Wealth management firms are likely to increase their spending on technology and the budget is forecast to reach $3.7 billion by the end of this year, a report by global consultancy Celent says.

"Celent expects a recovery for wealth management technology spending in 2010, with spending reaching $3.7 billion by the end of 2010, a five per cent increase over 2009," the report stated.

According to the report, the market crisis has made wealth management firms re-evaluate their ways of targeting and servicing clients across all customer segments. Firms are now looking at expanding their technology projects to target a broader customer segment as well as extend their service offerings.

In addition to their focus on the high net worth and ultra-high net worth individuals, the firms would also expand and develop more opportunities in the mass market and mass affluent segments, the report added.

"Projects that were put on hold in 2008-2009 are likely to restart in 2010. Firms will focus on reducing costs and augmenting advisor productivity through the use of technology, carefully evaluating the return on investment before making any investment," Celent analyst and coauthor of the report Arin Ray said.

The report provides an overview of the evolution of wealth management industry post crisis, with a focus on business and IT priorities on a global basis. The Celent report titled 'Wealth Management Business and IT Priorities for 2010: A Global Perspective' also revealed that firms are looking at ways to reach out to lower net worth clients with self-service models.

The report says firms would invest mostly in technology around front office and back office requirements, including advisor platforms, compliance, reporting, self-service and integration, it added.

For the report, Celent interviewed a total of 46 financial institutions, which included its prospects and clients as well as a list of representative clients of vendors drawn from all the main markets --Europe, North America and Asia.

In Asia-Pacific, wealth management IT spending totalled $0.63 billion in 2009, a five per cent increase over 2008. Although this is not a significant growth, it is certainly much healthier than other regions.

Celent expects spending to grow $0.68 billion by 2010, for an annual growth rate of eight per cent, the report added. Meanwhile, Asia presents the biggest growth opportunity for wealth managers as it has been growing at robust pace of 12-15 per cent per annum during 2005-2007 and even the impact of the global recession was less severe in region.